Question 1

Merchandise not sold at the end of the period is reported as:

Accepted Answer

A)  cost of goods sold. 
B)  old stock. 
C)  merchandise inventory. 
D)  net purchases. 
A)  cost of goods sold. 
B)  old stock. 
C)  merchandise inventory. 
D)  net purchases.

Question 2

Interest expense is an example of an expense classified under "other expense."

Accepted Answer

A) True 
 B)False

Question 3

The credit terms of a sale are normally indicated on a(n):

Accepted Answer

A)  purchase order. 
B)  invoice. 
C)  bill of lading. 
D)  check. 
A)  purchase order. 
B)  invoice. 
C)  bill of lading. 
D)  check.

Question 4

In recording the cost of merchandise sold for cash using a perpetual inventory system, the effect on the accounts is:

Accepted Answer

A)  increase Cost of Merchandise Sold; increase Cash. 
B)  increase Cost of Merchandise Sold; decrease Merchandise Inventory. 
C)  increase Merchandise Inventory; decrease Cost of Merchandise Sold. 
D)  increase Accounts Receivable; decrease Merchandise Inventory. 
A)  increase Cost of Merchandise Sold; increase Cash. 
B)  increase Cost of Merchandise Sold; decrease Merchandise Inventory. 
C)  increase Merchandise Inventory; decrease Cost of Merchandise Sold. 
D)  increase Accounts Receivable; decrease Merchandise Inventory.

Question 5

A sales invoice included the following information: merchandise price, $5,000; terms 1/10, n/eom. Assuming that a credit for merchandise returned of $600 is granted prior to payment, and that the invoice is paid within the discount period, what is the amount of cash received by the seller?

Accepted Answer

A)  $4,656 
B)  $4,400 
C)  $4,356 
D)  $4,950 
A)  $4,656 
B)  $4,400 
C)  $4,356 
D)  $4,950

Question 6

Under the indirect method for preparing the statement of cash flows, increases in current liabilities are _____ the net income in the cash flows from operating activities section.

Accepted Answer

A)  subtracted from 
B)  added to 
C)  not used when calculating 
D)  equal to 
A)  subtracted from 
B)  added to 
C)  not used when calculating 
D)  equal to

Question 7

Based on the following information, what would be recorded as purchases discount if the invoice is paid within the discount period? 1 $ \$ 5,000 $ of merchandise inventory $ w $ as ordered on Apri 2, 2010.
2 $ \$ 2,000 $ of this merchandise was received on Apiil 5, 2010.
3 On Apri 6, 2010, an invoice dated Apri 4,2010, with terms of $ 2 / 10 $, net 30 for $ \$ 2,150 $ which included a $ \$ 150 $ prepaid freight cost, was received.

4 On April 10, 2010, \$500 of the merchandise was returned to the seller.

Accepted Answer

A)  $100 
B)  $30 
C)  $43 
D)  $33 
A)  $100 
B)  $30 
C)  $43 
D)  $33

Question 8

Sales to customers who use bank credit cards such as MasterCard and Visa are usually recorded by a(n):

Accepted Answer

A)  decrease in Bank Credit Card Sales, increase in Credit Card Expense, and increase in Sales. 
B)  increase in Cash, increase in Credit Card Expense, and increase in Sales. 
C)  increase in Cash, decrease in Credit Card Expense, and increase in Sales. 
D)  decrease in Sales, increase in Credit Card Expense, and decrease in Cash. 
A)  decrease in Bank Credit Card Sales, increase in Credit Card Expense, and increase in Sales. 
B)  increase in Cash, increase in Credit Card Expense, and increase in Sales. 
C)  increase in Cash, decrease in Credit Card Expense, and increase in Sales. 
D)  decrease in Sales, increase in Credit Card Expense, and decrease in Cash.

Question 9

Gross profit is equal to:

Accepted Answer

A)  sales less (sales discounts and sales returns and allowances) plus cost of merchandise sold. 
B)  sales plus sales returns and allowances less sales discounts less cost of merchandise sold. 
C)  sales plus sales discounts less sales returns and allowances less cost of merchandise sold. 
D)  sales less (sales discounts and sales returns and allowances) less cost of merchandise sold. 
A)  sales less (sales discounts and sales returns and allowances) plus cost of merchandise sold. 
B)  sales plus sales returns and allowances less sales discounts less cost of merchandise sold. 
C)  sales plus sales discounts less sales returns and allowances less cost of merchandise sold. 
D)  sales less (sales discounts and sales returns and allowances) less cost of merchandise sold.

Question 10

Merchandise is ordered on November 12; the merchandise is shipped by the seller and the invoice is prepared, dated, and mailed by the seller on November 15; the merchandise is received by the buyer on November 17; the transaction is recorded in the buyer's accounts on November 18. The credit period begins with what date?

Accepted Answer

A)  November 12 
B)  November 15 
C)  November 17 
D)  November 18 
A)  November 12 
B)  November 15 
C)  November 17 
D)  November 18

Question 11

Which expenses are subtracted from gross profit to arrive at income from operations?

Accepted Answer

A)  All expenses 
B)  Cost of merchandise sold 
C)  Operating expenses 
D)  Sales discounts 
A)  All expenses 
B)  Cost of merchandise sold 
C)  Operating expenses 
D)  Sales discounts

Question 12

Net income or loss may appear on the income statement of both a service business and a merchandising business.

Accepted Answer

A) True 
 B)False

Question 13

If cash dividends of $145,000 were declared during the year and the decrease in dividends payable from the beginning to the end of the year was $7,000, the statement of cash flows would report $152,000 in the financing activities section.

Accepted Answer

A) True 
 B)False

Question 14

Sales discounts are granted by the seller to customers for payment at the end of the month.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is not an administrative expense?

Accepted Answer

A)  Salespersons' salaries 
B)  Office staff salaries 
C)  Depreciation of office equipment 
D)  Office supplies used 
A)  Salespersons' salaries 
B)  Office staff salaries 
C)  Depreciation of office equipment 
D)  Office supplies used

Question 16

Which term indicates that merchandise is free of transportation charges to the buyer?

Accepted Answer

A)  FOB destination 
B)  Transportation out 
C)  FOB shipping point 
D)  Transportation in 
A)  FOB destination 
B)  Transportation out 
C)  FOB shipping point 
D)  Transportation in

Question 17

Purchases discounts are discounts given to the seller.

Accepted Answer

A) True 
 B)False

Question 18

Which financial statement reconciles net income with net cash flows from operating activities?

Accepted Answer

A)  Balance sheet 
B)  Statement of retained earnings 
C)  Statement of cash flows 
D)  Income statement 
A)  Balance sheet 
B)  Statement of retained earnings 
C)  Statement of cash flows 
D)  Income statement

Question 19

Merchandise inventory shrinkage will increase Merchandise Inventory.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following statements is true?

Accepted Answer

A)  Only cash sales are included in the Sales account. 
B)  Sales is the total amount charged customers, including cash sales and sales on account. 
C)  Both sales discounts and sales returns and allowances are added to Sales to arrive at Net Sales. 
D)  Sales is the revenue account typically used in service businesses. 
A)  Only cash sales are included in the Sales account. 
B)  Sales is the total amount charged customers, including cash sales and sales on account. 
C)  Both sales discounts and sales returns and allowances are added to Sales to arrive at Net Sales. 
D)  Sales is the revenue account typically used in service businesses.

Merchandise not sold at the end of the period is reported as:

Interest expense is an example of an expense classified under "other expense."

The credit terms of a sale are normally indicated on a(n):

In recording the cost of merchandise sold for cash using a perpetual inventory system, the effect on the accounts is:

A sales invoice included the following information: merchandise price, $5,000; terms 1/10, n/eom. Assuming that a credit for merchandise returned of $600 is granted prior to payment, and that the invoice is paid within the discount period, what is the amount of cash received by the seller?

Under the indirect method for preparing the statement of cash flows, increases in current liabilities are _____ the net income in the cash flows from operating activities section.

Sales to customers who use bank credit cards such as MasterCard and Visa are usually recorded by a(n):

Gross profit is equal to:

Which expenses are subtracted from gross profit to arrive at income from operations?

Net income or loss may appear on the income statement of both a service business and a merchandising business.

If cash dividends of $145,000 were declared during the year and the decrease in dividends payable from the beginning to the end of the year was $7,000, the statement of cash flows would report $152,000 in the financing activities section.

Sales discounts are granted by the seller to customers for payment at the end of the month.

Which of the following is not an administrative expense?

Which term indicates that merchandise is free of transportation charges to the buyer?

Purchases discounts are discounts given to the seller.

Which financial statement reconciles net income with net cash flows from operating activities?

Merchandise inventory shrinkage will increase Merchandise Inventory.

Which of the following statements is true?

The Role of Accounting in Business

Basic Accounting Concepts

Accrual Accounting Concepts

Sarbanes-Oxley, Internal Control, and Cash

Receivables and Inventories

Fixed Assets and Intangible Assets

Liabilities and Stockholders Equity

Financial Statement Analysis

Accounting Systems for Manufacturing Businesses

Cost Behavior and Cost-Volume-Profit Analysis

Differential Analysis and Product Pricing

Budgeting and Standard Cost Systems

Performance Evaluation for Decentralized Operations

Capital Investment Analysis

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Exam 4: Accounting for Merchandising Businesses

Merchandise not sold at the end of the period is reported as:

Interest expense is an example of an expense classified under "other expense."

The credit terms of a sale are normally indicated on a(n):

In recording the cost of merchandise sold for cash using a perpetual inventory system, the effect on the accounts is:

A sales invoice included the following information: merchandise price, $5,000; terms 1/10, n/eom. Assuming that a credit for merchandise returned of $600 is granted prior to payment, and that the invoice is paid within the discount period, what is the amount of cash received by the seller?

Under the indirect method for preparing the statement of cash flows, increases in current liabilities are _____ the net income in the cash flows from operating activities section.

Sales to customers who use bank credit cards such as MasterCard and Visa are usually recorded by a(n):

Gross profit is equal to:

Which expenses are subtracted from gross profit to arrive at income from operations?

Net income or loss may appear on the income statement of both a service business and a merchandising business.

If cash dividends of $145,000 were declared during the year and the decrease in dividends payable from the beginning to the end of the year was $7,000, the statement of cash flows would report $152,000 in the financing activities section.

Sales discounts are granted by the seller to customers for payment at the end of the month.

Which of the following is not an administrative expense?

Which term indicates that merchandise is free of transportation charges to the buyer?

Purchases discounts are discounts given to the seller.

Which financial statement reconciles net income with net cash flows from operating activities?

Merchandise inventory shrinkage will increase Merchandise Inventory.

Which of the following statements is true?

The Role of Accounting in Business

Basic Accounting Concepts

Accrual Accounting Concepts

Sarbanes-Oxley, Internal Control, and Cash

Receivables and Inventories

Fixed Assets and Intangible Assets

Liabilities and Stockholders Equity

Financial Statement Analysis

Accounting Systems for Manufacturing Businesses

Cost Behavior and Cost-Volume-Profit Analysis

Differential Analysis and Product Pricing

Budgeting and Standard Cost Systems

Performance Evaluation for Decentralized Operations

Capital Investment Analysis

Filters