Question 1

What type of company would normally offer trade discounts to its customers?

Accepted Answer

A)  Service companies 
B)  Retailers 
C)  Wholesalers 
D)  On-line retailers 
A)  Service companies 
B)  Retailers 
C)  Wholesalers 
D)  On-line retailers

Question 2

In credit terms of 3/15, n/45, the "3" represents the

Accepted Answer

A)  number of days in the discount period 
B)  full amount of the invoice 
C)  number of days when the entire amount is due 
D)  percent of the cash discount 
A)  number of days in the discount period 
B)  full amount of the invoice 
C)  number of days when the entire amount is due 
D)  percent of the cash discount

Question 3

Discounts taken by a buyer because of early payment are recorded on the seller's accounting records as

Accepted Answer

A)  Purchases discount 
B)  Sales discount 
C)  Trade discount 
D)  Early payment discount 
A)  Purchases discount 
B)  Sales discount 
C)  Trade discount 
D)  Early payment discount

Question 4

A buyer who acquires merchandise under credit terms of 1/10, n/30 has 30days after the invoice date to take advantage of the cash discount.

Accepted Answer

A) True 
 B)False

Question 5

Conquest Company uses a perpetual inventory system. Conquest purchased $1,500 of merchandise on account and payment was made within the discount period. The credit terms were 2/10,n/30. Journalize Conquest's purchase and payment.

Accepted Answer

The answer of Conquest Company uses a perpetual inventory system....

Question 6

Merchandise with an invoice price of $3,000 is purchased on September 2 subject to terms of 2/10, n/30, FOB destination. Freight costs paid by the seller totaled $200. What is the cost of the merchandise if paid on September 12, assuming the discount is taken?

Accepted Answer

A)  $3,140 
B)  $3,136 
C)  $2,744 
D)  $2,940 
A)  $3,140 
B)  $3,136 
C)  $2,744 
D)  $2,940

Question 7

The buyer will include the sales tax as part of the cost of items purchased for use.

Accepted Answer

A) True 
 B)False

Question 8

The statement of owner's equity shows

Accepted Answer

A)  only net income, beginning and ending capital 
B)  only total assets, beginning and ending capital 
C)  only net income, beginning capital, and withdrawals 
D)  all the changes in the owner's capital as a result of net income, net loss, additional investments, and withdrawals 
A)  only net income, beginning and ending capital 
B)  only total assets, beginning and ending capital 
C)  only net income, beginning capital, and withdrawals 
D)  all the changes in the owner's capital as a result of net income, net loss, additional investments, and withdrawals

Question 9

The seller may prepay the freight costs even though the terms are FOB shipping point.

Accepted Answer

A) True 
 B)False

Question 10

Describe the major differences in preparing the financial statements for a service business and a merchandising business.

Accepted Answer

The answer of Describe the major differences in preparing the...

Question 11

When companies use a perpetual inventory system, the recording of the purchase of inventory will include a debit to purchases.

Accepted Answer

A) True 
 B)False

Question 12

When purchases of merchandise are made for cash, the transaction may be recorded with the following entry

Accepted Answer

A)  debit Cash; credit Merchandise Inventory 
B)  debit Merchandise Inventory; credit Cash 
C)  debit Merchandise Inventory; credit Cash Discounts 
D)  debit Merchandise Inventory; credit Purchases 
A)  debit Cash; credit Merchandise Inventory 
B)  debit Merchandise Inventory; credit Cash 
C)  debit Merchandise Inventory; credit Cash Discounts 
D)  debit Merchandise Inventory; credit Purchases

Question 13

Using the following information, what is the amount of gross profit?

Accepted Answer

A)  $34,870 
B)  $31,880 
C)  $27,460 
D)  $62,090 
A)  $34,870 
B)  $31,880 
C)  $27,460 
D)  $62,090

Question 14

The form of income statement that derives its name from the fact that the total of all expenses is deducted from the total of all revenues is called a

Accepted Answer

A)  multiple-step statement 
B)  revenue statement 
C)  report-form statement 
D)  single-step statement 
A)  multiple-step statement 
B)  revenue statement 
C)  report-form statement 
D)  single-step statement

Question 15

When the three sections of a balance sheet are presented on a page in a downward sequence, it is called the

Accepted Answer

A)  account form 
B)  comparative form 
C)  horizontal form 
D)  report form 
A)  account form 
B)  comparative form 
C)  horizontal form 
D)  report form

Question 16

In the merchandising income statement, sales will be reduced by sales discounts and sales returns and allowances to arrive at net sales.

Accepted Answer

A) True 
 B)False

Question 17

Under the periodic inventory system, the journal entry to record the purchase of merchandise inventory will include a debit to

Accepted Answer

A)  Merchandise Inventory 
B)  Purchases 
C)  Accounts Payable 
D)  Cost of Merchandise Purchased 
A)  Merchandise Inventory 
B)  Purchases 
C)  Accounts Payable 
D)  Cost of Merchandise Purchased

Question 18

Generally, the revenue account for a merchandising business is entitled

Accepted Answer

A)  Sales 
B)  Fees Earned 
C)  Gross Sales 
D)  Gross Profit 
A)  Sales 
B)  Fees Earned 
C)  Gross Sales 
D)  Gross Profit

Question 19

If title to merchandise purchases passes to the buyer when the goods are delivered to the buyer, the terms are

Accepted Answer

A)  consigned 
B)  n/30 
C)  FOB shipping point 
D)  FOB destination 
A)  consigned 
B)  n/30 
C)  FOB shipping point 
D)  FOB destination

Question 20

Merchandise with a list price of $4,200 and costing $2,300 is sold on account, subject to the following terms: FOB destination, 2/10, n/30. The seller prepays the freight costs of $85 (debit Freight Out for the freight costs). Prior to payment for the goods, the seller issues a credit memo for $750 to the customer for merchandise costing $425 that is returned. The correct amount is received within the discount period. The company uses a perpetual inventory system.
Record the foregoing transactions of the seller in the sequence indicated below.

Accepted Answer

The answer of Merchandise with a list price of $4,200...

Exam 5: Accounting for Merchandising Businesses

What type of company would normally offer trade discounts to its customers?

In credit terms of 3/15, n/45, the "3" represents the

Discounts taken by a buyer because of early payment are recorded on the seller's accounting records as

A buyer who acquires merchandise under credit terms of 1/10, n/30 has 30days after the invoice date to take advantage of the cash discount.

Conquest Company uses a perpetual inventory system. Conquest purchased $1,500 of merchandise on account and payment was made within the discount period. The credit terms were 2/10,n/30. Journalize Conquest's purchase and payment.

Merchandise with an invoice price of $3,000 is purchased on September 2 subject to terms of 2/10, n/30, FOB destination. Freight costs paid by the seller totaled $200. What is the cost of the merchandise if paid on September 12, assuming the discount is taken?

The buyer will include the sales tax as part of the cost of items purchased for use.

The statement of owner's equity shows

The seller may prepay the freight costs even though the terms are FOB shipping point.

Describe the major differences in preparing the financial statements for a service business and a merchandising business.

When companies use a perpetual inventory system, the recording of the purchase of inventory will include a debit to purchases.

When purchases of merchandise are made for cash, the transaction may be recorded with the following entry

Using the following information, what is the amount of gross profit?

The form of income statement that derives its name from the fact that the total of all expenses is deducted from the total of all revenues is called a

When the three sections of a balance sheet are presented on a page in a downward sequence, it is called the

In the merchandising income statement, sales will be reduced by sales discounts and sales returns and allowances to arrive at net sales.

Under the periodic inventory system, the journal entry to record the purchase of merchandise inventory will include a debit to

Generally, the revenue account for a merchandising business is entitled

If title to merchandise purchases passes to the buyer when the goods are delivered to the buyer, the terms are

Introduction to Accounting and Business

Analyzing Transactions

The Adjusting Process

Completing the Accounting Cycle

Inventories

Sarbanes-Oxley, Internal Control, and Cash

Receivables

Fixed Assets and Intangible Assets

Current Liabilities and Payroll

Corporations: Organization, Stock Transactions, and Dividends

Long-Term Liabilities: Bonds and Notes

Investments and Fair Value Accounting

Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting Concepts and Principles

Job Order Costing

Process Cost Systems

Cost Behavior and Cost-Volume-Profit Analysis

Variable Costing for Management Analysis

Budgeting

Performance Evaluation Using Variances From Standard Costs

Performance Evaluation for Decentralized Operations

Differential Analysis and Product Pricing

Capital Investment Analysis

Cost Allocation and Activity-Based Costing

Cost Management for Just-In-Time Environments

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