Question 1

The operating cycle of a merchandising company is generally shorter than that of a service company.

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

A Refund Liability account is not debited if a customer

Accepted Answer

A) returns defective merchandise. 
B) receives a credit for merchandise of inferior quality. 
C) pays within the discount period. 
D) returns goods that are not in accordance with specifications. 
A) returns defective merchandise. 
B) receives a credit for merchandise of inferior quality. 
C) pays within the discount period. 
D) returns goods that are not in accordance with specifications.

Question 4

The journal entry by the buyer to record a return of merchandise purchased on account under a perpetual inventory system would credit

Accepted Answer

A) Accounts Payable. 
B) Purchase Returns and Allowances. 
C) Sales. 
D) Inventory. 
A) Accounts Payable. 
B) Purchase Returns and Allowances. 
C) Sales. 
D) Inventory.

Question 5

Profit margin indicates whether a company is controlling operating expenses relative to sales.

Accepted Answer

A) True 
 B)False

Question 6

A company using a perpetual inventory system that returns goods purchased on credit would

Accepted Answer

A) debit Accounts Payable and credit Inventory. 
B) debit Sales and credit Accounts Payable. 
C) debit Cash and credit Accounts Payable. 
D) debit Accounts Payable and credit Purchases. 
A) debit Accounts Payable and credit Inventory. 
B) debit Sales and credit Accounts Payable. 
C) debit Cash and credit Accounts Payable. 
D) debit Accounts Payable and credit Purchases.

Question 7

A loss from operations will result if operating expenses exceed

Accepted Answer

A) cost of goods sold. 
B) selling expenses. 
C) cost of goods sold plus non-operating items. 
D) gross profit. 
A) cost of goods sold. 
B) selling expenses. 
C) cost of goods sold plus non-operating items. 
D) gross profit.

Question 8

Which of the following "formulas" is incorrect?

Accepted Answer

A) Gross profit - operating expenses = income before income tax. 
B) Sales - cost of goods sold = gross profit. 
C) Sales - gross profit = cost of goods sold. 
D) Operating expenses - cost of goods sold = gross profit. 
A) Gross profit - operating expenses = income before income tax. 
B) Sales - cost of goods sold = gross profit. 
C) Sales - gross profit = cost of goods sold. 
D) Operating expenses - cost of goods sold = gross profit.

Question 9

On July 10, Arbour Inc.purchased $5,000 of inventory on terms of 2/10, n/30.The amount due on August 25 is

Accepted Answer

A) $5,100. 
B) $5,000. 
C) $4,900. 
D) $4,990. 
A) $5,100. 
B) $5,000. 
C) $4,900. 
D) $4,990.

Question 10

Interest income for a merchandising company is usually reported in the non-operating activities section of the statement of income.

Accepted Answer

A) True 
 B)False

Question 11

Alliance Corporation purchased inventory with an invoice price of $22,000 and credit terms of 1/10, n/15.How much cash will Alliance pay if they pay within the discount period?

Accepted Answer

A) $22,000 
B) $21,780 
C) $22,220 
D) $18,700 
A) $22,000 
B) $21,780 
C) $22,220 
D) $18,700

Question 12

Generally, the revenue account for a merchandising company is called

Accepted Answer

A) Sales Revenue or Sales. 
B) Investment Revenue. 
C) Gross Profit. 
D) Gross Margin. 
A) Sales Revenue or Sales. 
B) Investment Revenue. 
C) Gross Profit. 
D) Gross Margin.

Question 13

A key difference between the periodic and perpetual inventory systems is the timing of the calculation of cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 14

In a perpetual inventory system, cost of goods sold is recorded

Accepted Answer

A) on a daily basis. 
B) on a monthly basis. 
C) on an annual basis. 
D) each time a sale occurs. 
A) on a daily basis. 
B) on a monthly basis. 
C) on an annual basis. 
D) each time a sale occurs.

Question 15

Freight costs incurred on incoming merchandise are an operating expense to the buyer.

Accepted Answer

A) True 
 B)False

Question 16

Sales taxes that are collected from selling a product or service are recorded as

Accepted Answer

A) revenue. 
B) an expense. 
C) an asset. 
D) a liability. 
A) revenue. 
B) an expense. 
C) an asset. 
D) a liability.

Question 17

When a company collects sales taxes from selling a product or service, these sales taxes are also recorded as revenue.

Accepted Answer

A) True 
 B)False

Question 18

The time it takes to go from cash to cash in producing revenues is called the

Accepted Answer

A) accounting cycle. 
B) purchasing cycle. 
C) operating cycle. 
D) merchandising cycle. 
A) accounting cycle. 
B) purchasing cycle. 
C) operating cycle. 
D) merchandising cycle.

Question 19

A purchase invoice is a document that

Accepted Answer

A) provides support for goods sold for cash. 
B) provides evidence of operating expenses incurred. 
C) provides evidence of credit purchases. 
D) serves only as a customer receipt. 
A) provides support for goods sold for cash. 
B) provides evidence of operating expenses incurred. 
C) provides evidence of credit purchases. 
D) serves only as a customer receipt.

Question 20

On the statement of income, purchases less purchase discounts and purchase returns and allowances, plus freight in equals

Accepted Answer

A) cost of goods purchased. 
B) cost of goods available for sale. 
C) net purchases. 
D) gross profit. 
A) cost of goods purchased. 
B) cost of goods available for sale. 
C) net purchases. 
D) gross profit.

The operating cycle of a merchandising company is generally shorter than that of a service company.

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

A Refund Liability account is not debited if a customer

The journal entry by the buyer to record a return of merchandise purchased on account under a perpetual inventory system would credit

Profit margin indicates whether a company is controlling operating expenses relative to sales.

A company using a perpetual inventory system that returns goods purchased on credit would

A loss from operations will result if operating expenses exceed

Which of the following "formulas" is incorrect?

On July 10, Arbour Inc.purchased $5,000 of inventory on terms of 2/10, n/30.The amount due on August 25 is

Interest income for a merchandising company is usually reported in the non-operating activities section of the statement of income.

Alliance Corporation purchased inventory with an invoice price of $22,000 and credit terms of 1/10, n/15.How much cash will Alliance pay if they pay within the discount period?

Generally, the revenue account for a merchandising company is called

A key difference between the periodic and perpetual inventory systems is the timing of the calculation of cost of goods sold.

In a perpetual inventory system, cost of goods sold is recorded

Freight costs incurred on incoming merchandise are an operating expense to the buyer.

Sales taxes that are collected from selling a product or service are recorded as

When a company collects sales taxes from selling a product or service, these sales taxes are also recorded as revenue.

The time it takes to go from cash to cash in producing revenues is called the

A purchase invoice is a document that

On the statement of income, purchases less purchase discounts and purchase returns and allowances, plus freight in equals

The Purpose and Use of Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Reporting and Analyzing Inventory

Internal Control and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Shareholders Equity

Reporting and Analyzing Investments

Statement of Cash Flows

Performance Measurement

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Exam 5: Merchandising Operations

The operating cycle of a merchandising company is generally shorter than that of a service company.

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

A Refund Liability account is not debited if a customer

The journal entry by the buyer to record a return of merchandise purchased on account under a perpetual inventory system would credit

Profit margin indicates whether a company is controlling operating expenses relative to sales.

A company using a perpetual inventory system that returns goods purchased on credit would

A loss from operations will result if operating expenses exceed

Which of the following "formulas" is incorrect?

On July 10, Arbour Inc.purchased $5,000 of inventory on terms of 2/10, n/30.The amount due on August 25 is

Interest income for a merchandising company is usually reported in the non-operating activities section of the statement of income.

Alliance Corporation purchased inventory with an invoice price of $22,000 and credit terms of 1/10, n/15.How much cash will Alliance pay if they pay within the discount period?

Generally, the revenue account for a merchandising company is called

A key difference between the periodic and perpetual inventory systems is the timing of the calculation of cost of goods sold.

In a perpetual inventory system, cost of goods sold is recorded

Freight costs incurred on incoming merchandise are an operating expense to the buyer.

Sales taxes that are collected from selling a product or service are recorded as

When a company collects sales taxes from selling a product or service, these sales taxes are also recorded as revenue.

The time it takes to go from cash to cash in producing revenues is called the

A purchase invoice is a document that

On the statement of income, purchases less purchase discounts and purchase returns and allowances, plus freight in equals

The Purpose and Use of Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Reporting and Analyzing Inventory

Internal Control and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Shareholders Equity

Reporting and Analyzing Investments

Statement of Cash Flows

Performance Measurement

Filters