Question 1

If net sales are $800,000 and cost of goods sold is $600,000, the gross profit rate is 25%.

Accepted Answer

A) True 
 B)False

Question 2

The major difference between the balance sheets of a service company and a merchandising company is inventory.

Accepted Answer

A) True 
 B)False

Question 3

In terms of liquidity, merchandise inventory is

Accepted Answer

A)  more liquid than cash. 
B)  more liquid than accounts receivable. 
C)  more liquid than prepaid expenses. 
D)  less liquid than store equipment. 
A)  more liquid than cash. 
B)  more liquid than accounts receivable. 
C)  more liquid than prepaid expenses. 
D)  less liquid than store equipment.

Question 4

Net sales appears on both the multiple-step and single-step forms of an income statement.

Accepted Answer

A) True 
 B)False

Question 5

Under the perpetual system, cash freight costs incurred by the buyer for the transporting of goods is recorded in

Accepted Answer

A)  Freight Expense 
B)  Freight - In 
C)  Merchandise Inventory d Freight - Out 
A)  Freight Expense 
B)  Freight - In 
C)  Merchandise Inventory d Freight - Out

Question 6

Prepare the necessary journal entries to record the following transactions, assuming Darby Company uses a perpetual inventory system.
(a) Darby sells $50,000 of merchandise, terms 1/10, n/30. The merchandise cost $30,000.
(b) The customer in (a) returned $5,000 of merchandise to Darby. The merchandise returned cost $3,000.
(c) Darby received the balance due within the discount period.

Accepted Answer

The answer of Prepare the necessary journal entries to record...

Question 7

Maxwell Company's financial information is presented below.   The missing amounts above are:

Accepted Answer

The answer of Maxwell Company's financial information is presented below....

Question 8

Assume that Vangundy Company uses a periodic inventory system and has these account balances: Purchases $500,000; Purchase Returns and Allowances $14,000; Purchase Discounts $9,000; and Freight-in $15,000. Determine net purchases and cost of goods purchased.

Accepted Answer

Calculation of Net P

Question 9

During October, 2010, Carol's Catering Company generated revenues of $13,000. Sales discounts totaled $200 for the month. Expenses were as follows: Cost of goods sold of $7,000 and operating expenses of $2,000.
Calculate (1) gross profit and (2) income from operations for the month.

Accepted Answer

(1) Gross profit: $5,800 ($13,

Question 10

The sales revenue section of an income statement for a retailer would not include

Accepted Answer

A)  Sales discounts. 
B)  Sales. 
C)  Net sales. 
D)  Cost of goods sold. 
A)  Sales discounts. 
B)  Sales. 
C)  Net sales. 
D)  Cost of goods sold.

Question 11

Birk Company sells merchandise on account for $2,000 to Kiner Company with credit terms of 2/10, n/30. Kiner Company returns $400 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)  $1,960 
B)  $1,968 
C)  $1,600 
D)  $1,568 
A)  $1,960 
B)  $1,968 
C)  $1,600 
D)  $1,568

Question 12

Kelso Company purchased merchandise on account from Office Suppliers for $86,000, with terms of 2/10, n/30. During the discount period, Kelso returned some merchandise and paid $78,400 as payment in full. Kelso uses a perpetual inventory system. Prepare the journal entries that Kelso Company made to record:
(1) the purchase of merchandise.
(2) the return of merchandise.
(3) the payment on account.
(b) Noble Company sold merchandise to Fugate Company on account for $73,000 with credit terms of ?/10, n/30. The cost of the merchandise sold was $43,800. During the discount period, Fugate Company returned $3,000 of merchandise and paid its account in full (minus the discount) by remitting $69,300 in cash. Both companies use a perpetual inventory system. Prepare the journal entries that Noble Company made to record:
(1) the sale of merchandise.
(2) the return of merchandise.
(3) the collection on account.

Accepted Answer

(a) To compute the amount due after retu

Question 13

To grant a customer a sales return, the seller credits Sales Returns and Allowances.

Accepted Answer

A) True 
 B)False

Question 14

The Freight-in account

Accepted Answer

A)  increases the cost of merchandise purchased. 
B)  is contra to the Purchases account. 
C)  is a permanent account. 
D)  has a normal credit balance. 
A)  increases the cost of merchandise purchased. 
B)  is contra to the Purchases account. 
C)  is a permanent account. 
D)  has a normal credit balance.

Question 15

In a perpetual inventory system, the Cost of Goods Sold account is used

Accepted Answer

A)  only when a cash sale of merchandise occurs. 
B)  only when a credit sale of merchandise occurs. 
C)  only when a sale of merchandise occurs. 
D)  whenever there is a sale of merchandise or a return of merchandise sold. 
A)  only when a cash sale of merchandise occurs. 
B)  only when a credit sale of merchandise occurs. 
C)  only when a sale of merchandise occurs. 
D)  whenever there is a sale of merchandise or a return of merchandise sold.

Question 16

Sampson Company's accounting records show the following at the year ending on December 31, 2010:   Using the periodic system, the cost of goods purchased is

Accepted Answer

A)  $180,210. 
B)  $204,210. 
C)  $208,610. 
D)  $195,810. 
A)  $180,210. 
B)  $204,210. 
C)  $208,610. 
D)  $195,810.

Question 17

If a merchandising company sells land at more than its cost, the gain should be reported in the sales revenue section of the income statement.

Accepted Answer

A) True 
 B)False

Question 18

A multiple-step income statement provides users with more information about a company's income performance.

Accepted Answer

A) True 
 B)False

Question 19

If a company determines cost of goods sold each time a sale occurs, it

Accepted Answer

A)  must have a computer accounting system. 
B)  uses a combination of the perpetual and periodic inventory systems. 
C)  uses a periodic inventory system. 
D)  uses a perpetual inventory system. 
A)  must have a computer accounting system. 
B)  uses a combination of the perpetual and periodic inventory systems. 
C)  uses a periodic inventory system. 
D)  uses a perpetual inventory system.

Question 20

Gross profit is obtained by subtracting ________________ from ________________.

Accepted Answer

cost of go

Exam 5: Accounting for Merchandising Operations

If net sales are $800,000 and cost of goods sold is $600,000, the gross profit rate is 25%.

The major difference between the balance sheets of a service company and a merchandising company is inventory.

In terms of liquidity, merchandise inventory is

Net sales appears on both the multiple-step and single-step forms of an income statement.

Under the perpetual system, cash freight costs incurred by the buyer for the transporting of goods is recorded in

Maxwell Company's financial information is presented below. The missing amounts above are:

Assume that Vangundy Company uses a periodic inventory system and has these account balances: Purchases $500,000; Purchase Returns and Allowances $14,000; Purchase Discounts $9,000; and Freight-in $15,000. Determine net purchases and cost of goods purchased.

During October, 2010, Carol's Catering Company generated revenues of $13,000. Sales discounts totaled $200 for the month. Expenses were as follows: Cost of goods sold of $7,000 and operating expenses of $2,000. Calculate (1) gross profit and (2) income from operations for the month.

The sales revenue section of an income statement for a retailer would not include

Birk Company sells merchandise on account for $2,000 to Kiner Company with credit terms of 2/10, n/30. Kiner Company returns $400 of merchandise that was damaged, along with a check to settle the account within the discount period. What is the amount of the check?

To grant a customer a sales return, the seller credits Sales Returns and Allowances.

The Freight-in account

In a perpetual inventory system, the Cost of Goods Sold account is used

Sampson Company's accounting records show the following at the year ending on December 31, 2010: Using the periodic system, the cost of goods purchased is

If a merchandising company sells land at more than its cost, the gain should be reported in the sales revenue section of the income statement.

A multiple-step income statement provides users with more information about a company's income performance.

If a company determines cost of goods sold each time a sale occurs, it

Gross profit is obtained by subtracting ________________ from ________________.

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

Filters

Gross profit is obtained by subtracting from .