Question 1

Financial information is presented below: $$\begin{array} { l r } 
\text { Operating expenses } & \$ 28,000 \
\text { Sales returns and allowances } & 7,000 \
\text { Sales discounts } & 3,000 \
\text { Sales revenue } & 150,000 \
\text { Cost of goods sold } & 98,000
\end{array}$$ The profit margin would be

Accepted Answer

A) $28. 
B) $09. 
C) $30. 
D) $10.

Question 2

Davies Company purchased merchandise inventory with an invoice price of $15,000 and credit terms of 2/10, n/30. What is the net cost of the goods if Davies Company pays within the discount period?

Accepted Answer

A) $15,000 
B) $14,760 
C) $14,700 d $12,000

Question 3

Anderson Inc. sells $1,200 of merchandise on account to Baltic Company with credit terms of 2/10, n/30. If Baltic Company remits a check taking advantage of the discount offered, what is the amount of Baltic Company's check?

Accepted Answer

A) $1,176 
B) $1,200 
C) $1,080 
D) $1,120

Question 4

All of the following statements are true regarding the periodic inventory system except

Accepted Answer

A) Under the periodic inventory system, the balance of cost of goods sold is calculated at the end of the period. 
B) Under the periodic inventory system, the balance in ending inventory is calculated at the end of the period. 
C) Using the periodic inventory system affects the balance sheet contents differently than when the perpetual system is used. 
D) Under the periodic system, a company uses separate accounts to record freight costs, returns, and discounts.

Question 5

Crowder Corporation recorded the return of $200 of goods originally sold on credit to Discount Industries. Using the periodic inventory approach, Crowder would record this transaction as:

Accepted Answer

The answer of Crowder Corporation recorded the return of $200...

Question 6

Cost of Goods Sold is considered an expense of a merchandising firm.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following expressions is incorrect?

Accepted Answer

A) Gross profit - Operating expenses = Net income 
B) Sales revenue - cost of goods sold - Operating expenses = Net income 
C) Net income + Operating expenses = Gross profit 
D) Operating expenses - Cost of goods sold = Gross profit

Question 8

For the income statement, IFRS requires

Accepted Answer

A) single-step approach. 
B) multiple-step approach. 
C) single-step approach or multiple-step approach. 
D) no specific income statement approach.

Question 9

A merchandising company's net income is determined by subtracting operating expenses from gross profit.

Accepted Answer

A) True 
 B)False

Question 10

If a customer agrees to retain merchandise that is defective because the seller is willing to reduce the selling price, this transaction is known as a sales

Accepted Answer

A) discount. 
B) return. 
C) contra asset. 
D) allowance.

Question 11

Under a perpetual inventory system

Accepted Answer

A) accounting records continuously disclose the amount of inventory. 
B) increases in inventory resulting from purchases are debited to purchases. 
C) there is no need for a year-end physical count. 
D) the account purchase returns and allowances is credited when goods are returned to vendors.

Question 12

The collection of a $500 account beyond the 2 percent discount period will result in a

Accepted Answer

A) debit to Cash for $490. 
B) debit to Accounts Receivable for $500. 
C) debit to Cash for $500. 
D) debit to Sales Discounts for $10.

Question 13

Financial information is presented below: $$\begin{array} { l r } 
\text { Operating expenses } & \$ 42,000 \
\text { Sales returns and allowances } & 12,000 \
\text { Sales discounts } & 3,000 \
\text { Sales revenue } & 165,000 \
\text { Cost of goods sold } & 96,000
\end{array}$$ Gross profit would be

Accepted Answer

A) $54,000. 
B) $57,000. 
C) $69,000. 
D) $66,000.

Question 14

The sales section of an income statement for a retailer would not include

Accepted Answer

A) Sales discounts. 
B) Sales revenue. 
C) Net sales. 
D) Cost of goods sold.

Question 15

The basic accounting entries for merchandising are

Accepted Answer

A) the same under GAAP and under IFRS. 
B) required under GAAP but not under IFRS. 
C) required under IFRS but not under GAAP. 
D) required under IFRS with some differences as compared to GAAP.

Question 16

Cash register tapes provide evidence of credit sales.

Accepted Answer

A) True 
 B)False

Question 17

Under GAAP, companies can choose which inventory system?

Accepted Answer

The answer of Under GAAP, companies can choose which inventory...

Question 18

The amount of cost of good available for sale during the year depends on the amounts of

Accepted Answer

A) beginning merchandise inventory and cost of goods sold. 
B) beginning merchandise inventory, net cost of purchases, and ending merchandise inventory. 
C) beginning merchandise inventory, cost of goods sold, and ending merchandise inventory. 
D) beginning merchandise inventory and net costs of purchases.

Question 19

An advantage of using the periodic inventory system is that it requires less record keeping than the perpetual inventory system.

Accepted Answer

A) True 
 B)False

Question 20

Gross profit appears on both the single-step and multiple-step forms of an income statement.

Accepted Answer

A) True 
 B)False

Exam 4: Merchandising Operations and the Multiple-Step Income Statement

Davies Company purchased merchandise inventory with an invoice price of $15,000 and credit terms of 2/10, n/30. What is the net cost of the goods if Davies Company pays within the discount period?

Anderson Inc. sells $1,200 of merchandise on account to Baltic Company with credit terms of 2/10, n/30. If Baltic Company remits a check taking advantage of the discount offered, what is the amount of Baltic Company's check?

All of the following statements are true regarding the periodic inventory system except

Crowder Corporation recorded the return of $200 of goods originally sold on credit to Discount Industries. Using the periodic inventory approach, Crowder would record this transaction as:

Cost of Goods Sold is considered an expense of a merchandising firm.

Which of the following expressions is incorrect?

For the income statement, IFRS requires

A merchandising company's net income is determined by subtracting operating expenses from gross profit.

If a customer agrees to retain merchandise that is defective because the seller is willing to reduce the selling price, this transaction is known as a sales

Under a perpetual inventory system

The collection of a $500 account beyond the 2 percent discount period will result in a

The sales section of an income statement for a retailer would not include

The basic accounting entries for merchandising are

Cash register tapes provide evidence of credit sales.

Under GAAP, companies can choose which inventory system?

The amount of cost of good available for sale during the year depends on the amounts of

An advantage of using the periodic inventory system is that it requires less record keeping than the perpetual inventory system.

Gross profit appears on both the single-step and multiple-step forms of an income statement.