Question 1

Gross profit is a measure of the overall profitability of a company.

Accepted Answer

A) True 
 B)False

Question 2

In terms of liquidity, inventory is

Accepted Answer

A)  more liquid than cash.
B)  more liquid than accounts receivable.
C)  more liquid than prepaid expenses.
D)  less liquid than store equipment.

Question 3

Under a periodic inventory system, the acquisition of inventory is charged to the Purchases account.

Accepted Answer

A) True 
 B)False

Question 4

Accepted Answer

Carter Company sells merchandise on account for $4,000 to Hannah Company with credit terms of 2/10, n/30.Hannah Company returns $600 of merchandise that was damaged along with a check to settle the account within the discount period.What entry does Carter Company make upon receipt of the check?

Correct Answer
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Question 5

Accepted Answer

When the physical count of Rosanna Company inventory had a cost of $4,350 at year-end and the unadjusted balance in Inventory was $4,500, Rosanna will have to make the following entry:

Question 6

Richter Company sells merchandise on account for $2,500 to Lynch Company with credit terms of 3/10, n/60.Lynch Company returns $200 of merchandise that was damaged, along with a check to settle the account within the discount period.What entry does Richter Company make upon receipt of the check and the damaged merchandise?

Accepted Answer

The answer of Richter Company sells merchandise on account for...

Question 7

For a merchandising company, all accounts that affect the determination of income are closed to the Income Summary account.

Accepted Answer

A) True 
 B)False

Question 8

In accounting for inventory, companies

Accepted Answer

A)  cannot use the periodic inventory system under GAAP.
B)  cannot use the periodic inventory system under IFRS.
C)  cannot use the perpetual system under IFRS.
D)  can use both periodic and perpetual inventory systems under GAAP and IFRS.IFRS.

Question 9

A Sales Returns and Allowances account is not debited if a customer

Accepted Answer

A)  returns defective merchandise.
B)  receives a credit for merchandise of inferior quality.
C)  utilizes a prompt payment incentive.
D)  returns goods that are not in accordance with specifications.

Question 10

If a company is given credit terms of 2/10, n/30, it should

Accepted Answer

A)  hold off paying the bill until the end of the credit period, while investing the money at 10% annual interest during this time.
B)  pay within the discount period and recognize a savings.
C)  pay within the credit period but don't take the trouble to invest the cash while waiting to pay the bill.
D)  recognize that the supplier is desperate for cash and withhold payment until the end of the credit period while negotiating a lower sales price.

Question 11

A sales discount does not

Accepted Answer

A)  provide the purchaser with a cash saving.
B)  reduce the amount of cash received from a credit sale.
C)  increase a contra-revenue account.
D)  increase an operating expense account.

Question 12

Under the perpetual system, freight costs incurred by the buyer for the transporting of goods is recorded in

Accepted Answer

A)  Freight Expense.
B)  Freight - In.
C)  Inventory. d Freight - Out.

Question 13

Financial information is presented below:  The gross profit rate would be

Accepted Answer

A)  .347.
B)  .397.
C)  .473.
D)  .542.

Question 14

Under a perpetual inventory system, acquisition of merchandise for resale is debited to the

Accepted Answer

A)  Inventory account.
B)  Purchases account.
C)  Supplies account.
D)  Cost of Goods Sold account.

Question 15

During August 2022, Baxter's Supply Store generated revenues of $60,000.The company's expenses were as follows: cost of goods sold of $36,000 and operating expenses of $4,000.The company also had rent revenue of $1,000 and a gain on the sale of a delivery truck of $2,000. Baxter's operating income for the month of August 2022 is

Accepted Answer

A)  $20,000.
B)  $21,000.
C)  $23,000.
D)  $24,000.

Question 16

The Inventory account is used in each of the following except the entry to record

Accepted Answer

A)  goods purchased on account.
B)  the return of goods purchased.
C)  payment of freight on goods sold.
D)  payment within the discount period.

Question 17

Accepted Answer

Rae Company uses a perpetual inventory system and made a purchase of merchandise on credit from Tyree Corporation on August 3 for $9,000, terms 2/10, n/45.On August 10, Rae makes the appropriate payment to Tyree.The entry on August 10 for Rae Company is

Correct Answer
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Question 18

On November 2, 2022, Kasdan Company has cash sales of $6,000 from merchandise having a cost of $3,600.The entries to record the day's cash sales will include:

Accepted Answer

A)  a $3,600 credit to Cost of Goods Sold.
B)  a $6,000 credit to Cash.
C)  a $3,600 credit to Inventory. d a $6,000 debit to Accounts Receivable.

Question 19

Under GAAP, companies generally classify income statement items by

Accepted Answer

A)  function.
B)  nature.
C)  nature or function
D)  date incurred.IFRS.

Question 20

Under a periodic inventory system, acquisition of merchandise is debited to the

Accepted Answer

A)  Inventory account.
B)  Cost of Goods Sold account.
C)  Purchases account.
D)  Accounts Payable account.

Exam 5: Accounting for Merchandising Operations

Correct AnswerverifiedShow Answer

A sales discount does not

Correct AnswerverifiedShow Answer

Under a periodic inventory system, the acquisition of inventory is charged to the Purchases account.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Financial information is presented below: The gross profit rate would be

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

For a merchandising company, all accounts that affect the determination of income are closed to the Income Summary account.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Under the perpetual system, freight costs incurred by the buyer for the transporting of goods is recorded in

Correct AnswerverifiedShow Answer

Under GAAP, companies generally classify income statement items by

Correct AnswerverifiedShow Answer

A Sales Returns and Allowances account is not debited if a customer

Correct AnswerverifiedShow Answer

The Inventory account is used in each of the following except the entry to record

Correct AnswerverifiedShow Answer

In terms of liquidity, inventory is

Correct AnswerverifiedShow Answer

Gross profit is a measure of the overall profitability of a company.

Correct AnswerverifiedShow Answer

Under a perpetual inventory system, acquisition of merchandise for resale is debited to the

Correct AnswerverifiedShow Answer

If a company is given credit terms of 2/10, n/30, it should

Correct AnswerverifiedShow Answer

On November 2, 2022, Kasdan Company has cash sales of $6,000 from merchandise having a cost of $3,600.The entries to record the day's cash sales will include:

Correct AnswerverifiedShow Answer

Under a periodic inventory system, acquisition of merchandise is debited to the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In accounting for inventory, companies

Correct AnswerverifiedShow Answer

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