Question 1

Gross profit equals

Accepted Answer

A) sales less operating expenses. 
B) gross sales less cost of goods sold. 
C) cost of goods sold less operating expenses. 
D) sales less cost of goods sold. 
A) sales less operating expenses. 
B) gross sales less cost of goods sold. 
C) cost of goods sold less operating expenses. 
D) sales less cost of goods sold.

Question 2

Cost of Goods Sold is considered an operating expense for a merchandising company.

Accepted Answer

A) True 
 B)False

Question 3

When goods are shipped FOB shipping point, freight costs are an operating expense for the seller.

Accepted Answer

A) True 
 B)False

Question 4

The Estimated Inventory returns account is a(n)

Accepted Answer

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

Question 5

If merchandise costing $2,500, terms 2/10 n/30, is paid within 10 days, the amount of the purchase discount is $250.

Accepted Answer

A) True 
 B)False

Question 6

The cost of goods sold section of a statement of income prepared under a periodic inventory system will contain more detail than under a perpetual inventory system.

Accepted Answer

A) True 
 B)False

Question 7

Inventory is usually the largest current asset for a merchandiser.

Accepted Answer

A) True 
 B)False

Question 8

Gross profit appears on both the single-step and multiple-step forms of the statement of income.

Accepted Answer

A) True 
 B)False

Question 9

The terms 2/10, n/30 mean that a 2% discount is allowed on payments made over 10 days but within the credit period.

Accepted Answer

A) True 
 B)False

Question 10

Given a perpetual inventory system which one of the following statements is false?

Accepted Answer

A) Freight costs incurred by the buyer are added to the Inventory account. 
B) Purchases of merchandise for sale are recorded in the Inventory account. 
C) A discount taken for early payment is credited to the Inventory account. 
D) A return of merchandise is credited to the Purchase Returns and Allowances account. 
A) Freight costs incurred by the buyer are added to the Inventory account. 
B) Purchases of merchandise for sale are recorded in the Inventory account. 
C) A discount taken for early payment is credited to the Inventory account. 
D) A return of merchandise is credited to the Purchase Returns and Allowances account.

Question 11

Evidence of cash sales is usually supported by

Accepted Answer

A) purchase invoices. 
B) sales invoices. 
C) purchase orders. 
D) cash register tapes. 
A) purchase invoices. 
B) sales invoices. 
C) purchase orders. 
D) cash register tapes.

Question 12

Use the following financial information to answer questions 
  
-What is the gross profit margin?

Accepted Answer

A) 20.6% 
B) 22.7% 
C) 50.0% 
D) 27.3% 
A) 20.6% 
B) 22.7% 
C) 50.0% 
D) 27.3%

Question 13

Sales revenues are usually considered earned when

Accepted Answer

A) cash is received from credit sales. 
B) an order is received. 
C) goods have been transferred from the seller to the buyer. 
D) adjusting entries are made. 
A) cash is received from credit sales. 
B) an order is received. 
C) goods have been transferred from the seller to the buyer. 
D) adjusting entries are made.

Question 14

Profit margin is a measure of

Accepted Answer

A) liquidity. 
B) profitability. 
C) solvency. 
D) comparability. 
A) liquidity. 
B) profitability. 
C) solvency. 
D) comparability.

Question 15

Operating expenses are subtracted from revenue for a service company and from gross profit for a merchandising company.

Accepted Answer

A) True 
 B)False

Question 16

Cost of goods sold is calculated from the following equation:

Accepted Answer

A) beginning inventory - cost of goods purchased + ending inventory. 
B) sales - cost of goods purchased + beginning inventory - ending inventory. 
C) sales + gross profit - ending inventory + beginning inventory. 
D) beginning inventory + cost of goods purchased - ending inventory. 
A) beginning inventory - cost of goods purchased + ending inventory. 
B) sales - cost of goods purchased + beginning inventory - ending inventory. 
C) sales + gross profit - ending inventory + beginning inventory. 
D) beginning inventory + cost of goods purchased - ending inventory.

Question 17

Which of the following is true about inventory systems?

Accepted Answer

A) Periodic inventory systems require more detailed inventory records. 
B) Perpetual inventory systems require more detailed inventory records. 
C) A periodic system requires cost of goods sold to be recorded after each sale. 
D) A perpetual system determines cost of goods sold only at the end of the accounting period. 
A) Periodic inventory systems require more detailed inventory records. 
B) Perpetual inventory systems require more detailed inventory records. 
C) A periodic system requires cost of goods sold to be recorded after each sale. 
D) A perpetual system determines cost of goods sold only at the end of the accounting period.

Question 18

Income from operations appears on both the single-step and multiple-step forms of the statement of income.

Accepted Answer

A) True 
 B)False

Question 19

Raven Corp.follows ASPE and sells merchandise on account for $4,000 to Eagle Corp., terms 2/10, n/30.Eagle returns $1,600 worth of merchandise that was damaged, along with a cheque to settle the account within the discount period.What entry does Raven make upon receipt of the cheque?

Accepted Answer

The answer of Raven Corp.follows ASPE and sells merchandise on...

Question 20

A merchandising company's income from operations is determined by subtracting cost of goods sold from sales.

Accepted Answer

A) True 
 B)False

Gross profit equals

Cost of Goods Sold is considered an operating expense for a merchandising company.

When goods are shipped FOB shipping point, freight costs are an operating expense for the seller.

The Estimated Inventory returns account is a(n)

If merchandise costing $2,500, terms 2/10 n/30, is paid within 10 days, the amount of the purchase discount is $250.

The cost of goods sold section of a statement of income prepared under a periodic inventory system will contain more detail than under a perpetual inventory system.

Inventory is usually the largest current asset for a merchandiser.

Gross profit appears on both the single-step and multiple-step forms of the statement of income.

The terms 2/10, n/30 mean that a 2% discount is allowed on payments made over 10 days but within the credit period.

Given a perpetual inventory system which one of the following statements is false?

Evidence of cash sales is usually supported by

Use the following financial information to answer questions -What is the gross profit margin?

Sales revenues are usually considered earned when

Profit margin is a measure of

Operating expenses are subtracted from revenue for a service company and from gross profit for a merchandising company.

Cost of goods sold is calculated from the following equation:

Which of the following is true about inventory systems?

Income from operations appears on both the single-step and multiple-step forms of the statement of income.

Raven Corp.follows ASPE and sells merchandise on account for $4,000 to Eagle Corp., terms 2/10, n/30.Eagle returns $1,600 worth of merchandise that was damaged, along with a cheque to settle the account within the discount period.What entry does Raven make upon receipt of the cheque?

A merchandising company's income from operations is determined by subtracting cost of goods sold from sales.

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

Exam 5: Merchandising Operations

Gross profit equals

Cost of Goods Sold is considered an operating expense for a merchandising company.

When goods are shipped FOB shipping point, freight costs are an operating expense for the seller.

The Estimated Inventory returns account is a(n)

If merchandise costing $2,500, terms 2/10 n/30, is paid within 10 days, the amount of the purchase discount is $250.

The cost of goods sold section of a statement of income prepared under a periodic inventory system will contain more detail than under a perpetual inventory system.

Inventory is usually the largest current asset for a merchandiser.

Gross profit appears on both the single-step and multiple-step forms of the statement of income.

The terms 2/10, n/30 mean that a 2% discount is allowed on payments made over 10 days but within the credit period.

Given a perpetual inventory system which one of the following statements is false?

Evidence of cash sales is usually supported by

Use the following financial information to answer questions -What is the gross profit margin?

Sales revenues are usually considered earned when

Profit margin is a measure of

Operating expenses are subtracted from revenue for a service company and from gross profit for a merchandising company.

Cost of goods sold is calculated from the following equation:

Which of the following is true about inventory systems?

Income from operations appears on both the single-step and multiple-step forms of the statement of income.

Raven Corp.follows ASPE and sells merchandise on account for $4,000 to Eagle Corp., terms 2/10, n/30.Eagle returns $1,600 worth of merchandise that was damaged, along with a cheque to settle the account within the discount period.What entry does Raven make upon receipt of the cheque?

A merchandising company's income from operations is determined by subtracting cost of goods sold from sales.

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