Exam 5: Accounting for Merchandising Operations

Gross profit is a measure of the overall profitability of a company.

Which of the following would not be classified as a contra account?

Freight costs paid by a seller on merchandise sold to customers will cause an increase

Freight costs incurred by the seller on outgoing merchandise are an operating expense to the seller.

In a multiple-step income statement, income from operations excludes other revenues and gains and other expenses and losses.

Cost of goods sold is determined only at the end of the accounting period in

Under a periodic inventory system, the acquisition of inventory is charged to the Purchases account.

A merchandising company that sells directly to consumers is a

Presented below is information for Pryor Company for the month of March 2010. Instructions (a) Prepare a multiple -step income statement. (b) Compute the gross profit rate.

Sales revenues are usually considered earned when

If a company has sales of $420,000, net sales of $400,000, and cost of goods sold of $260,000, the gross profit rate is

A merchandising company using a perpetual system may record an adjusting entry by

Dan Moran is a new accountant with Tabor Company. Tabor purchased merchandise on account for $9,000. The credit terms are 2/10, n/30. Dan has talked with the company's banker and knows that he could earn 8% on any money invested in the company's savings account. Instructions (a) Should Dan pay the invoice within the discount period or should he keep the $9,000 in the savings account and pay at the end of the credit period? Support your recommendation with a calculation showing which action would be best. (b) If Dan forgoes the discount, it may be viewed as paying an interest rate of 2% for the use of $9,000 for 20 days. Calculate the annual rate of interest that this is equivalent to.

The acquisition of merchandise inventory is debited to the ____________ account when a perpetual inventory system is used.

On July 9, Neal Company sells goods on credit to Al Dolan for $2,500, terms 1/10, n/60. Neal receives payment on July 18. The entry by Neal on July 18 is:

Gross profit for a merchandiser is net sales minus

Stan's Market recorded the following events involving a recent purchase of merchandise: Received goods for $20,000, terms 2/10, n/30. Returned $400 of the shipment for credit. Paid $100 freight on the shipment. Paid the invoice within the discount period. As a result of these events, the company's merchandise inventory

In a perpetual inventory system, the amount of the discount allowed for paying for merchandise purchased within the discount period is credited to

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 nonoperating income (loss) for the month of August, 2010 is

In 2010, Rooney Company had net sales of $600,000 and cost of goods sold of $360,000. Operating expenses were $150,000, and interest expense was $10,000. Rooney prepares a multiple-step income statement. Instructions (a) Compute Rooney's gross profit. (b) Compute the gross profit rate. (c) What is Rooney's income from operations and net income? (d) If Rooney prepared a single-step income statement, what amount would it report for net income?