Question 1

Upon making a credit card sale,a business should record the sale as an accounts receivable until the customer pays his or her credit card bill.

Accepted Answer

A) True 
 B)False

Question 2

Brendan Company sold merchandise worth $1,600 on credit,terms n/15 and on the next day the customer returned merchandise worth $100,which cost $60 for Brendan Company.What is the required journal entry to record the merchandise returns under the perpetual inventory system?

Accepted Answer

A) Accounts Receivables 100 Sales Returns and Allowances 100
Cost of Goods Sold 60
Merchandise Inventory 36 
B) Sales Returns and Allowances 100 Accounts Receivables 100
Merchandise Inventory 60
Cost of Goods Sold 60 
C) Accounts Receivables 100 Merchandise Inventory 100
Cost of Goods Sold 60
Sales 60 
D) Merchandise Inventory 100 Sales 100
Sales 60
Cost of Goods Sold 60

Question 3

The use of major credit cards does not require sellers to establish the customer's credit.

Accepted Answer

A) True 
 B)False

Question 4

The operating cycle involves the purchase and sale of merchandise inventory as well as the subsequent collection of cash from credit sales.

Accepted Answer

A) True 
 B)False

Question 5

Terms of "n/10 eom" mean that payment is due 10 days after the end of the month.

Accepted Answer

A) True 
 B)False

Question 6

The following lettered items represent a classification scheme for a multistep income statement.In the blank next to each account,write the letter indicating to which category it belongs.

Accepted Answer

The answer of The following lettered items represent a classification...

Question 7

Under the periodic inventory system,Cost of goods sold must be computed because it is not updated for sales and other transactions during the accounting period.

Accepted Answer

A) True 
 B)False

Question 8

If a U.S.company purchases goods for a fixed number of British pounds,and the exchange rate has fallen from $1.55 per pound to $1.50 per pound by the time payment is made,the U.S.company would record an exchange gain.

Accepted Answer

A) True 
 B)False

Question 9

Goods totaling $14,000 purchased February 2 on terms of 2/10,n/30 and on which returns of $2,000 were made on February 10 would be subject to which of the following discounts if paid for on February 12?

Accepted Answer

A) $240 
B) $280 
C) $320 
D) $40

Question 10

When a U.S.company does business with a British company and payment is in British pounds,an exchange gain or loss occurs if the exchange rate between dollars and pounds changes between the date of sale and the date of payment.

Accepted Answer

A) True 
 B)False

Question 11

An advantage of the single-step income statement over the multistep form is

Accepted Answer

A) the amount of information it provides. 
B) its simplicity. 
C) its comprehensiveness. 
D) its use in computing ratios.

Question 12

A retail operation would not have to take a physical inventory if it uses a perpetual inventory system.

Accepted Answer

A) True 
 B)False

Question 13

Ending merchandise inventory is not included in the calculation of cost of goods available for sale.

Accepted Answer

A) True 
 B)False

Question 14

Wolf Equipment uses a perpetual inventory method.Discuss how Wolf Equipment accounts for purchase returns and allowances.

Accepted Answer

The answer of Wolf Equipment uses a perpetual inventory method.Discuss...

Question 15

The other revenues and expenses section of a multistep income statement could include all the following except

Accepted Answer

A) interest expense. 
B) interest income. 
C) dividend income. 
D) insurance expense.

Question 16

Delivery expense is a selling expense on the income statement.

Accepted Answer

A) True 
 B)False

Question 17

Distinguish between the cost of goods available for sale and the cost of goods sold.

Accepted Answer

The answer of Distinguish between the cost of goods available...

Question 18

If insured goods are shipped FOB destination,the seller should file a claim for goods damaged in transit.

Accepted Answer

A) True 
 B)False

Question 19

What is the financing period? Is a longer or shorter financing period most desireable?

Accepted Answer

The answer of What is the financing period? Is a...

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 6: Accounting for Merchandising Operations

Upon making a credit card sale,a business should record the sale as an accounts receivable until the customer pays his or her credit card bill.

Brendan Company sold merchandise worth $1,600 on credit,terms n/15 and on the next day the customer returned merchandise worth $100,which cost $60 for Brendan Company.What is the required journal entry to record the merchandise returns under the perpetual inventory system?

The use of major credit cards does not require sellers to establish the customer's credit.

The operating cycle involves the purchase and sale of merchandise inventory as well as the subsequent collection of cash from credit sales.

Terms of "n/10 eom" mean that payment is due 10 days after the end of the month.

The following lettered items represent a classification scheme for a multistep income statement.In the blank next to each account,write the letter indicating to which category it belongs.

Under the periodic inventory system,Cost of goods sold must be computed because it is not updated for sales and other transactions during the accounting period.

If a U.S.company purchases goods for a fixed number of British pounds,and the exchange rate has fallen from $1.55 per pound to $1.50 per pound by the time payment is made,the U.S.company would record an exchange gain.

Goods totaling $14,000 purchased February 2 on terms of 2/10,n/30 and on which returns of $2,000 were made on February 10 would be subject to which of the following discounts if paid for on February 12?

When a U.S.company does business with a British company and payment is in British pounds,an exchange gain or loss occurs if the exchange rate between dollars and pounds changes between the date of sale and the date of payment.

An advantage of the single-step income statement over the multistep form is

A retail operation would not have to take a physical inventory if it uses a perpetual inventory system.

Ending merchandise inventory is not included in the calculation of cost of goods available for sale.

Wolf Equipment uses a perpetual inventory method.Discuss how Wolf Equipment accounts for purchase returns and allowances.

The other revenues and expenses section of a multistep income statement could include all the following except

Delivery expense is a selling expense on the income statement.

Distinguish between the cost of goods available for sale and the cost of goods sold.

If insured goods are shipped FOB destination,the seller should file a claim for goods damaged in transit.

What is the financing period? Is a longer or shorter financing period most desireable?

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