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Exam 5: Merchandising Operations and the Multiple-Step Income Statement

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Question 91

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Under the periodic system, the purchases account is used to accumulate all purchases of merchandise for resale.

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Question 92

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The operating cycle of a merchandising company ordinarily is shorter than that of a service company.

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Question 93

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A decline in a company's gross profit could be caused by all of the following except

Gross profit equals the difference between net sales and

Fehr Company sells merchandise on account for $5,000 to Kelly Company with credit terms of 2/10, n/30. Kelly Company returns $1,000 of merchandise that was damaged, along with a check to settle the account within the discount period. What is the amount of the check?

A merchandiser will earn an operating income of exactly $0 when

Stan's Market recorded the following events involving a recent purchase of inventory: Received goods for $90,000, terms 2/10, n/30. Returned $1,800 of the shipment for credit. Paid $450 freight on the shipment. Paid the invoice within the discount period. As a result of these events, the company's inventory

Operating expenses include interest expense and income tax expense.

Freight-out appears as an operating expense in the income statement.

The credit terms offered to a customer by a business firm were 2/10, n/30, which means

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

When an invoice is paid within the discount period, the amount of the discount decreases Inventory.

Menke Company is a furniture retailer and uses the perpetual inventory system. On January 14, 2014, Menke purchased merchandise inventory at a cost of $45,000. Credit terms were 2/10, n/30. The inventory was sold on account for $60,000 on January 21, 2014. Credit terms were 1/10, n/30. The accounts payable was settled on January 23, 2014, and the accounts receivables were settled on January 30, 2014. Prepare journal entries to record each of these transactions.

The use of IFRS results in more transactions affecting

Which of the following activities is not a component of the operating cycle?

When using a periodic inventory system, which statement concerning the computation of cost of goods sold is correct?

(Communication) Sandy Lang and Mandy Starr, two salespersons in adjoining territories, regularly compete for bonuses. During the last month, their dollar volume of sales, on which the bonuses are based, was nearly equal. On May 30, 2014, each made a large sale. Both orders were shipped on May 31, 2014, the last day of the month, and both were received by the customers on June 5, 2014. Sandy's sale was FOB shipping point (ownership passes to buyer at time of shipping), and Mandy's was FOB destination (ownership passes to buyer at time of receipt). The printed policy of the company states that sales "count" for purposes of calculating bonuses on the date that ownership passes to the purchaser. Sandy's sale was therefore counted in her May monthly total of sales while Mandy's sale was not. Mandy is quite upset. She has asked you to just include it, or to take Sandy's off as well. She also has told you that you are being unethical for allowing Sandy to get a bonus just for choosing a particular shipping method. As the accounting manager write a memo to Mandy on June 15, 2014, and explain your position.

If Hostell Company has net sales of $500,000 and cost of goods sold of $325,000, Hostell's gross profit rate is

The journal entry to record a credit sale ignoring cost of goods sold is

When sales of merchandise are made for cash, the transaction may be recorded by the following entry: