Exam 5: Merchandising Operations and the Multiple-Step Income Statement

Which of the following provides the best rationale regarding analysts' views about the information value of the gross profit rate versus the gross profit amount?

With respect to the income statement

An advantage of the single-step income statement over the multiple-step form is

Nonoperating activities include revenues and expenses that are related to the company's main line of operations.

When using a periodic inventory system, which statement concerning the computation of cost of goods sold is correct?

Under the periodic system, the purchases account is used to accumulate all purchases of merchandise for resale.

The entry to record a sale of $900 with terms of 2/10, n/30 will include a

Sales revenue minus operating expenses equals gross profit.

A quality of earnings ratio significantly less than 1 suggests that a company may be using more aggressive accounting techniques in order to accelerate income recognition.

A buyer borrows money at 6% interest to pay a $9,000 invoice with terms 1/10, n/30 on the 10th day of the discount period.The loan is repaid on the 30th day of the invoice.What is the buyer's net savings for these two transactions?

Freight-out is reported as an operating expense in the income statement.

Travis Corporation purchases merchandise on account from Jackson Company, terms 2/10, n/30.Travis and Jackson both use periodic inventory systems.If Travis pays within the discount period, Travis will

Periodic inventory systems are used most commonly by companies that sell

All of the following statements are true regarding the periodic inventory system except

The entry to record the return of goods from a customer would include a

A purchase invoice is a document that

Assets purchased for resale are recorded in which of the following accounts?

United Services and Supplies reports net income of $60,000 and cost of goods sold of $360,000.If US&S's gross profit rate was 40%, net sales were

Sales revenues, cost of goods sold, and gross profit are amounts on a merchandising company's income statement not commonly found on the income statement of a service company.

Technology has increased greatly the use of periodic inventory systems.