Question 1

Which of the following would not affect the operating activities section of the statement of cash flows, using the indirect method?

Accepted Answer

A)  Decrease in merchandise inventory 
B)  Payment on a note payable 
C)  Decrease in unearned rent 
D)  Depreciation expense 
A)  Decrease in merchandise inventory 
B)  Payment on a note payable 
C)  Decrease in unearned rent 
D)  Depreciation expense

Question 2

Gross profit is determined by subtracting the cost of merchandise sold from what?

Accepted Answer

A)  The cost of merchandise purchased 
B)  Fees earned 
C)  Accounts receivable 
D)  Net sales 
A)  The cost of merchandise purchased 
B)  Fees earned 
C)  Accounts receivable 
D)  Net sales

Question 3

If a $20,000 sale is made on January 1, with terms of 2/10, n/30, how much would the discount be if payment is made on January 9?

Accepted Answer

A)  $0 
B)  $200 
C)  $1,000 
D)  $400 
A)  $0 
B)  $200 
C)  $1,000 
D)  $400

Question 4

Using a perpetual inventory system, the return of merchandise purchased on account includes a(n):

Accepted Answer

A)  increase in Sales. 
B)  increase in Merchandise Inventory. 
C)  decrease in Merchandise Inventory. 
D)  decrease in Sales. 
A)  increase in Sales. 
B)  increase in Merchandise Inventory. 
C)  decrease in Merchandise Inventory. 
D)  decrease in Sales.

Question 5

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 6

A company has a net income of $39,000 and depreciation expenses of $9,000. During the year, its accounts payable balance decreased by $5,000. What is the net cash flow from operating activities using the indirect method for preparing the statement of cash flows?

Accepted Answer

A)  $48,000 
B)  $53,000 
C)  $35,000 
D)  $43,000 
A)  $48,000 
B)  $53,000 
C)  $35,000 
D)  $43,000

Question 7

It is usual for the credit period to begin with the date the merchandise is received by the buyer.

Accepted Answer

A) True 
 B)False

Question 8

East, Inc. had beginning inventory of $10,000, purchases of $25,000, and ending inventory of $5,000. What is East's cost of merchandise sold?

Accepted Answer

A)  $10,000 
B)  $25,000 
C)  $5,000 
D)  $30,000 
A)  $10,000 
B)  $25,000 
C)  $5,000 
D)  $30,000

Question 9

When the seller offers a sales discount, even if borrowing has to be done, it is generally advantageous for the buyer to pay within the discount period.

Accepted Answer

A) True 
 B)False

Question 10

There are two alternatives to reporting cash flows from operating activities in the statement of cash flows: (1) the direct method and (2) the indirect method.

Accepted Answer

A) True 
 B)False

Question 11

Operating expenses are subtracted from fees earned for a service business and from gross profit for a merchandising business.

Accepted Answer

A) True 
 B)False

Question 12

When someone purchases merchandise and incurs the cost of transportation, these costs of purchasing inventory are added to the cost of the inventory.

Accepted Answer

A) True 
 B)False

Question 13

What is the term applied to the excess of net revenue from sales over the cost of merchandise sold?

Accepted Answer

A)  Gross profit 
B)  Income from operations 
C)  Net income 
D)  Gross sales 
A)  Gross profit 
B)  Income from operations 
C)  Net income 
D)  Gross sales

Question 14

The merchandise inventory account is found on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 15

Deana, Inc. Deana, Inc. purchased merchandise for $500,000, received credit for purchase returns of $25,000, took purchase discounts of $10,000, and paid transportation in of $20,000.
Refer to Deana, Inc. What is the total cost of merchandise purchased?

Accepted Answer

A)  $520,000 
B)  $485,000 
C)  $445,000 
D)  $480,000 
A)  $520,000 
B)  $485,000 
C)  $445,000 
D)  $480,000

Question 16

Under the perpetual inventory system, the cost of merchandise sold is recorded when sales are made.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is not considered when figuring net purchases?

Accepted Answer

A)  Cost of goods sold 
B)  Purchase returns 
C)  Purchases discounts 
D)  Purchases 
A)  Cost of goods sold 
B)  Purchase returns 
C)  Purchases discounts 
D)  Purchases

Question 18

Merchandise is sold for $2,500, terms FOB destination, 2/10, n/30, with transportation costs of $150. If $500 of the merchandise is returned prior to payment and the invoice is paid within the discount period, the amount of the sales discount is $40.

Accepted Answer

A) True 
 B)False

Question 19

Multiple-step income statements show:

Accepted Answer

A)  gross profit but not income from operations. 
B)  neither gross profit nor income from operations. 
C)  both gross profit and income from operations. 
D)  income from operations but not gross profit. 
A)  gross profit but not income from operations. 
B)  neither gross profit nor income from operations. 
C)  both gross profit and income from operations. 
D)  income from operations but not gross profit.

Question 20

Revenue from sources other than the primary operating activity of a business is called other income.

Accepted Answer

A) True 
 B)False

Which of the following would not affect the operating activities section of the statement of cash flows, using the indirect method?

Gross profit is determined by subtracting the cost of merchandise sold from what?

If a $20,000 sale is made on January 1, with terms of 2/10, n/30, how much would the discount be if payment is made on January 9?

Using a perpetual inventory system, the return of merchandise purchased on account includes a(n):

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

A company has a net income of $39,000 and depreciation expenses of $9,000. During the year, its accounts payable balance decreased by $5,000. What is the net cash flow from operating activities using the indirect method for preparing the statement of cash flows?

It is usual for the credit period to begin with the date the merchandise is received by the buyer.

East, Inc. had beginning inventory of $10,000, purchases of $25,000, and ending inventory of $5,000. What is East's cost of merchandise sold?

When the seller offers a sales discount, even if borrowing has to be done, it is generally advantageous for the buyer to pay within the discount period.

There are two alternatives to reporting cash flows from operating activities in the statement of cash flows: (1) the direct method and (2) the indirect method.

Operating expenses are subtracted from fees earned for a service business and from gross profit for a merchandising business.

When someone purchases merchandise and incurs the cost of transportation, these costs of purchasing inventory are added to the cost of the inventory.

What is the term applied to the excess of net revenue from sales over the cost of merchandise sold?

The merchandise inventory account is found on the balance sheet.

Deana, Inc. Deana, Inc. purchased merchandise for $500,000, received credit for purchase returns of $25,000, took purchase discounts of $10,000, and paid transportation in of $20,000. Refer to Deana, Inc. What is the total cost of merchandise purchased?

Under the perpetual inventory system, the cost of merchandise sold is recorded when sales are made.

Which of the following is not considered when figuring net purchases?

Merchandise is sold for $2,500, terms FOB destination, 2/10, n/30, with transportation costs of $150. If $500 of the merchandise is returned prior to payment and the invoice is paid within the discount period, the amount of the sales discount is $40.

Multiple-step income statements show:

Revenue from sources other than the primary operating activity of a business is called other income.

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

Which of the following would not affect the operating activities section of the statement of cash flows, using the indirect method?

Gross profit is determined by subtracting the cost of merchandise sold from what?

If a $20,000 sale is made on January 1, with terms of 2/10, n/30, how much would the discount be if payment is made on January 9?

Using a perpetual inventory system, the return of merchandise purchased on account includes a(n):

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

A company has a net income of $39,000 and depreciation expenses of $9,000. During the year, its accounts payable balance decreased by $5,000. What is the net cash flow from operating activities using the indirect method for preparing the statement of cash flows?

It is usual for the credit period to begin with the date the merchandise is received by the buyer.

East, Inc. had beginning inventory of $10,000, purchases of $25,000, and ending inventory of $5,000. What is East's cost of merchandise sold?

When the seller offers a sales discount, even if borrowing has to be done, it is generally advantageous for the buyer to pay within the discount period.

There are two alternatives to reporting cash flows from operating activities in the statement of cash flows: (1) the direct method and (2) the indirect method.

Operating expenses are subtracted from fees earned for a service business and from gross profit for a merchandising business.

When someone purchases merchandise and incurs the cost of transportation, these costs of purchasing inventory are added to the cost of the inventory.

What is the term applied to the excess of net revenue from sales over the cost of merchandise sold?

The merchandise inventory account is found on the balance sheet.

Deana, Inc. Deana, Inc. purchased merchandise for $500,000, received credit for purchase returns of $25,000, took purchase discounts of $10,000, and paid transportation in of $20,000. Refer to Deana, Inc. What is the total cost of merchandise purchased?

Under the perpetual inventory system, the cost of merchandise sold is recorded when sales are made.

Which of the following is not considered when figuring net purchases?

Merchandise is sold for $2,500, terms FOB destination, 2/10, n/30, with transportation costs of $150. If $500 of the merchandise is returned prior to payment and the invoice is paid within the discount period, the amount of the sales discount is $40.

Multiple-step income statements show:

Revenue from sources other than the primary operating activity of a business is called other income.

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