Question 1

Gross profit is equal to:

Accepted Answer

A)   sales plus (sales discounts and sales returns and allowances)  plus cost of merchandise sold
B)   sales plus sales returns and allowances less sales discounts less cost of merchandise sold
C)   sales plus sales discounts less sales returns and allowances less cost of merchandise sold
D)   sales less (sales discounts and sales returns and allowances)  less cost of merchandise sold

Question 2

Which of the following items should not be included in the cost of ending merchandise inventory?

Accepted Answer

A)   purchased units in transit, shipped FOB shipping point
B)   purchased units in transit, shipped FOB destination
C)   units on hand in the warehouse
D)   sold units in transit, not invoiced and shipped FOB destination

Question 3

Using the letter preceding each account, arrange the following selected accounts in the order they would normally appear in a chart of accounts of a company that uses a multiple-step income statement.

Accepted Answer

(b) (c) (a) (g) (j) ...

Question 4

The inventory system employing accounting records that continuously disclose the amount of inventory is called

Accepted Answer

A)   retail
B)   periodic
C)   physical
D)   perpetual

Question 5

Other income and expenses are items that are related to the primary operating activity.

Accepted Answer

A) True 
 B)False

Question 6

Which account will be included in both service and merchandising companies closing entries?

Accepted Answer

A)   Sales
B)   Cost of Merchandise Sold
C)   Purchase Discounts
D)   Sales Returns and Allowances

Question 7

Expenses that are incurred directly or entirely in connection with the sale of merchandise are classified as

Accepted Answer

A)   selling expenses
B)   general expenses
C)   other expenses
D)   administrative expenses

Question 8

When comparing a retail business to a service business, the financial statement that changes the most is the

Accepted Answer

A)   Balance Sheet
B)   Income Statement
C)   Statement of Owner's Equity
D)   Statement of Cash Flow

Question 9

If title to merchandise purchases passes to the buyer when the goods are delivered to the buyer, the terms are

Accepted Answer

A)   consigned
B)   n/30
C)   FOB shipping point
D)   FOB destination

Question 10

Which of the following costs would be included in merchandise inventory?

Accepted Answer

The answer of Which of the following costs would be...

Question 11

The abbreviation FOB stands for Free On Board.

Accepted Answer

A) True 
 B)False

Question 12

Under the periodic inventory system, the cost of merchandise sold is recorded when sales are made.

Accepted Answer

A) True 
 B)False

Question 13

In a merchandise business, sales minus operating expenses equals net income.

Accepted Answer

A) True 
 B)False

Question 14

When goods are shipped FOB destination and the seller pays the freight charges, the buyer

Accepted Answer

A)   journalizes a reduction for the cost of the merchandise.
B)   journalizes a reimbursement to the seller.
C)   does not take a discount.
D)   makes no journal entry for the freight.

Question 15

Purchased goods in transit, shipped FOB destination, should be excluded from ending inventory of the buyer.

Accepted Answer

A) True 
 B)False

Question 16

Using the following information, what is the amount of merchandise available for sale?

Accepted Answer

A)   $35,540
B)   $36,580
C)   $37,700
D)   $34,500

Question 17

Under the perpetual inventory system, all purchases of merchandise are debited to the account entitled

Accepted Answer

A)   Merchandise Inventory
B)   Cost of Merchandise Sold
C)   Cost of Merchandise Available for Sale
D)   Purchases

Question 18

The form of the balance sheet in which assets, liabilities, and owner's equity are presented in a downward sequence is called the report form.

Accepted Answer

A) True 
 B)False

Question 19

Freight in is the amount paid by the company to deliver merchandise sold to a customer.

Accepted Answer

A) True 
 B)False

Question 20

In the merchandising income statement, sales will be reduced by sales discounts and sales returns and allowances to arrive at net sales.

Accepted Answer

A) True 
 B)False

Exam 6: Accounting for Merchandising Businesses

When comparing a retail business to a service business, the financial statement that changes the most is the

Correct AnswerverifiedShow Answer

Using the following information, what is the amount of merchandise available for sale?

Correct AnswerverifiedShow Answer

Expenses that are incurred directly or entirely in connection with the sale of merchandise are classified as

Correct AnswerverifiedShow Answer

The abbreviation FOB stands for Free On Board.

Correct AnswerverifiedShow Answer

When goods are shipped FOB destination and the seller pays the freight charges, the buyer

Correct AnswerverifiedShow Answer

Under the perpetual inventory system, all purchases of merchandise are debited to the account entitled

Correct AnswerverifiedShow Answer

Purchased goods in transit, shipped FOB destination, should be excluded from ending inventory of the buyer.

Correct AnswerverifiedShow Answer

The form of the balance sheet in which assets, liabilities, and owner's equity are presented in a downward sequence is called the report form.

Correct AnswerverifiedShow Answer

Freight in is the amount paid by the company to deliver merchandise sold to a customer.

Correct AnswerverifiedShow Answer

In the merchandising income statement, sales will be reduced by sales discounts and sales returns and allowances to arrive at net sales.

Correct AnswerverifiedShow Answer

Which of the following items should not be included in the cost of ending merchandise inventory?

Correct AnswerverifiedShow Answer

Which account will be included in both service and merchandising companies closing entries?

Correct AnswerverifiedShow Answer

Which of the following costs would be included in merchandise inventory?

Correct AnswerverifiedShow Answer

Under the periodic inventory system, the cost of merchandise sold is recorded when sales are made.

Correct AnswerverifiedShow Answer

Using the letter preceding each account, arrange the following selected accounts in the order they would normally appear in a chart of accounts of a company that uses a multiple-step income statement.

Correct Answerverified(b) (c) (a) (g) (j) ...View AnswerShow Answer

If title to merchandise purchases passes to the buyer when the goods are delivered to the buyer, the terms are

Correct AnswerverifiedShow Answer

Other income and expenses are items that are related to the primary operating activity.

Correct AnswerverifiedShow Answer

Gross profit is equal to:

Correct AnswerverifiedShow Answer

The inventory system employing accounting records that continuously disclose the amount of inventory is called

Correct AnswerverifiedShow Answer

In a merchandise business, sales minus operating expenses equals net income.

Correct AnswerverifiedShow Answer

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(b) (c) (a) (g) (j) ...
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