Question 1

Freight In is subtracted from the Purchases account to arrive at cost of goods purchased.

Accepted Answer

A) True 
 B)False

Question 2

Under the periodic inventory system, the Purchases account is

Accepted Answer

A) a permanent account. 
B) an account that is not closed. 
C) a temporary account. 
D) the same as the Inventory account and is reported on the statement of financial position. 
A) a permanent account. 
B) an account that is not closed. 
C) a temporary account. 
D) the same as the Inventory account and is reported on the statement of financial position.

Question 3

Which one of the following would appear on the statement of income of both a merchandising company and a service company?

Accepted Answer

A) Gross profit 
B) Net income 
C) Sales revenues 
D) Cost of goods sold 
A) Gross profit 
B) Net income 
C) Sales revenues 
D) Cost of goods sold

Question 4

The multiple-step statement of income is considered more useful than the single-step statement of income for a merchandising company because it highlights the components of net income.

Accepted Answer

A) True 
 B)False

Question 5

As an incentive for customers to pay their accounts promptly, a business may offer its customers

Accepted Answer

A) a sales discount. 
B) free delivery. 
C) a sales allowance. 
D) a sales return. 
A) a sales discount. 
B) free delivery. 
C) a sales allowance. 
D) a sales return.

Question 6

The form of the statement of income that derives its name from the fact that the total of all expenses is deducted from the total of all revenues is called a

Accepted Answer

A) multiple-step statement of income. 
B) revenue statement of income. 
C) report-form statement of income. 
D) single-step statement of income. 
A) multiple-step statement of income. 
B) revenue statement of income. 
C) report-form statement of income. 
D) single-step statement of income.

Question 7

Under the perpetual inventory system, which of the following accounts would not be used?

Accepted Answer

A) Sales 
B) Purchases 
C) Cost of Goods Sold 
D) Inventory 
A) Sales 
B) Purchases 
C) Cost of Goods Sold 
D) Inventory

Question 8

The credit terms offered by a company are 2/10, n/30, which means that

Accepted Answer

A) the customer must pay the bill within 10 days. 
B) the customer can deduct a 2% discount if the bill is paid between 10 days and 30 days from the invoice date. 
C) the customer can deduct a 2% discount if the bill is paid within 10 days of the invoice date. 
D) two sales returns can be made within 10 days of the invoice date and no returns thereafter. 
A) the customer must pay the bill within 10 days. 
B) the customer can deduct a 2% discount if the bill is paid between 10 days and 30 days from the invoice date. 
C) the customer can deduct a 2% discount if the bill is paid within 10 days of the invoice date. 
D) two sales returns can be made within 10 days of the invoice date and no returns thereafter.

Question 9

When a buyer purchases inventory the

Accepted Answer

A) buyer always pays the freight. 
B) buyer never pays the freight when the shipping terms are FOB destination. 
C) seller never pays the freight. 
D) seller always pays the freight when the shipping terms are FOB shipping point. 
A) buyer always pays the freight. 
B) buyer never pays the freight when the shipping terms are FOB destination. 
C) seller never pays the freight. 
D) seller always pays the freight when the shipping terms are FOB shipping point.

Question 10

Inventory becomes part of the cost of goods sold when a company

Accepted Answer

A) pays for the inventory. 
B) purchases the inventory. 
C) sells the inventory. 
D) receives payment from the customer. 
A) pays for the inventory. 
B) purchases the inventory. 
C) sells the inventory. 
D) receives payment from the customer.

Question 11

If a purchaser using a perpetual inventory system pays freight costs, then the

Accepted Answer

A) Inventory account is increased. 
B) Inventory account is not affected. 
C) Freight Out account is increased. 
D) Freight In account is increased. 
A) Inventory account is increased. 
B) Inventory account is not affected. 
C) Freight Out account is increased. 
D) Freight In account is increased.

Question 12

The abbreviation "FOB" stands for

Accepted Answer

A) free on board. 
B) freight on board. 
C) free only (to)buyer. 
D) freight charge on buyer. 
A) free on board. 
B) freight on board. 
C) free only (to)buyer. 
D) freight charge on buyer.

Question 13

Under the perpetual inventory system when a company does NOT anticipate or estimate any returns, in addition to making the entry to record the sale, the seller would

Accepted Answer

A) debit Inventory and credit Cost of Goods Sold. 
B) debit Cost of Goods Sold and credit Purchases. 
C) debit Cost of Goods Sold and credit Inventory. 
D) make no additional entry until the end of the period. 
A) debit Inventory and credit Cost of Goods Sold. 
B) debit Cost of Goods Sold and credit Purchases. 
C) debit Cost of Goods Sold and credit Inventory. 
D) make no additional entry until the end of the period.

Question 14

When using the five-step model, the entry to record the return of goods from a customer would include a

Accepted Answer

A) debit to Sales. 
B) credit to Sales. 
C) debit to Refund Liability. 
D) credit to Refund Liability.. 
A) debit to Sales. 
B) credit to Sales. 
C) debit to Refund Liability. 
D) credit to Refund Liability..

Question 15

Compared to a perpetual inventory system, the use of the periodic inventory system will result in a different value for inventory on the statement of financial position.

Accepted Answer

A) True 
 B)False

Question 16

Net purchases plus freight in is called

Accepted Answer

A) cost of goods sold. 
B) cost of goods available for sale. 
C) cost of goods purchased. 
D) total goods available for sale. 
A) cost of goods sold. 
B) cost of goods available for sale. 
C) cost of goods purchased. 
D) total goods available for sale.

Question 17

If a company has a higher gross profit margin than other companies in the same industry, it means that the company

Accepted Answer

A) is more profitable overall. 
B) has done a better job at maintaining marks-ups or controlling product costs relative to sales revenue. 
C) has higher income from operations. 
D) has done a better job in controlling its operating and other expenses relative to sales revenue. 
A) is more profitable overall. 
B) has done a better job at maintaining marks-ups or controlling product costs relative to sales revenue. 
C) has higher income from operations. 
D) has done a better job in controlling its operating and other expenses relative to sales revenue.

Question 18

For a company using a perpetual inventory system, the journal entry to record the purchase of $3,500 of goods on account, with terms of 4/10, n/30, would include a

Accepted Answer

A) debit to Accounts Payable of $3,500. 
B) credit to Accounts Payable of $3,360. 
C) debit to Inventory of $3,360. 
D) debit to Inventory of $3,500. 
A) debit to Accounts Payable of $3,500. 
B) credit to Accounts Payable of $3,360. 
C) debit to Inventory of $3,360. 
D) debit to Inventory of $3,500.

Question 19

What is the term applied to the excess of sales over the cost of goods sold?

Accepted Answer

A) gross sales 
B) income from operations 
C) net income 
D) gross profit 
A) gross sales 
B) income from operations 
C) net income 
D) gross profit

Question 20

The Freight In account

Accepted Answer

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

Freight In is subtracted from the Purchases account to arrive at cost of goods purchased.

Under the periodic inventory system, the Purchases account is

Which one of the following would appear on the statement of income of both a merchandising company and a service company?

The multiple-step statement of income is considered more useful than the single-step statement of income for a merchandising company because it highlights the components of net income.

As an incentive for customers to pay their accounts promptly, a business may offer its customers

The form of the statement of income that derives its name from the fact that the total of all expenses is deducted from the total of all revenues is called a

Under the perpetual inventory system, which of the following accounts would not be used?

The credit terms offered by a company are 2/10, n/30, which means that

When a buyer purchases inventory the

Inventory becomes part of the cost of goods sold when a company

If a purchaser using a perpetual inventory system pays freight costs, then the

The abbreviation "FOB" stands for

Under the perpetual inventory system when a company does NOT anticipate or estimate any returns, in addition to making the entry to record the sale, the seller would

When using the five-step model, the entry to record the return of goods from a customer would include a

Compared to a perpetual inventory system, the use of the periodic inventory system will result in a different value for inventory on the statement of financial position.

Net purchases plus freight in is called

If a company has a higher gross profit margin than other companies in the same industry, it means that the company

For a company using a perpetual inventory system, the journal entry to record the purchase of $3,500 of goods on account, with terms of 4/10, n/30, would include a

What is the term applied to the excess of sales over the cost of goods sold?

The Freight In account

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

Freight In is subtracted from the Purchases account to arrive at cost of goods purchased.

Under the periodic inventory system, the Purchases account is

Which one of the following would appear on the statement of income of both a merchandising company and a service company?

The multiple-step statement of income is considered more useful than the single-step statement of income for a merchandising company because it highlights the components of net income.

As an incentive for customers to pay their accounts promptly, a business may offer its customers

The form of the statement of income that derives its name from the fact that the total of all expenses is deducted from the total of all revenues is called a

Under the perpetual inventory system, which of the following accounts would not be used?

The credit terms offered by a company are 2/10, n/30, which means that

When a buyer purchases inventory the

Inventory becomes part of the cost of goods sold when a company

If a purchaser using a perpetual inventory system pays freight costs, then the

The abbreviation "FOB" stands for

Under the perpetual inventory system when a company does NOT anticipate or estimate any returns, in addition to making the entry to record the sale, the seller would

When using the five-step model, the entry to record the return of goods from a customer would include a

Compared to a perpetual inventory system, the use of the periodic inventory system will result in a different value for inventory on the statement of financial position.

Net purchases plus freight in is called

If a company has a higher gross profit margin than other companies in the same industry, it means that the company

For a company using a perpetual inventory system, the journal entry to record the purchase of $3,500 of goods on account, with terms of 4/10, n/30, would include a

What is the term applied to the excess of sales over the cost of goods sold?

The Freight In account

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