Question 1

For a merchandising company, all accounts that affect the determination of income are closed to the Income Summary account.

Accepted Answer

A) True 
 B)False

Question 2

If a purchaser using a perpetual system agrees to freight terms of FOB shipping point, then the

Accepted Answer

A)  Merchandise Inventory account will be increased. 
B)  Merchandise Inventory account will not be affected. 
C)  seller will bear the freight cost. 
D)  carrier will bear the freight cost. 
A)  Merchandise Inventory account will be increased. 
B)  Merchandise Inventory account will not be affected. 
C)  seller will bear the freight cost. 
D)  carrier will bear the freight cost.

Question 3

A buyer would record a payment within the discount period under a perpetual inventory system by crediting

Accepted Answer

A)  Accounts Payable. 
B)  Merchandise Inventory. 
C)  Purchase Discounts. 
D)  Sales Discounts. 
A)  Accounts Payable. 
B)  Merchandise Inventory. 
C)  Purchase Discounts. 
D)  Sales Discounts.

Question 4

If a company has net sales of $500,000 and cost of goods sold of $350,000, the gross profit percentage is

Accepted Answer

A)  70%. 
B)  30%. 
C)  15%. 
D)  100%. 
A)  70%. 
B)  30%. 
C)  15%. 
D)  100%.

Question 5

During August, 2010, Joe's Supply Store generated revenues of $30,000. The company's expenses were as follows: cost of goods sold of $12,000 and operating expenses of $2,000. The company also had rent revenue of $500 and a gain on the sale of a delivery truck of $1,000.
Joe's gross profit for August, 2010 is

Accepted Answer

A)  $30,000. 
B)  $19,000. 
C)  $18,000. 
D)  $16,000. 
A)  $30,000. 
B)  $19,000. 
C)  $18,000. 
D)  $16,000.

Question 6

Merchandise inventory is reported as a long-term asset on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 7

Mather Company made a purchase of merchandise on credit from Underwood Company on August 8, for $9,000, terms 3/10, n/30. On August 17, Mather makes the appropriate payment to Underwood. The entry on August 17 for Mather Company is:

Accepted Answer

The answer of Mather Company made a purchase of merchandise...

Question 8

Under a perpetual inventory system, the cost of goods sold is determined each time a sale occurs.

Accepted Answer

A) True 
 B)False

Question 9

Which one of the following is shown on a multiple-step but not on a single-step income statement?

Accepted Answer

A)  Net sales 
B)  Net income 
C)  Gross profit 
D)  Cost of goods sold 
A)  Net sales 
B)  Net income 
C)  Gross profit 
D)  Cost of goods sold

Question 10

The respective normal account balances of Sales, Sales Returns and Allowances, and Sales Discounts are

Accepted Answer

A)  credit, credit, credit. 
B)  debit, credit, debit. 
C)  credit, debit, debit. 
D)  credit, debit, credit. 
A)  credit, credit, credit. 
B)  debit, credit, debit. 
C)  credit, debit, debit. 
D)  credit, debit, credit.

Question 11

The freight cost incurred by a seller to deliver goods sold to a customer is called ________________.

Accepted Answer

The answer of The freight cost incurred by a seller...

Question 12

Rowland Company reported the following balances at June 30, 2010:   Net sales for the month is

Accepted Answer

A)  $10,800. 
B)  $10,400. 
C)  $10,200. 
D)  $5,200. 
A)  $10,800. 
B)  $10,400. 
C)  $10,200. 
D)  $5,200.

Question 13

Nen Company uses a perpetual inventory system. During May, the following transactions and events occurred.   
Instructions
Journalize the May transactions for Nen Company (seller) assuming that Nen uses a perpetual inventory system. You may omit explanations.

Accepted Answer

The answer of Nen Company uses a perpetual inventory system....

Question 14

Cost of goods available for sale is computed by adding

Accepted Answer

A)  freight-in to net purchases. 
B)  beginning inventory to net purchases. 
C)  beginning inventory to purchases and freight-in. 
D)  beginning inventory to cost of goods purchased. 
A)  freight-in to net purchases. 
B)  beginning inventory to net purchases. 
C)  beginning inventory to purchases and freight-in. 
D)  beginning inventory to cost of goods purchased.

Question 15

Ball Company sells merchandise on account for $1,500 to Edds Company with credit terms of 2/10, n/30. Edds Company returns $300 of merchandise that was damaged, along with a check to settle the account within the discount period. What is the amount of the check?

Accepted Answer

A)  $1,470 
B)  $1,476 
C)  $1,200 
D)  $1,176 
A)  $1,470 
B)  $1,476 
C)  $1,200 
D)  $1,176

Question 16

The gross profit section for a merchandising company appears on both the multiple-step and single-step forms of an income statement.

Accepted Answer

A) True 
 B)False

Question 17

Cost of goods available for sale is computed by adding

Accepted Answer

A)  beginning inventory to net purchases. 
B)  beginning inventory to the cost of goods purchased. 
C)  net purchases and freight-in. 
D)  purchases to beginning inventory. 
A)  beginning inventory to net purchases. 
B)  beginning inventory to the cost of goods purchased. 
C)  net purchases and freight-in. 
D)  purchases to beginning inventory.

Question 18

A sales discount does not

Accepted Answer

A)  provide the purchaser with a cash saving. 
B)  reduce the amount of cash received from a credit sale. 
C)  increase a contra-revenue account. 
D)  increase an operating expense account. 
A)  provide the purchaser with a cash saving. 
B)  reduce the amount of cash received from a credit sale. 
C)  increase a contra-revenue account. 
D)  increase an operating expense account.

Question 19

A merchandising company using a perpetual system will make

Accepted Answer

A)  the same number of adjusting entries as a service company does. 
B)  one more adjusting entry than a service company does. 
C)  one less adjusting entry than a service company does. 
D)  different types of adjusting entries compared to a service company. 
A)  the same number of adjusting entries as a service company does. 
B)  one more adjusting entry than a service company does. 
C)  one less adjusting entry than a service company does. 
D)  different types of adjusting entries compared to a service company.

Question 20

A company shows the following balances:   What is the gross profit percentage?

Accepted Answer

A)  56% 
B)  70% 
C)  44% 
D)  30% 
A)  56% 
B)  70% 
C)  44% 
D)  30%

Exam 5: Accounting for Merchandising Operations

For a merchandising company, all accounts that affect the determination of income are closed to the Income Summary account.

If a purchaser using a perpetual system agrees to freight terms of FOB shipping point, then the

A buyer would record a payment within the discount period under a perpetual inventory system by crediting

If a company has net sales of $500,000 and cost of goods sold of $350,000, the gross profit percentage is

Merchandise inventory is reported as a long-term asset on the balance sheet.

Mather Company made a purchase of merchandise on credit from Underwood Company on August 8, for $9,000, terms 3/10, n/30. On August 17, Mather makes the appropriate payment to Underwood. The entry on August 17 for Mather Company is:

Under a perpetual inventory system, the cost of goods sold is determined each time a sale occurs.

Which one of the following is shown on a multiple-step but not on a single-step income statement?

The respective normal account balances of Sales, Sales Returns and Allowances, and Sales Discounts are

The freight cost incurred by a seller to deliver goods sold to a customer is called ________________.

Rowland Company reported the following balances at June 30, 2010: Net sales for the month is

Nen Company uses a perpetual inventory system. During May, the following transactions and events occurred. Instructions Journalize the May transactions for Nen Company (seller) assuming that Nen uses a perpetual inventory system. You may omit explanations.

Cost of goods available for sale is computed by adding

Ball Company sells merchandise on account for $1,500 to Edds Company with credit terms of 2/10, n/30. Edds Company returns $300 of merchandise that was damaged, along with a check to settle the account within the discount period. What is the amount of the check?

The gross profit section for a merchandising company appears on both the multiple-step and single-step forms of an income statement.

Cost of goods available for sale is computed by adding

A sales discount does not

A merchandising company using a perpetual system will make

A company shows the following balances: What is the gross profit percentage?

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Inventories

Accounting Information Systems

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Corporations: Organization and Capital Stock Transactions

Corporations: Dividends, Retained Earnings, and Income Reporting

Long-Term Liabilities

Investments

Statement of Cash Flows

Financial Analysis: the Big Picture

Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit

Incremental Analysis

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

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