Question 1

-Based on common-sized income statements,which of the companies spent the least on operating expenses in relationship to its sales?

Accepted Answer

A) Company A 
B) Company B 
C) Company C 
D) Company D 
A) Company A 
B) Company B 
C) Company C 
D) Company D

Question 2

The following entry is taken from the journal of a merchandising company:
 
What is the effect of this entry on the company's financial statements?

Accepted Answer

A) Assets and stockholders' equity increase. 
B) Assets and liabilities increase. 
C) Assets and stockholders' equity decrease. 
D) Assets decrease and stockholders' equity increases. 
A) Assets and stockholders' equity increase. 
B) Assets and liabilities increase. 
C) Assets and stockholders' equity decrease. 
D) Assets decrease and stockholders' equity increases.

Question 3

[The following information applies to the questions displayed below.]
 
Darlington Company entered into the following business events during its first month of operations. The company uses the perpetual inventory system.

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.

-What is the net cash flow from operating activities as a result of the four transactions?

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 4

Selling costs are recognized as expenses in the period when goods are sold.

Accepted Answer

A) True 
 B)False

Question 5

A company's chart of accounts includes,in part,the following account numbers and corresponding account titles:
  
-Which accounts would affect operating income?

Accepted Answer

A) Account numbers 2,4,and 9 
B) Account numbers 3,5,7,and 9 
C) Account numbers 3,4,7,and 9 
D) Account numbers 3,4,7,8,and 9 
A) Account numbers 2,4,and 9 
B) Account numbers 3,5,7,and 9 
C) Account numbers 3,4,7,and 9 
D) Account numbers 3,4,7,8,and 9

Question 6

A multistep income statement shows sales revenue,cost of goods sold,and gross margin.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following statements about period costs is true?

Accepted Answer

A) Most period costs are expensed in the period the costs are incurred. 
B) Period costs are expensed when the products associated with these costs are sold. 
C) Period costs are usually recorded as assets. 
D) Period costs do not adhere to the matching principle. 
A) Most period costs are expensed in the period the costs are incurred. 
B) Period costs are expensed when the products associated with these costs are sold. 
C) Period costs are usually recorded as assets. 
D) Period costs do not adhere to the matching principle.

Question 8

The following information for Year 2 is taken from the accounts of Tuttle Company.The company uses the periodic inventory system.
 
Based on this information,what is the inventory at December 31,Year 2?

Accepted Answer

A) $55,200 
B) $24,400 
C) $38,800 
D) $40,400 
A) $55,200 
B) $24,400 
C) $38,800 
D) $40,400

Question 9

A company using the perpetual inventory system paid cash for a transportation-in cost.Which of the following choices reflects the effects of this event on the financial statements?

Accepted Answer

A) Option A 
B) Option B 
C) Option C 
D) Option D 
A) Option A 
B) Option B 
C) Option C 
D) Option D

Question 10

The term FOB shipping point indicates that the seller is responsible for freight costs.

Accepted Answer

A) True 
 B)False

Question 11

With a perpetual inventory system,the cost of merchandise inventory is recognized at the time of purchase.

Accepted Answer

A) True 
 B)False

Question 12

Ashton Company uses the perpetual inventory system.The company's inventory account had a $6,600 balance as of December 31,Year 1.A physical count of inventory shows only $5,900 of merchandise in stock at December 31,Year 1.How will the entry to recognize the missing inventory affect the company's financial statements?

Accepted Answer

A) Increase assets. 
B) Increase expense. 
C) Decrease cash flow from operating activities. 
D) All of these answer choices are correct. 
A) Increase assets. 
B) Increase expense. 
C) Decrease cash flow from operating activities. 
D) All of these answer choices are correct.

Question 13

What is (are)the term(s)used to describe a discount given to encourage prompt payment?

Accepted Answer

A) Cash discount. 
B) Sales discount by the seller. 
C) Purchase discount by the buyer. 
D) All of these answer choices are correct. 
A) Cash discount. 
B) Sales discount by the seller. 
C) Purchase discount by the buyer. 
D) All of these answer choices are correct.

Question 14

[The following information applies to the questions displayed below.]
 
Darlington Company entered into the following business events during its first month of operations. The company uses the perpetual inventory system.

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.

-What effect will the return of merchandise to the supplier in event (2)have on Darlington's financial statements?

Accepted Answer

A) Assets and stockholders' equity decrease by $1,176. 
B) Assets and liabilities decrease by $1,176. 
C) Assets and liabilities decrease by $1,200. 
D) None.It is an asset exchange transaction. 
A) Assets and stockholders' equity decrease by $1,176. 
B) Assets and liabilities decrease by $1,176. 
C) Assets and liabilities decrease by $1,200. 
D) None.It is an asset exchange transaction.

-Based on common-sized income statements,which of the companies spent the least on operating expenses in relationship to its sales?

The following entry is taken from the journal of a merchandising company: What is the effect of this entry on the company's financial statements?

Selling costs are recognized as expenses in the period when goods are sold.

A company's chart of accounts includes,in part,the following account numbers and corresponding account titles: -Which accounts would affect operating income?

A multistep income statement shows sales revenue,cost of goods sold,and gross margin.

Which of the following statements about period costs is true?

The following information for Year 2 is taken from the accounts of Tuttle Company.The company uses the periodic inventory system. Based on this information,what is the inventory at December 31,Year 2?

A company using the perpetual inventory system paid cash for a transportation-in cost.Which of the following choices reflects the effects of this event on the financial statements?

The term FOB shipping point indicates that the seller is responsible for freight costs.

With a perpetual inventory system,the cost of merchandise inventory is recognized at the time of purchase.

What is (are)the term(s)used to describe a discount given to encourage prompt payment?

An Introduction to Accounting

Accounting for Accruals and Deferrals

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

Exam 4: Accounting for Merchandising Businesses

-Based on common-sized income statements,which of the companies spent the least on operating expenses in relationship to its sales?

The following entry is taken from the journal of a merchandising company: What is the effect of this entry on the company's financial statements?

Selling costs are recognized as expenses in the period when goods are sold.

A company's chart of accounts includes,in part,the following account numbers and corresponding account titles: -Which accounts would affect operating income?

A multistep income statement shows sales revenue,cost of goods sold,and gross margin.

Which of the following statements about period costs is true?

The following information for Year 2 is taken from the accounts of Tuttle Company.The company uses the periodic inventory system. Based on this information,what is the inventory at December 31,Year 2?

A company using the perpetual inventory system paid cash for a transportation-in cost.Which of the following choices reflects the effects of this event on the financial statements?

The term FOB shipping point indicates that the seller is responsible for freight costs.

With a perpetual inventory system,the cost of merchandise inventory is recognized at the time of purchase.

What is (are)the term(s)used to describe a discount given to encourage prompt payment?

An Introduction to Accounting

Accounting for Accruals and Deferrals

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