Question 1

A small increase in the gross profit percentage may indicate an important rise in income.

Accepted Answer

A) True 
 B)False

Question 2

From the following details of a merchandiser, calculate the Cost of Goods Sold. (Assume the merchandiser uses the periodic inventory system.)

Accepted Answer

A) $116,540 
B) $81,460 
C) $114,950 
D) $53,540 
A) $116,540 
B) $81,460 
C) $114,950 
D) $53,540

Question 3

A company purchased inventory for $2,000 from a vendor on account, FOB shipping point, with terms of 2/10, n/30. The company paid the shipper $100 cash for freight in. The company then returned damaged goods worth $200. The invoice has been paid 8 days after the sale. Assuming that there was no beginning inventory balance, the cost of inventory would be: (Assume a perpetual inventory system)

Accepted Answer

A) $1,764. 
B) $1,864. 
C) $2,100. 
D) $1,900. 
A) $1,764. 
B) $1,864. 
C) $2,100. 
D) $1,900.

Question 4

Under which of the following terms will the buyer be required to pay transportation costs?

Accepted Answer

A) FOB destination 
B) FOB shipping point 
C) CIF 
D) 5/5, net 45 
A) FOB destination 
B) FOB shipping point 
C) CIF 
D) 5/5, net 45

Question 5

A wholesaler or a retailer needs to maintain stock to carry out its day-to-day operations. This stock is known as:

Accepted Answer

A) accounts receivable. 
B) prepaid insurance. 
C) merchandise inventory. 
D) equipment. 
A) accounts receivable. 
B) prepaid insurance. 
C) merchandise inventory. 
D) equipment.

Question 6

A company ships goods to a customer, and pays transportation costs. To the seller, the transportation costs so paid are known as:

Accepted Answer

A) freight out. 
B) freight in. 
C) sales commission. 
D) brokerage. 
A) freight out. 
B) freight in. 
C) sales commission. 
D) brokerage.

Question 7

Which of the following line items will appear on the income statement of a merchandiser but not of a service company?

Accepted Answer

A) Salaries Expense 
B) Depreciation Expense 
C) Cost of Goods Sold 
D) Supplies Inventory 
A) Salaries Expense 
B) Depreciation Expense 
C) Cost of Goods Sold 
D) Supplies Inventory

Question 8

Procession Groceries, a famous grocery merchandiser, purchased goods and paid transportation to bring them to the company warehouse. The transportation cost is known as:

Accepted Answer

A) freight out. 
B) selling expense 
C) freight in. 
D) cost of goods sold. 
A) freight out. 
B) selling expense 
C) freight in. 
D) cost of goods sold.

Question 9

Expenses that fall outside the regular operations of a business are:

Accepted Answer

A) not shown in the income statement of a merchandiser. 
B) treated as current assets and are shown as merchandise inventory. 
C) included under the other revenues and expenses section of the income statement. 
D) included in the selling and administrative expense section of the income statement. 
A) not shown in the income statement of a merchandiser. 
B) treated as current assets and are shown as merchandise inventory. 
C) included under the other revenues and expenses section of the income statement. 
D) included in the selling and administrative expense section of the income statement.

Question 10

A merchandiser uses a perpetual inventory system. The third step in the process of closing the accounts of a merchandiser is to:

Accepted Answer

A) make the revenue accounts equal to zero via the Income Summary account. 
B) make the Income Summary account equal to zero via the Owner's Name, Withdrawals account. 
C) make the expense accounts equal to zero via the Income Summary account. 
D) make the Income Summary account equal to zero via the Owners' Name, Capital account. 
A) make the revenue accounts equal to zero via the Income Summary account. 
B) make the Income Summary account equal to zero via the Owner's Name, Withdrawals account. 
C) make the expense accounts equal to zero via the Income Summary account. 
D) make the Income Summary account equal to zero via the Owners' Name, Capital account.

Question 11

Under the perpetual inventory system, when a purchaser makes payment within the discount period, the amount of discount will be credited to the Merchandise Inventory account.

Accepted Answer

A) True 
 B)False

Question 12

Up-to-date Merchandisers has the following transactions for the month of July.   Calculate Gross Profit.

Accepted Answer

A) $90,000 
B) $125,000 
C) $140,000 
D) $160,000 
A) $90,000 
B) $125,000 
C) $140,000 
D) $160,000

Question 13

On January 21st, 2014, Bessant merchandisers, received merchandise from Mullies Inc. On that date, it found a few of these goods to be damaged. On January 22, it returned the damaged goods to the seller. Such returns will be treated as ________ by Bessant.

Accepted Answer

A) purchase returns 
B) sales returns 
C) purchase allowances 
D) sales allowances 
A) purchase returns 
B) sales returns 
C) purchase allowances 
D) sales allowances

Question 14

Cost of goods sold appears on a multi-step income statement but not on a single-step income statement.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is true of freight in?

Accepted Answer

A) It is an administrative expense. 
B) It is a selling expense. 
C) It is transportation cost on purchases. 
D) It is transportation cost on sales. 
A) It is an administrative expense. 
B) It is a selling expense. 
C) It is transportation cost on purchases. 
D) It is transportation cost on sales.

Question 16

The general ledger shows a balance of $67,900 in the Merchandise Inventory account at the end of the period. The physical inventory count shows inventory of $65,300. The adjusting entry includes a:

Accepted Answer

A) debit to Cost of Goods Sold and a credit to Merchandise Inventory for $2,600. 
B) debit to Cost of Goods Sold and a credit to Cash for $2,600. 
C) debit to Merchandise Inventory and a credit to Cost of Goods Sold for $2,600. 
D) debit to Merchandise Inventory and a credit to Cash for $2,600. 
A) debit to Cost of Goods Sold and a credit to Merchandise Inventory for $2,600. 
B) debit to Cost of Goods Sold and a credit to Cash for $2,600. 
C) debit to Merchandise Inventory and a credit to Cost of Goods Sold for $2,600. 
D) debit to Merchandise Inventory and a credit to Cash for $2,600.

Question 17

The net income calculated using both the single and multi-step formats of income statement is always the same.

Accepted Answer

A) True 
 B)False

Question 18

Operating income is gross profit minus operating expenses.

Accepted Answer

A) True 
 B)False

Question 19

A company using the perpetual inventory system purchased inventory worth $500,000 on account with terms of credit being 3/15, n/45. Defective inventory of $50,000 was returned 2 days later and the accounts were appropriately adjusted. If the company paid the invoice 25 days later, the journal entry to record the payment would be:

Accepted Answer

A) $500,000 debit to Accounts Payable and $500,000 credit to Cash. 
B) $450,000 debit to Accounts Payable, $450,000 credit to Cash. 
C) $500,000 debit to Accounts Payable ,$486,500 credit to Cash and $13,500 credit to Inventory. 
D) $486,500 debit to Accounts Payable, $13,500 credit to Inventory and $450,000 credit to Cash. 
A) $500,000 debit to Accounts Payable and $500,000 credit to Cash. 
B) $450,000 debit to Accounts Payable, $450,000 credit to Cash. 
C) $500,000 debit to Accounts Payable ,$486,500 credit to Cash and $13,500 credit to Inventory. 
D) $486,500 debit to Accounts Payable, $13,500 credit to Inventory and $450,000 credit to Cash.

Question 20

On November 1, 2015, Wrenns Martch sold merchandise for $10,000, FOB destination, with payment terms of 3/10, n/40. Sales returns on this sale amounted to $3,000. Wrenns received payment for the balance on November 10, 2015. The cost of goods sold was $3,600. Calculate the amount of gross profit from the transaction.

Accepted Answer

A) $1,800 
B) $3,190 
C) $1,320 
D) $6,790 
A) $1,800 
B) $3,190 
C) $1,320 
D) $6,790

Exam 5: Merchandising Operations

A small increase in the gross profit percentage may indicate an important rise in income.

From the following details of a merchandiser, calculate the Cost of Goods Sold. (Assume the merchandiser uses the periodic inventory system.)

Under which of the following terms will the buyer be required to pay transportation costs?

A wholesaler or a retailer needs to maintain stock to carry out its day-to-day operations. This stock is known as:

A company ships goods to a customer, and pays transportation costs. To the seller, the transportation costs so paid are known as:

Which of the following line items will appear on the income statement of a merchandiser but not of a service company?

Procession Groceries, a famous grocery merchandiser, purchased goods and paid transportation to bring them to the company warehouse. The transportation cost is known as:

Expenses that fall outside the regular operations of a business are:

A merchandiser uses a perpetual inventory system. The third step in the process of closing the accounts of a merchandiser is to:

Under the perpetual inventory system, when a purchaser makes payment within the discount period, the amount of discount will be credited to the Merchandise Inventory account.

Up-to-date Merchandisers has the following transactions for the month of July. Calculate Gross Profit.

On January 21st, 2014, Bessant merchandisers, received merchandise from Mullies Inc. On that date, it found a few of these goods to be damaged. On January 22, it returned the damaged goods to the seller. Such returns will be treated as ________ by Bessant.

Cost of goods sold appears on a multi-step income statement but not on a single-step income statement.

Which of the following is true of freight in?

The general ledger shows a balance of $67,900 in the Merchandise Inventory account at the end of the period. The physical inventory count shows inventory of $65,300. The adjusting entry includes a:

The net income calculated using both the single and multi-step formats of income statement is always the same.

Operating income is gross profit minus operating expenses.

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandise Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Plant Assets, Natural Resources, and Intangibles

Current Liabilities and Payroll

Partnerships

Corporations

Long-Term Liabilities

Investments

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets

Flexible Budgets and Standard Cost Systems

Cost Allocation and Responsibility Accounting

Short-Term Business Decisions

Capital Investment Decisions

Filters

On January 21^st, 2014, Bessant merchandisers, received merchandise from Mullies Inc. On that date, it found a few of these goods to be damaged. On January 22, it returned the damaged goods to the seller. Such returns will be treated as ________ by Bessant.