Question 1

A criticism of a single-step income statement is that net income is not available for analysis.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following accounts is a contra account to Sales?

Accepted Answer

A)  Accounts Payable 
B)  Sales Returns and Allowances 
C)  Accounts Receivable 
D)  Interest Revenue 
A)  Accounts Payable 
B)  Sales Returns and Allowances 
C)  Accounts Receivable 
D)  Interest Revenue

Question 3

On the income statement, sales discounts are normally deducted from sales to yield the cost of merchandise sold.

Accepted Answer

A) True 
 B)False

Question 4

If the seller is to pay the delivery expense of delivering merchandise, the delivery terms are stated as:

Accepted Answer

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

Question 5

NBC Company had $32,000 in net sales, $15,000 in cost of merchandise sold, $18,000 in operating expenses, and $2,000 in other income. What is NBC Company's gross profit?

Accepted Answer

A)  $17,000 
B)  $3,000 
C)  $1,000 
D)  $(1,000) 
A)  $17,000 
B)  $3,000 
C)  $1,000 
D)  $(1,000)

Question 6

Merchandise subject to terms 1/10, n/30, FOB shipping point, is sold on account to a customer for $17,500. The seller issued a credit memorandum for $4,000 prior to payment. What is the amount of the cash discount allowable?

Accepted Answer

A)  $215 
B)  $175 
C)  $135 
D)  $140 
A)  $215 
B)  $175 
C)  $135 
D)  $140

Question 7

Which of the following is not an example of selling expenses?

Accepted Answer

A)  Salespersons' salaries 
B)  Office staff salaries 
C)  Depreciation of store equipment 
D)  Advertising 
A)  Salespersons' salaries 
B)  Office staff salaries 
C)  Depreciation of store equipment 
D)  Advertising

Question 8

The effect of a sales return and allowance is a reduction in sales revenue and a decrease in cash or accounts receivable.

Accepted Answer

A) True 
 B)False

Question 9

The indirect method of preparing the statement of cash flows reconciles net income with net cash flows from operating activities.

Accepted Answer

A) True 
 B)False

Question 10

Repayments of bonds would be shown as a cash outflow in the investing section of the statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 11

Freight in is the amount paid by the seller to deliver merchandise sold to a customer.

Accepted Answer

A) True 
 B)False

Question 12

When purchases of merchandise are made for cash, under the perpetual inventory system, the transaction:

Accepted Answer

A)  increases Cash; decreases Merchandise Inventory. 
B)  increases Merchandise Inventory; decreases Cash. 
C)  increases Merchandise Inventory; decreases Cash Discounts. 
D)  increases Merchandise Inventory; decreases Purchases. 
A)  increases Cash; decreases Merchandise Inventory. 
B)  increases Merchandise Inventory; decreases Cash. 
C)  increases Merchandise Inventory; decreases Cash Discounts. 
D)  increases Merchandise Inventory; decreases Purchases.

Question 13

Prepare a multiple-step income statement for Surry Co. from the following data for the year ended December 31, 2013.
Sales, $915,000; cost of merchandise sold, $670,000; administrative expenses, $30,000; interest expense, $12,000; rent revenue, $19,000; sales returns and allowances, $55,000; selling expenses, $120,000.

Accepted Answer

None

Question 14

On the income statement, the merchandise inventory at the beginning of the period is added to sales to yield the cost of merchandise sold during the period.

Accepted Answer

A) True 
 B)False

Question 15

Expenses that cannot be traced directly to operations are identified as:

Accepted Answer

A)  other income. 
B)  operating expenses. 
C)  cost of goods sold. 
D)  other expenses. 
A)  other income. 
B)  operating expenses. 
C)  cost of goods sold. 
D)  other expenses.

Question 16

Sales discounts is used in accounting for transactions with customers.

Accepted Answer

A) True 
 B)False

Question 17

If the buyer is to pay the delivery expense of delivering merchandise, delivery terms are stated as:

Accepted Answer

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

Question 18

Merchandise inventory shrinkage will decrease Retained Earnings.

Accepted Answer

A) True 
 B)False

Question 19

Selected data from the ledger of Wiles Co. after adjustment at June 30, the end of the fiscal year, are listed as follows:
 $\begin{array}{llll}
\$ 4,680 & \text { Prepaid Insurance } & \$ 39,120 & \text { Accounts Receivable } \
77,750 & \text { Notes Payable } & 60,540 & \text { AccumulatedDepreciation } \
75,000 & \text { Retained Earnings } & 90,500 & \text { Administrative Expenses } \
3,060 & \text { Salaries Payable } & 60,000 & \text { Capital Stock } \
920,000 & \text { Sales (net) } & 655,000 & \text { Cost of Merchandise Sold } \
110,000 & \text { Selling Expenses } & 40,000 & \text { Dividends } \
3,125 & \text { Supplies } & 10,500 & \text { Interest Revenue } \
& & 82,700 & \text { Office Equipment }
\end{array}$
 Prepare a single-step income statement for the year ended June 30, 2013.

Accepted Answer

None

Question 20

Discounts taken by the buyer for early payment of an invoice are called purchases discounts by the buyer.

Accepted Answer

A) True 
 B)False

A criticism of a single-step income statement is that net income is not available for analysis.

Which of the following accounts is a contra account to Sales?

On the income statement, sales discounts are normally deducted from sales to yield the cost of merchandise sold.

If the seller is to pay the delivery expense of delivering merchandise, the delivery terms are stated as:

NBC Company had $32,000 in net sales, $15,000 in cost of merchandise sold, $18,000 in operating expenses, and $2,000 in other income. What is NBC Company's gross profit?

Merchandise subject to terms 1/10, n/30, FOB shipping point, is sold on account to a customer for $17,500. The seller issued a credit memorandum for $4,000 prior to payment. What is the amount of the cash discount allowable?

Which of the following is not an example of selling expenses?

The effect of a sales return and allowance is a reduction in sales revenue and a decrease in cash or accounts receivable.

The indirect method of preparing the statement of cash flows reconciles net income with net cash flows from operating activities.

Repayments of bonds would be shown as a cash outflow in the investing section of the statement of cash flows.

Freight in is the amount paid by the seller to deliver merchandise sold to a customer.

When purchases of merchandise are made for cash, under the perpetual inventory system, the transaction:

On the income statement, the merchandise inventory at the beginning of the period is added to sales to yield the cost of merchandise sold during the period.

Expenses that cannot be traced directly to operations are identified as:

Sales discounts is used in accounting for transactions with customers.

If the buyer is to pay the delivery expense of delivering merchandise, delivery terms are stated as:

Merchandise inventory shrinkage will decrease Retained Earnings.

Discounts taken by the buyer for early payment of an invoice are called purchases discounts by the buyer.

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

Exam 4: Accounting for Merchandising Businesses

A criticism of a single-step income statement is that net income is not available for analysis.

Which of the following accounts is a contra account to Sales?

On the income statement, sales discounts are normally deducted from sales to yield the cost of merchandise sold.

If the seller is to pay the delivery expense of delivering merchandise, the delivery terms are stated as:

NBC Company had $32,000 in net sales, $15,000 in cost of merchandise sold, $18,000 in operating expenses, and $2,000 in other income. What is NBC Company's gross profit?

Merchandise subject to terms 1/10, n/30, FOB shipping point, is sold on account to a customer for $17,500. The seller issued a credit memorandum for $4,000 prior to payment. What is the amount of the cash discount allowable?

Which of the following is not an example of selling expenses?

The effect of a sales return and allowance is a reduction in sales revenue and a decrease in cash or accounts receivable.

The indirect method of preparing the statement of cash flows reconciles net income with net cash flows from operating activities.

Repayments of bonds would be shown as a cash outflow in the investing section of the statement of cash flows.

Freight in is the amount paid by the seller to deliver merchandise sold to a customer.

When purchases of merchandise are made for cash, under the perpetual inventory system, the transaction:

On the income statement, the merchandise inventory at the beginning of the period is added to sales to yield the cost of merchandise sold during the period.

Expenses that cannot be traced directly to operations are identified as:

Sales discounts is used in accounting for transactions with customers.

If the buyer is to pay the delivery expense of delivering merchandise, delivery terms are stated as:

Merchandise inventory shrinkage will decrease Retained Earnings.

Discounts taken by the buyer for early payment of an invoice are called purchases discounts by the buyer.

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