Question 1

Cost of goods sold reports the:

Accepted Answer

A) cost of merchandise available to sell. 
B) cost of merchandise purchased. 
C) cost times the quantity of goods sold. 
D) selling price times the quantity of goods sold. 
A) cost of merchandise available to sell. 
B) cost of merchandise purchased. 
C) cost times the quantity of goods sold. 
D) selling price times the quantity of goods sold. C

Question 2

Moreland Moldings purchased goods on credit costing $85,000 with terms of 3/10 n/30.Payment is made to the seller 7 days after the purchase.How would the payment be recorded?

Accepted Answer

A) Debit Inventory for $2,550,debit Cash for $82,450,and credit Accounts Payable for $85,000. 
B) Debit Accounts Payable for $85,000,credit Cash for $82,450,and credit Cost of Goods Sold for $2,550. 
C) Debit Accounts Payable for $85,000 credit Cash for $82,450,and credit Inventory for $2,550. 
D) Debit Accounts Payable and credit Cash for $85,000. 
A) Debit Inventory for $2,550,debit Cash for $82,450,and credit Accounts Payable for $85,000. 
B) Debit Accounts Payable for $85,000,credit Cash for $82,450,and credit Cost of Goods Sold for $2,550. 
C) Debit Accounts Payable for $85,000 credit Cash for $82,450,and credit Inventory for $2,550. 
D) Debit Accounts Payable and credit Cash for $85,000. C

Question 3

Assume that a perpetual inventory system is in use.Which of the following statements regarding the journal entries prepared is correct?

Accepted Answer

A) "Freight-out" or delivery costs associated with sales should be included in Cost of Goods Sold. 
B) When a company receives payment from a customer for a sale,Cash is debited and Accounts Payable is credited. 
C) When a company grants an allowance to a customer,Inventory is credited when using a perpetual inventory system. 
D) When a customer returns inventory,the seller debits Sales Revenue (or Sales Returns & Allowances)under a perpetual inventory system. 
A) "Freight-out" or delivery costs associated with sales should be included in Cost of Goods Sold. 
B) When a company receives payment from a customer for a sale,Cash is debited and Accounts Payable is credited. 
C) When a company grants an allowance to a customer,Inventory is credited when using a perpetual inventory system. 
D) When a customer returns inventory,the seller debits Sales Revenue (or Sales Returns & Allowances)under a perpetual inventory system. D

Question 4

Match the term to the appropriate definition.There are more definitions than terms.
-Gross Profit (or Gross Margin)

Accepted Answer

A) A ratio indicating the percentage of profit earned on each dollar of sales,after considering the cost of products sold. 
B) A sales price reduction given to customers for prompt payment of their account balance. 
C) Presents important subtotals,such as gross profit,to help distinguish core operating results from other,less significant items that affect net income. 
D) Expresses the relationship between inventory on hand,purchased,and sold;shown as either BI + P - EI = CGS or BI + P - CGS = EI. 
E) Refunds and price reductions given to customers after goods have been sold and found unsatisfactory.
F)A cash discount received for prompt payment of a purchase on account.
G)The cost of inventory lost to theft,fraud,and error.
H)Net sales minus cost of goods sold.It is a subtotal,not an account.
I)A reduction in the cost of inventory purchases associated with unsatisfactory goods.
J)The sum of beginning inventory and purchases for the period. 
A) A ratio indicating the percentage of profit earned on each dollar of sales,after considering the cost of products sold. 
B) A sales price reduction given to customers for prompt payment of their account balance. 
C) Presents important subtotals,such as gross profit,to help distinguish core operating results from other,less significant items that affect net income. 
D) Expresses the relationship between inventory on hand,purchased,and sold;shown as either BI + P - EI = CGS or BI + P - CGS = EI. 
E) Refunds and price reductions given to customers after goods have been sold and found unsatisfactory.
F)A cash discount received for prompt payment of a purchase on account.
G)The cost of inventory lost to theft,fraud,and error.
H)Net sales minus cost of goods sold.It is a subtotal,not an account.
I)A reduction in the cost of inventory purchases associated with unsatisfactory goods.
J)The sum of beginning inventory and purchases for the period.

Question 5

Match the term to the appropriate definition.There are more definitions than terms.
-Perpetual Inventory System

Accepted Answer

A) The sum of beginning inventory and purchases for the period. 
B) Presents important subtotals,such as gross profit,to help distinguish core operating results from other,less significant items that affect net income. 
C) A term of sale indicating that goods are owned by the seller until they are delivered to the buyer. 
D) Sells goods that have been obtained from a supplier. 
E) Inventory records are updated every time inventory is bought,sold,or returned.
F)A sales price reduction given to customers for prompt payment of their account balance.
G)Inventory records are updated at the end of the accounting period.To determine how much merchandise has been sold,inventory must be physically counted at the end of the period.
H)A term of sale indicating that goods are owned by the buyer the moment they leave the seller's premises.
I)Sells services rather than physical goods.
J)Assets acquired for resale to customers. 
A) The sum of beginning inventory and purchases for the period. 
B) Presents important subtotals,such as gross profit,to help distinguish core operating results from other,less significant items that affect net income. 
C) A term of sale indicating that goods are owned by the seller until they are delivered to the buyer. 
D) Sells goods that have been obtained from a supplier. 
E) Inventory records are updated every time inventory is bought,sold,or returned.
F)A sales price reduction given to customers for prompt payment of their account balance.
G)Inventory records are updated at the end of the accounting period.To determine how much merchandise has been sold,inventory must be physically counted at the end of the period.
H)A term of sale indicating that goods are owned by the buyer the moment they leave the seller's premises.
I)Sells services rather than physical goods.
J)Assets acquired for resale to customers.

Question 6

Match the term to the appropriate definition.There are more definitions than terms.
-Cost of Goods Sold Equation

Accepted Answer

A) A ratio indicating the percentage of profit earned on each dollar of sales,after considering the cost of products sold. 
B) A sales price reduction given to customers for prompt payment of their account balance. 
C) Presents important subtotals,such as gross profit,to help distinguish core operating results from other,less significant items that affect net income. 
D) Expresses the relationship between inventory on hand,purchased,and sold;shown as either BI + P - EI = CGS or BI + P - CGS = EI. 
E) Refunds and price reductions given to customers after goods have been sold and found unsatisfactory.
F)A cash discount received for prompt payment of a purchase on account.
G)The cost of inventory lost to theft,fraud,and error.
H)Net sales minus cost of goods sold.It is a subtotal,not an account.
I)A reduction in the cost of inventory purchases associated with unsatisfactory goods.
J)The sum of beginning inventory and purchases for the period. 
A) A ratio indicating the percentage of profit earned on each dollar of sales,after considering the cost of products sold. 
B) A sales price reduction given to customers for prompt payment of their account balance. 
C) Presents important subtotals,such as gross profit,to help distinguish core operating results from other,less significant items that affect net income. 
D) Expresses the relationship between inventory on hand,purchased,and sold;shown as either BI + P - EI = CGS or BI + P - CGS = EI. 
E) Refunds and price reductions given to customers after goods have been sold and found unsatisfactory.
F)A cash discount received for prompt payment of a purchase on account.
G)The cost of inventory lost to theft,fraud,and error.
H)Net sales minus cost of goods sold.It is a subtotal,not an account.
I)A reduction in the cost of inventory purchases associated with unsatisfactory goods.
J)The sum of beginning inventory and purchases for the period.

Question 7

In a perpetual system,when inventory is sold on account:

Accepted Answer

A) Sales Revenue is increased and Accounts Receivable is decreased. 
B) Sales Revenue,Cost of Goods Sold,and Accounts Receivable are increased while Inventory is decreased. 
C) Sales Revenue and Accounts Receivable are increased,and Cost of Goods Sold and Inventory are decreased. 
D) Sales Revenue is increased and Inventory is decreased. 
A) Sales Revenue is increased and Accounts Receivable is decreased. 
B) Sales Revenue,Cost of Goods Sold,and Accounts Receivable are increased while Inventory is decreased. 
C) Sales Revenue and Accounts Receivable are increased,and Cost of Goods Sold and Inventory are decreased. 
D) Sales Revenue is increased and Inventory is decreased.

Question 8

Most companies report sales revenue,sales returns and allowances,and sales discounts,as well as net sales on their externally reported income statements.

Accepted Answer

A) True 
 B)False

Question 9

Polk Company uses a perpetual inventory system and had the following transactions during November: November 6-Purchased $8,700 of inventory on account,terms 2/10,n/30.
November 8-Returned $1,200 of defective units and received full credit.
November 15-Paid the amount due.
What journal entry will be recorded by Polk Company on November 6?

Accepted Answer

A) Debit Inventory and credit Accounts Payable for $8,700. 
B) Debit Cost of Goods Sold and credit Accounts Payable for $8,526. 
C) Debit Purchases and credit Accounts Payable for $8,700. 
D) Debit Inventory and credit Accounts Payable for $8,526. 
A) Debit Inventory and credit Accounts Payable for $8,700. 
B) Debit Cost of Goods Sold and credit Accounts Payable for $8,526. 
C) Debit Purchases and credit Accounts Payable for $8,700. 
D) Debit Inventory and credit Accounts Payable for $8,526.

Question 10

Which of the following statements about a multistep income statement is not correct?

Accepted Answer

A) Income before income taxes = Net income + Income tax expense 
B) Depreciation is subtracted in the calculation of core operating results. 
C) Income from operations = Income before income tax expense + Other revenues (expenses),net 
D) Income from operations = Net income + Income tax expense − Other revenues (expenses),net 
A) Income before income taxes = Net income + Income tax expense 
B) Depreciation is subtracted in the calculation of core operating results. 
C) Income from operations = Income before income tax expense + Other revenues (expenses),net 
D) Income from operations = Net income + Income tax expense − Other revenues (expenses),net

Question 11

Windsor,Inc.uses a perpetual inventory system and reported $250,000 of inventory at the beginning of the month based on a physical count of inventory.During the month,the company bought $22,500 of inventory and sold inventory that had cost $15,000.At the end of the month,the physical count of inventory shows $255,000 on hand.How much shrinkage occurred during the month?

Accepted Answer

A) $17,500 
B) $12,500 
C) $2,500 
D) $5,000 
A) $17,500 
B) $12,500 
C) $2,500 
D) $5,000

Question 12

A retail store that increases all of its product prices by 25% will experience a(n)________ in its overall gross profit percentage but may experience a(n)________ in sales volume.

Accepted Answer

A) increase,increase 
B) decrease,decrease 
C) decrease,increase 
D) increase,decrease 
A) increase,increase 
B) decrease,decrease 
C) decrease,increase 
D) increase,decrease

Question 13

If a company achieves a small increase in its gross profit percentage from one year to the next,the company:

Accepted Answer

A) will have a higher net income. 
B) must have had a sales volume increase. 
C) must have decreased its operating expenses. 
D) might be obtaining products at a lower cost per unit. 
A) will have a higher net income. 
B) must have had a sales volume increase. 
C) must have decreased its operating expenses. 
D) might be obtaining products at a lower cost per unit.

Question 14

The following is a listing of some of the balance sheet accounts and all of the income statement accounts for Northview Company as they appear on the company's adjusted trial balance. $\begin{array}{lr}
\text { Accounts Payable } & \$ 30,000 \
\text { Accounts Receivable } & 33,000 \
\text { Inventory } & 60,000 \
\text { Advertising Expense } & 36,000 \
\text { Cost of Goods Sold } & 267,000 \
\text { Delivery Expense } & 18,000 \
\text { Income Tax Expense } & 6,000 \
\text { Insurance Expense } & 3,000 \
\text { Rent Expense } & 36,000 \
\text { Sales Revenue } & 480,000 \
\text { Sales Discounts } & 33,000 \
\text { Sales Returns \& Allowances } & 57,000
\end{array}$ Gross profit would be:

Accepted Answer

A) $105,000. 
B) $111,000. 
C) $123,000. 
D) $213,000. 
A) $105,000. 
B) $111,000. 
C) $123,000. 
D) $213,000.

Question 15

Match the term to the appropriate definition.There are more definitions than terms.
-Shrinkage

Accepted Answer

A) Presents important subtotals,such as gross profit,to help distinguish core operating results from other,less significant items that affect net income. 
B) A reduction in the cost of inventory purchases associated with unsatisfactory goods. 
C) Refunds and price reductions given to customers after goods have been sold and found unsatisfactory. 
D) A ratio indicating the percentage of profit earned on each dollar of sales,after considering the cost of products sold. 
E) Net sales minus cost of goods sold.It is a subtotal,not an account.
F)A sales price reduction given to customers for prompt payment of their account balance.
G)The sum of beginning inventory and purchases for the period.
H)A cash discount received for prompt payment of a purchase on account.
I)Assets acquired for resale to customers.
J)The cost of inventory lost to theft,fraud,and error. 
A) Presents important subtotals,such as gross profit,to help distinguish core operating results from other,less significant items that affect net income. 
B) A reduction in the cost of inventory purchases associated with unsatisfactory goods. 
C) Refunds and price reductions given to customers after goods have been sold and found unsatisfactory. 
D) A ratio indicating the percentage of profit earned on each dollar of sales,after considering the cost of products sold. 
E) Net sales minus cost of goods sold.It is a subtotal,not an account.
F)A sales price reduction given to customers for prompt payment of their account balance.
G)The sum of beginning inventory and purchases for the period.
H)A cash discount received for prompt payment of a purchase on account.
I)Assets acquired for resale to customers.
J)The cost of inventory lost to theft,fraud,and error.

Question 16

Buckeye Co.had beginning inventory of $18,000,cost of goods sold of $42,000,and ending inventory of $24,000.Purchases were:

Accepted Answer

A) $36,000. 
B) $30,000. 
C) $27,000. 
D) $48,000. 
A) $36,000. 
B) $30,000. 
C) $27,000. 
D) $48,000.

Question 17

When goods are sold to a customer with credit terms of 2/15,n/30,the customer will receive a:

Accepted Answer

A) 15% discount if they pay within 2 days. 
B) 2% discount if they pay 15% of the amount due within 30 days. 
C) 15% discount if they pay within 30 days. 
D) 2% discount if they pay within 15 days. 
A) 15% discount if they pay within 2 days. 
B) 2% discount if they pay 15% of the amount due within 30 days. 
C) 15% discount if they pay within 30 days. 
D) 2% discount if they pay within 15 days.

Question 18

When a company collects from a customer who pays within the discount period,the discount:

Accepted Answer

A) is a reduction in the initial sales revenue. 
B) is an addition to the cost of goods sold. 
C) is a reduction to the inventory account. 
D) is an addition to the sales returns and allowances account. 
A) is a reduction in the initial sales revenue. 
B) is an addition to the cost of goods sold. 
C) is a reduction to the inventory account. 
D) is an addition to the sales returns and allowances account.

Question 19

The purchase of merchandise on account in a perpetual system is recorded with a debit to ________ and a credit to ________.

Accepted Answer

A) Inventory;Accounts Payable 
B) Accounts Payable;Inventory 
C) Inventory;Accounts Receivable 
D) Accounts Receivable;Inventory 
A) Inventory;Accounts Payable 
B) Accounts Payable;Inventory 
C) Inventory;Accounts Receivable 
D) Accounts Receivable;Inventory

Question 20

Which of the following is a correct statement?

Accepted Answer

A) Sales discounts are offered to compensate customers for unsatisfactory merchandise. 
B) Sales discounts are offered to encourage prompt payment by customers. 
C) Sales discounts may result in creating a liability Deferred Revenue. 
D) Sales discounts may result in creating an account Inventory-Estimated Returns. 
A) Sales discounts are offered to compensate customers for unsatisfactory merchandise. 
B) Sales discounts are offered to encourage prompt payment by customers. 
C) Sales discounts may result in creating a liability Deferred Revenue. 
D) Sales discounts may result in creating an account Inventory-Estimated Returns.

Cost of goods sold reports the:

Moreland Moldings purchased goods on credit costing $85,000 with terms of 3/10 n/30.Payment is made to the seller 7 days after the purchase.How would the payment be recorded?

Assume that a perpetual inventory system is in use.Which of the following statements regarding the journal entries prepared is correct?

Match the term to the appropriate definition.There are more definitions than terms. -Gross Profit (or Gross Margin)

Match the term to the appropriate definition.There are more definitions than terms. -Perpetual Inventory System

Match the term to the appropriate definition.There are more definitions than terms. -Cost of Goods Sold Equation

In a perpetual system,when inventory is sold on account:

Most companies report sales revenue,sales returns and allowances,and sales discounts,as well as net sales on their externally reported income statements.

Which of the following statements about a multistep income statement is not correct?

A retail store that increases all of its product prices by 25% will experience a(n) in its overall gross profit percentage but may experience a(n) in sales volume.

If a company achieves a small increase in its gross profit percentage from one year to the next,the company:

Match the term to the appropriate definition.There are more definitions than terms. -Shrinkage

Buckeye Co.had beginning inventory of $18,000,cost of goods sold of $42,000,and ending inventory of $24,000.Purchases were:

When goods are sold to a customer with credit terms of 2/15,n/30,the customer will receive a:

When a company collects from a customer who pays within the discount period,the discount:

The purchase of merchandise on account in a perpetual system is recorded with a debit to and a credit to .

Which of the following is a correct statement?

Business Decisions and Financial Accounting

The Balance Sheet

The Income Statement

Adjustments,Financial Statements,and Financial Results

Fraud,Internal Control,and Cash

Inventory and Cost of Goods Sold

Receivables,Bad Debt Expense,and Interest Revenue

Long-Lived Tangible and Intangible Assets

Liabilities

Stockholders Equity

Statement of Cash Flows

Measuring and Evaluating Financial Performance

Filters

Exam 6: Merchandising Operations and the Multistep Income Statement

Cost of goods sold reports the:

Moreland Moldings purchased goods on credit costing $85,000 with terms of 3/10 n/30.Payment is made to the seller 7 days after the purchase.How would the payment be recorded?

Assume that a perpetual inventory system is in use.Which of the following statements regarding the journal entries prepared is correct?

Match the term to the appropriate definition.There are more definitions than terms. -Gross Profit (or Gross Margin)

Match the term to the appropriate definition.There are more definitions than terms. -Perpetual Inventory System

Match the term to the appropriate definition.There are more definitions than terms. -Cost of Goods Sold Equation

In a perpetual system,when inventory is sold on account:

Most companies report sales revenue,sales returns and allowances,and sales discounts,as well as net sales on their externally reported income statements.

Which of the following statements about a multistep income statement is not correct?

A retail store that increases all of its product prices by 25% will experience a(n)________ in its overall gross profit percentage but may experience a(n)________ in sales volume.

If a company achieves a small increase in its gross profit percentage from one year to the next,the company:

Match the term to the appropriate definition.There are more definitions than terms. -Shrinkage

Buckeye Co.had beginning inventory of $18,000,cost of goods sold of $42,000,and ending inventory of $24,000.Purchases were:

When goods are sold to a customer with credit terms of 2/15,n/30,the customer will receive a:

When a company collects from a customer who pays within the discount period,the discount:

The purchase of merchandise on account in a perpetual system is recorded with a debit to ________ and a credit to ________.

Which of the following is a correct statement?

Business Decisions and Financial Accounting

The Balance Sheet

The Income Statement

Adjustments,Financial Statements,and Financial Results

Fraud,Internal Control,and Cash

Inventory and Cost of Goods Sold

Receivables,Bad Debt Expense,and Interest Revenue

Long-Lived Tangible and Intangible Assets

Liabilities

Stockholders Equity

Statement of Cash Flows

Measuring and Evaluating Financial Performance

Filters

A retail store that increases all of its product prices by 25% will experience a(n) in its overall gross profit percentage but may experience a(n) in sales volume.

The purchase of merchandise on account in a perpetual system is recorded with a debit to and a credit to .