This document includes truefalse question, problem, matching question and many many about Accounting for Merchandising Operations with answer, function, and detailed knowledge. Hope you read it and have best answer
Trang 1CHAPTER 5 - ANSWER:
ACCOUNTING FOR MERCHANDISING
OPERATIONS TRUE - FALSE STATEMENT
1 TRUE Retailers and wholesalers are both considered merchandising enterprises
13 TRUE Cost of Goods Sold is considered an expense of a merchandising firm
14 TRUE Operating expenses are subtracted from revenue for a service enterprise andfrom gross profit for a merchandising enterprise.
15 TRUE Net sales minus cost of goods sold is called gross profit
16 TRUE Under the perpetual inventory system, purchases of merchandise for saleare recorded in the Inventory account.
17 TRUE Freight costs incurred by the seller on outgoing merchandise are anoperating expense to the seller.
18 TRUE The terms 2/10, net/30 mean that a 2 % discount is allowed on paymentsmade within the 10 days discount period.
19 FALSE A buyer who acquires merchandise under credit terms of 1/10, n/30 has 10days after the invoice date to take advantage of the cash discount.
20 FALSE Discounts taken by the buyer for early payment of an invoice arecalled purchases discounts by the buyer.
21 TRUE If merchandise costing $5,000, with terms 2/10, n/30, is paid within 10days, the amount of the purchase discount is $100.
22 TRUE When an invoice is paid within the discount period, the amount of thediscount decreases Inventory
23 FALSE
24 FALSE
Trang 225 FALSE Sales Returns and Allowances is a contra-revenueSales Discounts is a contra asset account. account
26 TRUE The revenue recognition principle applies to merchandisers by recognizingsales revenues when they are earned
27 FALSE
28 FALSE Sales Discounts is a contra revenue account to Sales Revenue
29 FALSE The normal balance of Sales Returns and Allowances is a debit
30 TRUE When the terms of sale include a sales discount, it usually is advisable forthe buyer to pay within the discount period.
31 TRUE Sales Discounts and Sales Returns and Allowances both have normal debitbalances.
32 TRUE Merchandise is sold for $5,000 with terms 1/10, n/30 If $1,000 of themerchandise is returned prior to payment and the invoice is paid within the
discount period, the amount of the sales discount is $40
33 FALSE The terms 2/10, net/30 mean that a 2 % discount is allowed on paymentsmade within the 10 days discount period.
34 TRUE The multiple-step income statement is considered more useful than thesingle-step income statement because it highlights the components of net
income
35 TRUE General and administrative expenses are a category of operating expense
36 TRUE Advertising expense appears as a selling expense in the income statement
37 FALSE
38 FALSE
39 FALSE
40 FALSE
41 TRUE A merchandising company’s net income is determined by subtractingoperating expenses from gross profit.
42 TRUE Sales revenues, cost of goods sold, and gross profit are amounts on amerchandising company's income statement not commonly found on the
income statement of a service company
43 FALSE
44 FALSE
45 TRUE Gross profit represents the merchandising profit of a company
46 TRUE If net sales are $750,000 and cost of goods sold is $600,000, the grossprofit rate is 20%
47 TRUE With the periodic inventory system, goods available for sale must becalculated before cost of goods sold
48 TRUE Under the periodic system, the purchases account is used to accumulate allpurchases of merchandise for resale.
49 FALSE
50 FALSE Gross profit is computed by subtracting cost of goods sold from net sales
51 FALSE
Trang 352 TRUE Under the periodic inventory system, acquisitions of merchandise are notrecorded in the Inventory account.
MULTIPLE CHOICE QUESTIONS
53 Merchandising companies that sell to retailers are known as
b Payment of employees’ salaries
c Collection of cash from merchandise sales
57 Gross profit equals the difference between
a net income and operating expenses
b net sales revenues and cost of goods sold
c net sales revenues and operating expenses
d net sales revenues and cost of goods sold plus operating expenses
58 Each of the following companies is a merchandising company except a
a wholesale parts company
b candy store
c moving company
d furniture store
59 Net income will result if gross profit exceeds
a cost of goods sold
b operating expenses
c purchases
d cost of goods sold plus operating expenses
Trang 460 A merchandiser will earn an operating income of exactly $0 when
a net sales equals cost of goods sold
b cost of goods sold equals gross margin
c operating expenses equal net sales
d gross profit equals operating expenses
61 A merchandiser that sells directly to consumers is a
a retailer
b wholesaler
c broker
d service enterprise
62 Two categories of expenses in merchandising companies are
a cost of goods sold and financing expenses
b operating expenses and financing expenses
c cost of goods sold and operating expenses
d sales and cost of goods sold
63 The primary source of revenue for a wholesaler is
a investment income
b service revenue
c the sale of merchandise
d the sale of plant assets the company owns
64 Generally, the revenue account for a merchandising enterprise is called
a Sales Revenue or Sales
b Investment Income
c Gross Profit
d Net Sales
65 Under a perpetual inventory system
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 arereturned to vendors
66 The operating cycle of a merchandising company is
a always one year in length
b ordinarily longer than that of a service company
c about the same as that of a service company
d ordinarily shorter than that of a service company
67 Sales revenue less cost of goods sold is called
a gross profit
b net profit
c net income
d marginal income
Trang 568 After gross profit is calculated, operating expenses are deducted to determine
a gross margin
b net income
c gross profit on sales
d net margin
69 Which of the following expressions is incorrect?
a Gross profit - operating expenses = net income
b Sales - cost of goods sold - operating expenses = net income
c Net income + operating expenses = gross profit
d Operating expenses - cost of goods sold = gross profit
70 Detailed records of goods held for resale are not maintained under a
a perpetual inventory system
b periodic inventory system
c double entry accounting system
d single entry accounting system
71 A perpetual inventory system would most likely be used by a(n)
a automobile dealership
b hardware store
c drugstore
d convenience store
72 Which of the following is a true statement about inventory systems?
a Periodic inventory systems require more detailed inventory records
b Perpetual inventory systems require more detailed inventory records
c A periodic system requires cost of goods sold be determined after eachsale
d A perpetual system determines cost of goods sold only at the end of theaccounting period
73 The figure for which of the following items is determined at a different timeunder the perpetual inventory method than under the periodic method?
d each time a sale occurs
75 The primary difference between a periodic and perpetual inventory system isthat a periodic system
a keeps a record showing the inventory on hand at all time
b provides better control over inventories
c records the cost of the sale on the date the sale is made
Trang 6d determines the inventory on hand only at the end of the accounting period.
76 When using the periodic system the physical inventory count is used todetermine
a only the sales value of goods in the ending inventory
b both the cost of the goods in ending inventory and the sales value of goodssold during the period
c both the cost of the goods sold and the cost of ending inventory
d only the cost of merchandise sold during the period
77 Inventory becomes part of cost of goods sold when a company
a pays for the inventory
b purchases the inventory
c sells the inventory
d receives payment from the customer
78 Under the perpetual inventory system, which of the following accounts wouldnot be used?
a Sales Revenue
b Purchases
c Cost of Goods Sold
d Inventory
79 If a company determines cost of goods sold each time a sale occurs, it
a must have a computer accounting system
b uses a combination of the perpetual and periodic inventory systems
c uses a periodic inventory system
d uses a perpetual inventory system
80 The periodic inventory system is used most commonly by companies that sell
a low-priced, high-volume merchandise
b high-priced, high-volume merchandise
c high-priced, low-volume merchandise
d high-priced, low and high-volume merchandise
81 What is a difference between merchandising companies and serviceenterprises?
a Merchandising companies must prepare multiple-step income statementsand service enterprises must prepare single-step income statements
b Merchandising companies generally have a longer operating cycle thanservice enterprises
c Cost of goods sold is an expense for service enterprises but not formerchandising companies
d All are differences
82 Which statement is incorrect?
a Periodic inventory systems provide better control over inventories thanperpetual inventory systems
Trang 7b Computers and electronic scanners allow more companies to use aperpetual inventory system.
c Freight-in is debited to merchandise inventory when a perpetual inventorysystem is used
d Regardless of the inventory system that is used, companies should take aphysical inventory count
83 Under a perpetual inventory system, acquisition of merchandise for resale isdebited to
a the Inventory account
b the Purchases account
c the Supplies account
d the Cost of Goods Sold account
84 The journal entry to record a return of merchandise purchased on accountunder a perpetual inventory system would credit
b A return of merchandise inventory to the supplier
c Payment of freight costs for goods shipped to a customer
d Payment of freight costs for goods received from a supplier
86 A company using a perpetual inventory system that returns goods previouslypurchased on credit would
a debit Accounts Payable and credit Inventory
b debit Sales and credit Accounts Payable
c debit Cash and credit Accounts Payable
d debit Accounts Payable and credit Purchases
87 If a purchaser using a perpetual inventory system pays the transportation costs,then the
a Inventory account is increased
b Inventory account is not affected
c Freight-out account is increased
d Delivery Expense account is increased
88 Freight costs incurred by a seller on merchandise sold to customers will cause
an increase
a in the selling expenses of the buyer
b in operating expenses for the seller
c to the cost of goods sold of the seller
d to a contra-revenue account of the seller
Trang 889 Conway Company purchased merchandise inventory with an invoice price of
$8,000 and credit terms of 2/10, n/30 What is the net cost of the goods ifConway Company pays within the discount period?
a $0
b $20.00
c $20.40
d $40.00
91 In the credit terms of 1/10, n/30, the “1” represents the
a number of days in the discount period
b full amount of the invoice
c number of days when the entire amount is due
d percent of the cash discount
92 Farwell Company purchased merchandise with an invoice price of $2,000 andcredit terms of 2/10, n/30 Assuming a 360 day year, what is the impliedannual interest rate inherent in the credit terms?
a 4%
b 24%
c 36%
d 72%
93 Davies Company purchased merchandise inventory with an invoice price of
$7,500 and credit terms of 2/10, n/30 What is the net cost of the goods ifDavies Company pays within the discount period?
a 1%
Trang 9b 6%
c 12%
d 18%
96 A credit sale of $900 is made on July 15, terms 2/10, net/30, on which a return
of $50 is granted on July 18 What amount is received as payment in full onJuly 24?
a $900
b $833
c $850
d $882
97 If a company is given credit terms of 2/10, n/30, it should
a hold off paying the bill until the end of the credit period, while investingthe 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 cashwhile waiting to pay the bill
d recognize that the supplier is desperate for cash and withhold paymentuntil the end of the credit period while negotiating a lower sales price
98 A purchase invoice is a document that
a provides support for goods purchased for cash
b provides evidence of incurred operating expenses
c provides evidence of credit purchases
d serves only as a customer receipt
99 Adams Company is a retailer and uses a perpetual inventory system Whichstatement is correct?
a Returns of merchandise inventory by Adams Company to a manufacturerare credited to Inventory
b Freight paid to get merchandise inventory to Adams Company’s store isdebited to Freight Expense
c A return of merchandise inventory by one of Adams Company’s customers
is credited to Inventory
d Discounts taken by Adams Company’s customers are credited to Inventory
100 As the president of Harter Company, you notice that no discounts have been
taken when settling accounts payables What would be an acceptableexplanation?
a All invoices have credit terms of n/30
b There is not sufficient cash to pay within the discount period
c Discounts are missed because no one knows how to enter them in the newaccounting software
d The full amount of the invoice is being paid within the discount period andthe treasurer is pocketing the discount amount
101 When using a perpetual inventory system, why are discounts credited to
Inventory?
Trang 10a The discounts are debited to discount expense and thus the credit has to bemade to merchandise inventory.
b The discounts reduce the cost of the inventory
c The discounts are a reduction of business expenses
d None of the answers is correct
102 Tony’s Market recorded the following events involving a recent purchase of
inventory:
Received goods for $30,000, terms 2/10, n/30
Returned $600 of the shipment for credit
Paid $150 freight on the shipment
Paid the invoice within the discount period
As a result of these events, the company’s inventory
Received goods for $60,000, terms 2/10, n/30
Returned $1,200 of the shipment for credit
Paid $300 freight on the shipment
Paid the invoice within the discount period
As a result of these events, the company’s inventory
d More than one of the above is correct
105 Under the perpetual system, cash freight costs incurred by the buyer for the
transporting of goods is recorded in which account?
b Cost of Goods Sold
c Sales Returns and Allowances
d Purchase Discounts
Trang 11107 Sales revenues are usually considered earned when
a cash is received from credit sales
b an order is received
c goods have been transferred from the seller to the buyer
d adjusting entries are made
108 Sales revenue
a may be recorded before cash is collected
b will always equal cash collections in a month
c only results from credit sales
d is only recorded after cash is collected
109 The journal entry to record a credit sale is
110 Under the perpetual inventory system, in addition to making the entry to
record a sale, a company would
a debit Inventory and credit Cost of Goods Sold
b debit Cost of Goods Sold and credit Purchases
c debit Cost of Goods sold and credit Inventory
d make no additional entry until the end of the period
111 When sales of merchandise are made for cash, the transaction may be recorded
by the following entry
a debit Sales Revenue, credit Cash
b debit Cash, credit Sales
c debit Sales Revenue, credit Cash Discounts
d debit Sales Revenue, credit Sales Returns and Allowances
112 The entry to record a sale of $900 with terms of 2/10, n/30 will include a
a debit to Sales Discounts for $18
b debit to Sales Revenue for $882
c credit to Accounts Receivable for $900
d credit to Sales Revenue for $900
113 A sales invoice is prepared when goods
a are sold for cash
b are sold on credit
c sold on credit are returned
d are sold on credit or for cash
114 The Sales Returns and Allowances account is classified as a(n)
Trang 12a asset account.
b contra asset account
c expense account
d contra revenue account
115 The entry to record the return of goods from a customer would include a
a debit to Sales Revenue
b credit to Sales Revenue
c debit to Sales Returns and Allowances
d credit to Sales Returns and Allowances
116 The entry to record the receipt of payment within the discount period on a sale
of $500 with terms of 2/10, n/30 will include a
a credit to Sales Discounts for $10
b debit to Sales Revenue for $490
c credit to Accounts Receivable for $500
d credit to Sales Revenue for $500
117 The entry to record a sale of $500 with terms of 2/10, n/30 will include a
a credit to Sales Discounts for $10
b debit to Cash for $490
c credit to Accounts Receivable for $500
d credit to Sales Revenue for $500
118 The collection of an $800 account within the 2 percent discount period willresult in a
a debit to Sales Discounts for $16
b debit to Accounts Receivable for $784
c credit to Cash for $784
d credit to Accounts Receivable for $784
119 A sales invoice is used as documentation for a journal entry that requires a
a debit to Cash and a credit to Sales Revenue
b debit to Sales Returns and Allowances and a credit to AccountsReceivable
c debit to Accounts Receivable and a credit to Sales Revenue
d debit to Cash and a credit to Sales Returns and Allowances
120 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
a discount
b return
c contra asset
d allowance
121 When goods are returned that relate to a prior cash sale
a the Sales Returns and Allowances account should not be used
b the Cash account will be credited
c Sales Returns and Allowances will be credited
Trang 13d Accounts Receivable will be credited.
122 The Sales Returns and Allowances account does not provide information to
management about
a possible inferior merchandise
b the percentage of credit sales versus cash sales
c inefficiencies in filling orders
d errors in filling customers
123 A Sales Returns and Allowances account is not debited if a customer
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
124 As an incentive for customers to pay their accounts promptly, a business may
offer its customers
a the customer must pay the bill within 10 days
b the customer can deduct a 2% discount if the bill is paid between the 10thand 30th day from the invoice date
c the customer can deduct a 2% discount if the bill is paid within 10 days ofthe invoice date
d two sales returns can be made within 10 days of the invoice date and noreturns thereafter
126 A sales discount does not
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
127 Anderson Inc sells $600 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?
a $588
b $600
c $540
d $560
128 Aber Company sells merchandise on account for $1,500 to Borth Company
with credit terms of 2/10, n/30 Borth Company returns $250 of merchandisethat was damaged, along with a check to settle the account within the discountperiod What is the amount of the check?
Trang 14a $1,220
b $1,230
c $1,225
d $1,125
129 Casin Company sells $800 of merchandise on account to Delta Exploration
with credit terms of 2/10, n/30 If Delta Exploration remits a check takingadvantage of the discount offered, what is the amount of Delta Exploration'scheck?
b Sales returns and allowances
c both (a) and (b)
d Neither (a) and (b)
131 Fehr Company sells merchandise on account for $2,500 to Kelly Company
with credit terms of 2/10, n/30 Kelly Company returns $500 of merchandisethat was damaged, along with a check to settle the account within the discountperiod What is the amount of the check?
a $2,450
b $2,460
c $2,000
d $1,960
132 Piper Company sells merchandise on account for $1,800 to Morton Company
with credit terms of 2/10, n/30 Morton Company returns $600 of merchandisethat was damaged, along with a check to settle the account within the discountperiod What entry does Piper Company make upon receipt of the check?
Trang 15133 The collection of a $900 account beyond the 2 percent discount period will
result in a
a debit to cash for $882
b debit to Accounts Receivable for $900
c debit to Cash for $900
d debit to Sales Discounts for $18
134 The collection of a $500 account beyond the 2 percent discount period will
result in a
a debit to Cash for $490
b credit to Accounts Receivable for $500
c credit to Cash for $500
d debit to Sales Discounts for $10
135 Which of the following would not be classified as a contra account?
a Sales Revenue
b Sales Returns and Allowances
c Accumulated Depreciation
d Sales Discounts
136 Which of the following accounts has a normal credit balance?
a Sales Returns and Allowances
b Sales Discounts
c Sales Revenue
d Cost of Goods Sold
137 With respect to the income statement
a contra revenue accounts do not appear on the income statement
b sales discounts increase the amount of sales
c contra revenue accounts increase the amount of operating expenses
d sales discounts are included in the calculation of gross profit
138 When a seller records a return of goods, the account that is credited is
a Sales Revenue
b Sales Returns and Allowances
c Merchandise Inventory
d Accounts Receivable
139 The respective normal account balances of Sales, Sales Returns and
Allowances, and Sales Discounts are
a credit, credit, credit
b debit, credit, debit
c credit, debit, debit
d credit, debit, credit
140 Rains Company is a furniture retailer On January 14, 2012, Rains purchased
merchandise inventory at a cost of $36,000 Credit terms were 2/10, n/30 Theinventory was sold on account for $60,000 on January 21, 2012 Credit termswere 1/10, n/30 The accounts payable was settled on January 23, 2012 and the
Trang 16accounts receivables were settled on January 30, 2012 Which statement iscorrect?
a Cash flows were affected on January 14 and January 21
b Gross profit percentage is 60%
c On January 30, 2012, customers should remit cash in the amount of
$59,400
d There is not enough information available to answer this question
141 Which statement is incorrect?
a The sales account is used to record the sales of goods held for resale tocustomers
b Sales discounts are recorded as debits to the sales account
c The sales account is a revenue account
d The sales account has a normal credit balance and is closed at the end ofthe accounting period
142 Indicate which one of the following would not appear on both a single-step
income statement and a multiple-step income statement
a Gross profit
b Operating expenses
c Sales revenues
d Cost of goods sold
143 The form of income statement that derives its name from the fact that the total
of all expenses is deducted from the total of all revenues is called a
a multiple-step statement
b revenue statement
c report-form statement
d single-step statement
144 Gross profit does not appear
a on a multiple-step income statement
b on a single-step income statement
c to be relevant in analyzing the operation of a merchandising company
d on either a multiple-step or single-step income statement
145 Gross profit equals the difference between sales and
a operating expenses
b cost of goods sold
c net income
d cost of goods sold plus operating expenses
146 Positive operating income will result if gross profit exceeds
a costs of goods sold
Trang 17b Income from operations
b There may be a section for non-operating activities
c There may be a section for operating assets
d There is a section for cost of goods sold
150 An advantage of the single-step income statement over the multiple-step form
is
a the amount of information it provides
b its comprehensiveness
c its simplicity
d its use in computing ratios
151 Income from operations appears on
a both a multiple-step and a single-step income statement
b neither a multiple-step nor a single-step income statement
c a single-step income statement
d a multiple-step income statement
152 Income from operations is gross profit less
1 operating expenses and other expenses and losses
2 operating expenses plus other revenues and gains
153 Multiple-step income statements show
a gross profit but not income from operations
b neither gross profit nor income from operations
c both income from operations and gross profit
d income from operations but not gross profit
154 Interest expense would be classified on a multiple-step income statement
under the heading
a Other expenses and losses
Trang 18b Other revenues and gains
c Selling expenses
d Cost of goods sold
155 Gross profit for a merchandising concern is net sales minus
a operating expenses
b cost of goods sold
c sales discounts
d cost of goods available for sale
156 The sales revenues section of an income statement for a retailer would not
include
a Sales discounts
b Sales
c Net sales
d Cost of goods sold
157 The operating expenses section of an income statement for a merchandising
company would not include
a Freight-out
b Utilities expense
c Cost of goods sold
d Insurance expense
158 Indicate which one of the following would appear on the income statement of
both a merchandising company and a service company
a Gross profit
b Operating expenses
c Sales revenues
d Cost of goods sold
159 Gross profit does not appear
a on a merchandising company income statement
b on a service company income statement
c to be relevant in analyzing the operation of a merchandising company
d on the income statement if the periodic inventory system is used because itcannot be calculated
160 Financial information is presented below:
Gross profit would be
Trang 19Operating Expenses $ 45,000
The gross profit rate would be
The profit margin ratio would be
Gross profit would be
The gross profit rate would be
The profit margin ratio would be
Trang 20The amount of net sales on the income statement would be
Gross Profit would be
The gross profit rate would be
The profit margin ratio would be
a .454
b .119
Trang 21The amount of net sales on the income statement would be
Gross profit would be
The gross profit rate would be
The profit margin ratio would be
a .43
b .20
c .07
d .08
Trang 22174 What is an advantage of using the multiple-step income statement?
a It highlights the components of net income
b Gross profit is not a separate item
c It is easier to prepare than the single-step income statement
d Net income will be higher than net income computed using the single-stepincome statement
175 For a jewelry retailer, which is an example of Other Revenues and Gains?
a repair revenue
b unearned revenue
c gain on sale of display cases
d discount received for paying for merchandise inventory within thediscount period
176 When using a periodic inventory system, which statement concerning the
computation of cost of goods sold is correct?
a The amount of ending inventory is determined on the last day of theaccounting period
b Cost of Goods Available for Sale includes net purchases plus the endinginventory
c Purchases represent cash paid for purchases during the accounting period
d Freight in is ignored
177 When using the periodic inventory system, which of the following is not a step
in determining cost of goods purchased?
a Add freight in
b Subtract purchase returns and allowances
c Subtract cost of ending inventory
d All of these are necessary steps
178 At the beginning of the year, Uptown Athletic had an inventory of $400,000
During the year, the company purchased goods costing $1,500,000 If Uptown Athletic reported ending inventory of $600,000 and sales of $2,000,000, their cost of goods sold and gross profit rate would be
a $900,000 and 65%
b $1,300,000 and 35%
c $900,000 and 35%
d $1,300,000 and 65%
179 At the beginning of the year, Wildcat Athletic had an inventory of $200,000
During the year, the company purchased goods costing $700,000 If Wildcat Athletic reported ending inventory of $300,000 and sales of $1,000,000, their cost of goods sold and gross profit rate would be
a $400,000 and 60%
b $600,000 and 40%
c $400,000 and 40%
d $600,000 and 60%