Question 1

When inventory is sold,the cost of the inventory is removed from inventory and reported on a multistep the income statement as:

Accepted Answer

A) inventory expense. 
B) cost of goods sold. 
C) selling,general,and administrative expenses. 
D) operating expenses. 
A) inventory expense. 
B) cost of goods sold. 
C) selling,general,and administrative expenses. 
D) operating expenses.

Question 2

Sales Returns and Allowances are reported on the:

Accepted Answer

A) income statement only. 
B) balance sheet only. 
C) both the income statement and the balance sheet. 
D) statement of cash flows only. 
A) income statement only. 
B) balance sheet only. 
C) both the income statement and the balance sheet. 
D) statement of cash flows only.

Question 3

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

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 4

If a merchandiser offers a sales discount of 2/10,net/30 on a sale of $2,000,the amount due in 10 days is the net amount of $1,960.

Accepted Answer

A) True 
 B)False

Question 5

The following is a listing of all of the income statement accounts for Mulberry Street Sportswear as they appear on the adjusted trial balance as of December 31.
 $\begin{array}{lr}
\text { Advertising Expense } & \$ 12,000 \
\text { Cost of Goods Sold } & 89,000 \
\text { Delivery Expense } & 6,000 \
\text { Insurance Expense } & 1,000 \
\text { Income Tax Expense } & 2,000 \
\text { Rent Expense } & 12,000 \
\text { Interest Expense } & 5,000 \
\text { Sales Revenue } & 160,000 \
\text { Sales Discounts } & 11,000 \
\text { Sales Returns \& Allowances } & 19,000
\end{array}$ Required:
a.Prepare a multistep income statement.
b.Compute the gross profit percentage.

Accepted Answer

a.
*Selling,General,and Administrative E

Question 6

Monte Vista uses the perpetual inventory system.At the beginning of the quarter,Monte Vista has $60,000 in inventory.During the quarter the company purchases $15,800 of new inventory from a vendor,returned $1,400 of inventory to the vendor,and took advantage of discounts from the vendor of $400.At the end of the quarter the balance in inventory is $53,000.What is the cost of goods sold?

Accepted Answer

A) $21,000 
B) $22,800 
C) $7,000 
D) $23,800 
A) $21,000 
B) $22,800 
C) $7,000 
D) $23,800

Question 7

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 15?

Accepted Answer

A) Debit Accounts Payable and credit Cash for $7,350 
B) Debit Accounts Payable for $7,500,credit Purchase Discount for $150,and credit Cash for $7,350 
C) Debit Accounts Payable for $7,500,credit Inventory for $150,and credit Cash for $7,350 
D) Debit Accounts Payable for $7,350,credit Inventory for $150,and credit Cash for $7,200 
A) Debit Accounts Payable and credit Cash for $7,350 
B) Debit Accounts Payable for $7,500,credit Purchase Discount for $150,and credit Cash for $7,350 
C) Debit Accounts Payable for $7,500,credit Inventory for $150,and credit Cash for $7,350 
D) Debit Accounts Payable for $7,350,credit Inventory for $150,and credit Cash for $7,200

Question 8

Juan sells $75,000 of TVs to a customer.The credit terms state a 2% discount if paid in 7 days and a 1% discount if paid in 8-14 days.The customer pays in 12 days.How much cash does Juan receive?

Accepted Answer

A) $75,000 
B) $73,500 
C) $74,250 
D) $1,500 
A) $75,000 
B) $73,500 
C) $74,250 
D) $1,500

Question 9

Devonshire,Inc.sold merchandise inventory on account at a price of $16,000 with payment terms of 1/10,n/30.The merchandise cost Devonshire $11,000.If the customer paid for the merchandise 5 days after receiving the invoice,how much cash was collected by Devonshire?

Accepted Answer

A) $11,000 
B) $15,840 
C) $10,890 
D) $16,000 
A) $11,000 
B) $15,840 
C) $10,890 
D) $16,000

Question 10

Match the term to the appropriate definition.There are more definitions than terms.
-Purchase Returns and Allowances

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 11

A company sells goods at a selling price of $20,000.The cost of the goods is $15,000.Under a perpetual inventory system,the journal entries prepared to record the credit sale will include one with a debit to:

Accepted Answer

A) Inventory and a credit to Sales Revenue for $15,000. 
B) Cost of Goods Sold and a credit to Inventory for $15,000. 
C) Inventory and credit to Sales Revenue for $20,000. 
D) Cost of Goods Sold and a credit to Sales Revenue for $15,000. 
A) Inventory and a credit to Sales Revenue for $15,000. 
B) Cost of Goods Sold and a credit to Inventory for $15,000. 
C) Inventory and credit to Sales Revenue for $20,000. 
D) Cost of Goods Sold and a credit to Sales Revenue for $15,000.

Question 12

Willetta Company purchases inventory for $10,000 with terms 3/10,n/30.It then returns $2,000 of the inventory purchased to the supplier and also receives an allowance for defective inventory of $100.The company pays the amount due within the discount period.What is the amount of the discount that will be taken?

Accepted Answer

A) $300 
B) $237 
C) $240 
D) $297 
A) $300 
B) $237 
C) $240 
D) $297

Question 13

Mitchell uses a perpetual inventory system.Mitchell sells a computer from inventory for $1,198 on credit.Mitchell originally bought the computer from IBM for $790.What journal entry (entries)will Mitchell prepare to record the sale?

Accepted Answer

A) Debit Cash and credit Sales Revenue for $1,198;debit Cost of Goods Sold and credit Inventory for $790. 
B) Debit Accounts Receivable for $1,198,credit Inventory for $790,and credit Gross Profit for $408. 
C) Debit Accounts Receivable and credit Sales Revenue for $1,198;debit Cost of Goods Sold and credit Inventory for $790. 
D) Debit Inventory for $790,debit Cost of Goods Sold for $408,and credit Accounts Receivable for $1,198. 
A) Debit Cash and credit Sales Revenue for $1,198;debit Cost of Goods Sold and credit Inventory for $790. 
B) Debit Accounts Receivable for $1,198,credit Inventory for $790,and credit Gross Profit for $408. 
C) Debit Accounts Receivable and credit Sales Revenue for $1,198;debit Cost of Goods Sold and credit Inventory for $790. 
D) Debit Inventory for $790,debit Cost of Goods Sold for $408,and credit Accounts Receivable for $1,198.

Question 14

Inventory is reported as a(n)________ on the ________.

Accepted Answer

A) current asset;balance sheet 
B) current asset;balance sheet and income statement 
C) expense;income statement 
D) expense;balance sheet 
A) current asset;balance sheet 
B) current asset;balance sheet and income statement 
C) expense;income statement 
D) expense;balance sheet

Question 15

Inventory shrinkage is the difference between inventory in the warehouse and inventory counted.

Accepted Answer

A) True 
 B)False

Question 16

A company reported the following: $\begin{array}{lr}
\text { Cost of Goods Sold } & \$ 200,000 \
\text { General, Selling, and Administrative Expenses } & 52,800 \
\text { Income Tax Expense } & 3,600 \
\text { Inventory } & 12,000 \
\text { Net Income } & 22,560 \
\text { Sales Revenue } & 284,000 \
\text { Sales Discounts } & 2,720\
\text { Sales Returns \& Allowances }&2,320
\end{array}$ What is the amount of gross profit?

Accepted Answer

A) $75,360 
B) $78,960 
C) $84,000 
D) $26,160 
A) $75,360 
B) $78,960 
C) $84,000 
D) $26,160

Question 17

Which one of the following statements regarding sales discounts is correct?

Accepted Answer

A) If a company offers a discount to encourage prompt payment and the discount is taken,the discount reduces the amount of net sales. 
B) Credit terms of "2/10,n/30" means that if payment is made in two days,a 10% discount may be taken;if not paid within two days,the full invoice price will be due in thirty days. 
C) The terms "sales discounts" and "purchase discounts" are used interchangeably by a company. 
D) A sales discount is subtracted from Sales Revenue whereas a purchase discount is added to Cost of Goods Sold. 
A) If a company offers a discount to encourage prompt payment and the discount is taken,the discount reduces the amount of net sales. 
B) Credit terms of "2/10,n/30" means that if payment is made in two days,a 10% discount may be taken;if not paid within two days,the full invoice price will be due in thirty days. 
C) The terms "sales discounts" and "purchase discounts" are used interchangeably by a company. 
D) A sales discount is subtracted from Sales Revenue whereas a purchase discount is added to Cost of Goods Sold.

Question 18

Sales Revenue is a(n)________ account and ________ is an expense account.

Accepted Answer

A) asset;Sales Discounts 
B) revenue;Sales Returns and Allowances 
C) revenue;Cost of Goods Sold 
D) liability;Gross Profit 
A) asset;Sales Discounts 
B) revenue;Sales Returns and Allowances 
C) revenue;Cost of Goods Sold 
D) liability;Gross Profit

Question 19

Elm Corporation is a merchandising company.The year began with inventory of $35,100,Purchases for the year were $67,600,and the Ending Inventory was $18,200.What is the Cost of Goods Sold that would be reported on the income statement?

Accepted Answer

A) $120,900 
B) $50,700 
C) $14,300 
D) $84,500 
A) $120,900 
B) $50,700 
C) $14,300 
D) $84,500

Question 20

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

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.

When inventory is sold,the cost of the inventory is removed from inventory and reported on a multistep the income statement as:

Sales Returns and Allowances are reported on the:

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

If a merchandiser offers a sales discount of 2/10,net/30 on a sale of $2,000,the amount due in 10 days is the net amount of $1,960.

Juan sells $75,000 of TVs to a customer.The credit terms state a 2% discount if paid in 7 days and a 1% discount if paid in 8-14 days.The customer pays in 12 days.How much cash does Juan receive?

Devonshire,Inc.sold merchandise inventory on account at a price of $16,000 with payment terms of 1/10,n/30.The merchandise cost Devonshire $11,000.If the customer paid for the merchandise 5 days after receiving the invoice,how much cash was collected by Devonshire?

Match the term to the appropriate definition.There are more definitions than terms. -Purchase Returns and Allowances

A company sells goods at a selling price of $20,000.The cost of the goods is $15,000.Under a perpetual inventory system,the journal entries prepared to record the credit sale will include one with a debit to:

Mitchell uses a perpetual inventory system.Mitchell sells a computer from inventory for $1,198 on credit.Mitchell originally bought the computer from IBM for $790.What journal entry (entries)will Mitchell prepare to record the sale?

Inventory is reported as a(n) on the .

Inventory shrinkage is the difference between inventory in the warehouse and inventory counted.

A company reported the following: Cost of Goods Sold \ 200,000 General, Selling, and Administrative Expenses 52,800 Income Tax Expense 3,600 Inventory 12,000 Net Income 22,560 Sales Revenue 284,000 Sales Discounts 2,720 Sales Returns \& Allowances 2,320 What is the amount of gross profit?

Which one of the following statements regarding sales discounts is correct?

Sales Revenue is a(n) account and is an expense account.

Elm Corporation is a merchandising company.The year began with inventory of $35,100,Purchases for the year were $67,600,and the Ending Inventory was $18,200.What is the Cost of Goods Sold that would be reported on the income statement?

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

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

When inventory is sold,the cost of the inventory is removed from inventory and reported on a multistep the income statement as:

Sales Returns and Allowances are reported on the:

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

If a merchandiser offers a sales discount of 2/10,net/30 on a sale of $2,000,the amount due in 10 days is the net amount of $1,960.

Juan sells $75,000 of TVs to a customer.The credit terms state a 2% discount if paid in 7 days and a 1% discount if paid in 8-14 days.The customer pays in 12 days.How much cash does Juan receive?

Devonshire,Inc.sold merchandise inventory on account at a price of $16,000 with payment terms of 1/10,n/30.The merchandise cost Devonshire $11,000.If the customer paid for the merchandise 5 days after receiving the invoice,how much cash was collected by Devonshire?

Match the term to the appropriate definition.There are more definitions than terms. -Purchase Returns and Allowances

A company sells goods at a selling price of $20,000.The cost of the goods is $15,000.Under a perpetual inventory system,the journal entries prepared to record the credit sale will include one with a debit to:

Mitchell uses a perpetual inventory system.Mitchell sells a computer from inventory for $1,198 on credit.Mitchell originally bought the computer from IBM for $790.What journal entry (entries)will Mitchell prepare to record the sale?

Inventory is reported as a(n)________ on the ________.

Inventory shrinkage is the difference between inventory in the warehouse and inventory counted.

A company reported the following: Cost of Goods Sold \ 200,000 General, Selling, and Administrative Expenses 52,800 Income Tax Expense 3,600 Inventory 12,000 Net Income 22,560 Sales Revenue 284,000 Sales Discounts 2,720 Sales Returns \& Allowances 2,320 What is the amount of gross profit?

Which one of the following statements regarding sales discounts is correct?

Sales Revenue is a(n)________ account and ________ is an expense account.

Elm Corporation is a merchandising company.The year began with inventory of $35,100,Purchases for the year were $67,600,and the Ending Inventory was $18,200.What is the Cost of Goods Sold that would be reported on the income statement?

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

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

Inventory is reported as a(n) on the .

Sales Revenue is a(n) account and is an expense account.