Question 1

If the buyer is to pay the transportation cost of delivering merchandise,the freight or shipping terms would be stated as:

Accepted Answer

FOB shippi

Question 2

The following entry is taken from the journal of a merchandising company:
This entry results in

Accepted Answer

A) an increase in operating expenses. 
B) an increase in Cost of Goods Sold. 
C) an increase in inventory. 
D) a decrease in gross margin. 
A) an increase in operating expenses. 
B) an increase in Cost of Goods Sold. 
C) an increase in inventory. 
D) a decrease in gross margin.

Question 3

A multistep income statement shows Sales,Cost of Goods Sold,and Gross Margin.

Accepted Answer

A) True 
 B)False

Question 4

Net sales is calculated by subtracting cost of goods sold from sales revenue.

Accepted Answer

A) True 
 B)False

Question 5

Llewelyn Company paid the amount due on a purchase of merchandise on account.Llewelyn uses the perpetual inventory system.Which of the following answers reflects the effect of the payment on the financial statements?

Accepted Answer

A)    
B)   
C)   
D)    
E)   
A)    
B)   
C)   
D)    
E)

Question 6

The following events apply to Deb's Dance Wholesalers.
1)Sold merchandise to a customer.The goods were shipped FOB destination,with a freight cost of $50.
2)Purchased merchandise with freight cost of $75,shipped with the terms FOB shipping point.
3)Sold merchandise to a customer with freight cost of $40,shipped FOB shipping point.
Required: a)Based on the above events,what is the total amount of freight that will be paid by Deb's Dance Wholesalers?
b)How much of the freight cost will be recorded as an expense when incurred?

Accepted Answer

a)Freight paid by Da

Question 7

Which of the following is considered a product cost?

Accepted Answer

A) Utility expense for the current month. 
B) Salaries paid to employees of a retailer. 
C) Transportation cost on goods received from suppliers. 
D) Transportation cost on goods shipped to customers. 
A) Utility expense for the current month. 
B) Salaries paid to employees of a retailer. 
C) Transportation cost on goods received from suppliers. 
D) Transportation cost on goods shipped to customers.

Question 8

Which of the following would be considered as primarily a merchandising business?

Accepted Answer

A) West Consulting 
B) Martin's Supermarket 
C) Sandridge and Associates Law Offices 
D) KPM Accounting and Tax Service 
A) West Consulting 
B) Martin's Supermarket 
C) Sandridge and Associates Law Offices 
D) KPM Accounting and Tax Service

Question 9

Ballard Company uses the perpetual inventory system.The company purchased $16,000 of merchandise from Andes Company under the terms 2/10,net/30.Ballard paid for the merchandise within 10 days and also paid $500 freight to obtain the goods under terms FOB shipping point.All of the merchandise purchased was sold for $30,000 cash.The amount of gross margin for this merchandise is:

Accepted Answer

A) $14,000 
B) $13,820 
C) $16,000 
D) $13,500 
A) $14,000 
B) $13,820 
C) $16,000 
D) $13,500

Question 10

In a perpetual inventory system,a purchase allowance is treated as a decrease in expenses by the company that purchased the goods.

Accepted Answer

A) True 
 B)False

Question 11

Kenyon Company experienced a transaction that had the following effect on the financial statements:
Which transaction would have this effect?

Accepted Answer

A) Paid for merchandise that had been purchased on account. 
B) A loss on land that was sold for cash. 
C) Return by a customer of a sale that was made on account. 
D) Return to a supplier of merchandise purchased on account. 
A) Paid for merchandise that had been purchased on account. 
B) A loss on land that was sold for cash. 
C) Return by a customer of a sale that was made on account. 
D) Return to a supplier of merchandise purchased on account.

Question 12

Which of the following account titles is normally used in a periodic inventory system?

Accepted Answer

A) Transportation-in. 
B) Purchases. 
C) Purchase Returns and Allowances. 
D) All of these answer choices are normally used. 
A) Transportation-in. 
B) Purchases. 
C) Purchase Returns and Allowances. 
D) All of these answer choices are normally used.

Question 13

Indicate whether each of the following statements is true or false.(Assume a perpetual inventory system. )
_____ a)Transportation-out cost is a part of selling and administrative costs.
_____ b)When transportation-out cost is incurred,the balance in the inventory account increases.
_____ c)When transportation-in cost is incurred,the balance in the inventory account increases.
_____ d)When the transportation-out cost is incurred,the balance in the cost of goods sold account increases.
_____ e.Transportation-in cost is a part of selling and administrative costs.

Accepted Answer

a)True b)F

Question 14

Use the following for questions 
Assume the perpetual inventory method is used.
1)The company purchased $12,500 of merchandise on account under terms 2/10,n/30.
2)The company returned $1,200 of merchandise to the supplier before payment was made.
3)The liability was paid within the discount period.
4)All of the merchandise purchased was sold for $18,800 cash.
-The amount of gross margin from the four transactions is:

Accepted Answer

A) $5,100. 
B) $7,726. 
C) $6,550. 
D) $11,074. 
A) $5,100. 
B) $7,726. 
C) $6,550. 
D) $11,074.

Question 15

The Cost of Goods Sold account is classified as:

Accepted Answer

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

Question 16

Product costs are matched against sales revenue

Accepted Answer

A) in the period immediately following the purchase. 
B) in the period immediately following the sale. 
C) when the merchandise is purchased. 
D) when the merchandise is sold. 
A) in the period immediately following the purchase. 
B) in the period immediately following the sale. 
C) when the merchandise is purchased. 
D) when the merchandise is sold.

Question 17

Discuss the major differences between a perpetual inventory system and a periodic inventory system.

Accepted Answer

The perpetual system derives its name fr

Question 18

Indicate whether each of the following statements is true or false.(Assume a perpetual inventory system. )
_____ a)The freight terms FOB shipping point increase the cost of inventory to the buyer.
_____ b)The term FOB means that goods are shipped free of charge to buyer and seller.
_____ c)FOB shipping point means that purchaser's responsibility ends at shipping point.
_____ d)FOB destination means that seller's responsibility ends at destination.
_____ e)When the seller of merchandise records freight under the terms FOB shipping point,the seller records an expense.

Accepted Answer

a)True b)F

Question 19

The income statement is not affected by a purchase of merchandise.

Accepted Answer

A) True 
 B)False

Question 20

Indicate how each event affects the elements of financial statements.Use the following letters to record your answer in the box shown below each element.You do not need to enter amounts.Assume that Frank Company uses a perpetual inventory system.
  
-Whetzel Co.paid a supplier,Jacobs Company,the amount owed on account related to a purchase of inventory on account with terms of net 30.

Accepted Answer

(D)(D)(N)(

If the buyer is to pay the transportation cost of delivering merchandise,the freight or shipping terms would be stated as:

The following entry is taken from the journal of a merchandising company: This entry results in

A multistep income statement shows Sales,Cost of Goods Sold,and Gross Margin.

Net sales is calculated by subtracting cost of goods sold from sales revenue.

Llewelyn Company paid the amount due on a purchase of merchandise on account.Llewelyn uses the perpetual inventory system.Which of the following answers reflects the effect of the payment on the financial statements?

Which of the following is considered a product cost?

Which of the following would be considered as primarily a merchandising business?

In a perpetual inventory system,a purchase allowance is treated as a decrease in expenses by the company that purchased the goods.

Kenyon Company experienced a transaction that had the following effect on the financial statements: Which transaction would have this effect?

Which of the following account titles is normally used in a periodic inventory system?

The Cost of Goods Sold account is classified as:

Product costs are matched against sales revenue

Discuss the major differences between a perpetual inventory system and a periodic inventory system.

The income statement is not affected by a purchase of merchandise.

An Introduction to Accounting

Understanding the Accounting Cycle

The Double-Entry Accounting System

Accounting for Inventories

Internal Control and Accounting for Cash

Accounting for Receivables

Accounting for Long-Term Operational Assets

Accounting for Current Liabilities and Payroll

Accounting for Long-Term Debt

Proprietorships,partnerships,and Corporations

Statement of Cash Flows

Financial Statement Analysis

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Exam 4: Accounting for Merchandising Businesses

If the buyer is to pay the transportation cost of delivering merchandise,the freight or shipping terms would be stated as:

The following entry is taken from the journal of a merchandising company: This entry results in

A multistep income statement shows Sales,Cost of Goods Sold,and Gross Margin.

Net sales is calculated by subtracting cost of goods sold from sales revenue.

Llewelyn Company paid the amount due on a purchase of merchandise on account.Llewelyn uses the perpetual inventory system.Which of the following answers reflects the effect of the payment on the financial statements?

Which of the following is considered a product cost?

Which of the following would be considered as primarily a merchandising business?

In a perpetual inventory system,a purchase allowance is treated as a decrease in expenses by the company that purchased the goods.

Kenyon Company experienced a transaction that had the following effect on the financial statements: Which transaction would have this effect?

Which of the following account titles is normally used in a periodic inventory system?

The Cost of Goods Sold account is classified as:

Product costs are matched against sales revenue

Discuss the major differences between a perpetual inventory system and a periodic inventory system.

The income statement is not affected by a purchase of merchandise.

An Introduction to Accounting

Understanding the Accounting Cycle

The Double-Entry Accounting System

Accounting for Inventories

Internal Control and Accounting for Cash

Accounting for Receivables

Accounting for Long-Term Operational Assets

Accounting for Current Liabilities and Payroll

Accounting for Long-Term Debt

Proprietorships,partnerships,and Corporations

Statement of Cash Flows

Financial Statement Analysis

Filters