Question 1

The Sales Returns and Allowances account is classified as a(n)

Accepted Answer

A)  asset account. 
B)  contra asset account. 
C)  expense account. 
D)  contra revenue account. 
A)  asset account. 
B)  contra asset account. 
C)  expense account. 
D)  contra revenue account.

Question 2

Geran Company purchased merchandise inventory with an invoice price of $5,000 and credit terms of 2/10, n/30. What is the net cost of the goods if Geran Company pays within the discount period?

Accepted Answer

A)  $5,000 
B)  $4,900 
C)  $4,500 
D)  $4,600 
A)  $5,000 
B)  $4,900 
C)  $4,500 
D)  $4,600

Question 3

The journal entry to record a credit sale is

Accepted Answer

A)  Cash Sales 
B)  Cash Service Revenue 
C)  Accounts Receivable Service Revenue 
D)  Accounts Receivable Sales 
A)  Cash Sales 
B)  Cash Service Revenue 
C)  Accounts Receivable Service Revenue 
D)  Accounts Receivable Sales

Question 4

Which of the following would not be considered a merchandising company?

Accepted Answer

A)  Retailer 
B)  Wholesaler 
C)  Service firm 
D)  Dot Com firm 
A)  Retailer 
B)  Wholesaler 
C)  Service firm 
D)  Dot Com firm

Question 5

The steps in the accounting cycle are different for a merchandising company than for a service company.

Accepted Answer

A) True 
 B)False

Question 6

Kennedy Company had the following account balances at year-end: cost of goods sold $80,000; merchandise inventory $15,000; operating expenses $39,000; sales $144,000; sales discounts $1,600; and sales returns and allowances $2,300. A physical count of inventory determines that merchandise inventory on hand is $14,400.
Instructions
(a) Prepare the adjusting entry necessary as a result of the physical count.
(b) Prepare closing entries.

Accepted Answer

The answer of Kennedy Company had the following account balances...

Question 7

Match the items below by entering the appropriate code letter in the space provided.
A. Net Sales 
B. Sales discounts
C. Purchase invoice
D. Periodic inventory system 
E. FOB destination
F. FOB shipping point
 G. Freight-out
 H. Gross profit
I. Operating expenses
 J. Income from operations
1. An incentive to encourage customers to pay their accounts early.
2. Expenses incurred in the process of earning sales revenue.
3. Freight terms that require the seller to pay the freight cost.
4. Sales less sales returns and allowances and sales discounts.
5. A document that supports each credit purchase.
6. Net sales less cost of goods sold.
7. Freight cost to deliver goods to customers reported as a selling expense.
8. Requires a physical count of goods on hand to compute cost of goods sold.
9. Gross profit less total operating expenses.
10. Freight terms that require the buyer to pay the freight cost.

Accepted Answer

1. B 6. H
2. I 7. G

Question 8

Which of the following accounts is not closed to Income Summary?

Accepted Answer

A)  Cost of Goods Sold 
B)  Merchandise Inventory 
C)  Sales 
D)  Sales Discounts 
A)  Cost of Goods Sold 
B)  Merchandise Inventory 
C)  Sales 
D)  Sales Discounts

Question 9

A sales invoice is a source document that

Accepted Answer

A)  provides support for goods purchased for resale. 
B)  provides evidence of incurred operating expenses. 
C)  provides evidence of credit sales. 
D)  serves only as a customer receipt. 
A)  provides support for goods purchased for resale. 
B)  provides evidence of incurred operating expenses. 
C)  provides evidence of credit sales. 
D)  serves only as a customer receipt.

Question 10

Three items are missing in each of the following columns and are identified by letter.   
Instructions
Calculate the missing amounts and identify them by letter.

Accepted Answer

(a) $455,000 (d) $80

Question 11

Indicate which one of the following would appear on the income statement of both a merchandising company and a service company.

Accepted Answer

A)  Gross profit 
B)  Operating expenses 
C)  Sales revenues 
D)  Cost of goods sold 
A)  Gross profit 
B)  Operating expenses 
C)  Sales revenues 
D)  Cost of goods sold

Question 12

At the beginning of September, 2010, GLF Company reported Merchandise Inventory of $4,000. During the month, the company made purchases of $7,800. At September 31, 2010, a physical count of inventory reported $3,200 on hand. Cost of goods sold for the month is

Accepted Answer

A)  $600. 
B)  $7,800. 
C)  $8,600. 
D)  $11,800. 
A)  $600. 
B)  $7,800. 
C)  $8,600. 
D)  $11,800.

Question 13

Freight terms of FOB Destination means that the seller pays the freight costs.

Accepted Answer

A) True 
 B)False

Question 14

Tony's Market recorded the following events involving a recent purchase of merchandise:
Received goods for $50,000, terms 2/10, n/30.
Returned $1,000 of the shipment for credit.
Paid $250 freight on the shipment.
Paid the invoice within the discount period.
As a result of these events, the company's merchandise inventory

Accepted Answer

A)  increased by $48,020. 
B)  increased by $49,250. 
C)  increased by $48,265. 
D)  increased by $48,270. 
A)  increased by $48,020. 
B)  increased by $49,250. 
C)  increased by $48,265. 
D)  increased by $48,270.

Question 15

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 operating income for the month of August, 2010 is

Accepted Answer

A)  $30,000. 
B)  $19,500. 
C)  $18,500. 
D)  $16,000. 
A)  $30,000. 
B)  $19,500. 
C)  $18,500. 
D)  $16,000.

Question 16

Operating expenses are different for merchandising and service enterprises.

Accepted Answer

A) True 
 B)False

Question 17

In the balance sheet, ending merchandise inventory is reported

Accepted Answer

A)  in current assets immediately following accounts receivable. 
B)  in current assets immediately following prepaid expenses. 
C)  in current assets immediately following cash. 
D)  under property, plant, and equipment. 
A)  in current assets immediately following accounts receivable. 
B)  in current assets immediately following prepaid expenses. 
C)  in current assets immediately following cash. 
D)  under property, plant, and equipment.

Question 18

The following information is available for Sager Company:
Instructions
Compute each of the following:
(a) Net sales
(b) Gross profit
(c) Income from operations

Accepted Answer

(a) Net sales = $335,000 ($350

Question 19

Assume that Vangundy Company uses a periodic inventory system and has these account balances: Purchases $600,000; Purchase Returns and Allowances $25,000; Purchase Discounts $11,000; and Freight-in $19,000; beginning inventory of $45,000; ending inventory of $55,000; and net sales of $750,000. Determine the cost of goods sold.

Accepted Answer

The answer of Assume that Vangundy Company uses a periodic...

Question 20

The Merchandise Inventory account is used in each of the following except the entry to record

Accepted Answer

A)  goods purchased on account. 
B)  the return of goods purchased. 
C)  payment of freight on goods sold. 
D)  payment within the discount period. 
A)  goods purchased on account. 
B)  the return of goods purchased. 
C)  payment of freight on goods sold. 
D)  payment within the discount period.

Exam 5: Accounting for Merchandising Operations

The Sales Returns and Allowances account is classified as a(n)

Geran Company purchased merchandise inventory with an invoice price of $5,000 and credit terms of 2/10, n/30. What is the net cost of the goods if Geran Company pays within the discount period?

The journal entry to record a credit sale is

Which of the following would not be considered a merchandising company?

The steps in the accounting cycle are different for a merchandising company than for a service company.

Which of the following accounts is not closed to Income Summary?

A sales invoice is a source document that

Three items are missing in each of the following columns and are identified by letter. Instructions Calculate the missing amounts and identify them by letter.

Indicate which one of the following would appear on the income statement of both a merchandising company and a service company.

At the beginning of September, 2010, GLF Company reported Merchandise Inventory of $4,000. During the month, the company made purchases of $7,800. At September 31, 2010, a physical count of inventory reported $3,200 on hand. Cost of goods sold for the month is

Freight terms of FOB Destination means that the seller pays the freight costs.

Operating expenses are different for merchandising and service enterprises.

In the balance sheet, ending merchandise inventory is reported

The following information is available for Sager Company: Instructions Compute each of the following: (a) Net sales (b) Gross profit (c) Income from operations

The Merchandise Inventory account is used in each of the following except the entry to record

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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