Question 1

Multiple-step income statements show:

Accepted Answer

A)  gross profit but not income from operations.
B)  neither gross profit nor income from operations.
C)  both gross profit and income from operations.
D)  income from operations but not gross profit.E) C) and D)
F) None of the above

Question 2

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.E) B) and C)
F) A) and C)

Question 3

Sales to customers who use bank credit cards,such as MasterCard and VISA,are generally treated as credit sales.

Accepted Answer

A) True 
 B)False

Question 4

The credit terms of a sale are normally indicated on a(n)

Accepted Answer

A)  purchase order.
B)  invoice.
C)  bill of lading.
D)  account receivable.E) None of the above
F) All of the above

Question 5

Revenue from sources other than the primary operating activity of a business is called other income.

Accepted Answer

A) True 
 B)False

Question 6

If a $20,000 sale is made on January 1,with terms of 2/10,n/30,how much would the discount be if payment is made on January 9?

Accepted Answer

A)  $0
B)  $200
C)  $1,000
D)  $400E) A) and D)
F) All of the above

Question 7

A sale of $600 on account subject to a sales tax of 5% would increase account receivable by $570.

Accepted Answer

A) True 
 B)False

Question 8

The sales discount account is a contra account to Sales.

Accepted Answer

A) True 
 B)False

Question 9

Refer to Deana,Inc.If Deana,Inc.had $20,000 in beginning inventory,and sold goods costing $300,000,what is the ending inventory balance?

Accepted Answer

A)  $165,000
B)  $240,000
C)  $200,000
D)  $185,000E) B) and C)
F) A) and B)

Question 10

Sales Discounts is used in accounting for transactions with customers.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following would be subtracted from gross profit to reach operating income?

Accepted Answer

A)  Operating expenses
B)  Other expenses
C)  Income taxes
D)  All of theseE) All of the above
F) A) and B)

Question 12

Sales discounts are granted by the seller to customers for payment at the end of the month.

Accepted Answer

A) True 
 B)False

Question 13

The indirect method of preparing the statement of cash flows reconciles net income with net cash flows from operating activities.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following accounts will NOT be found in the Cost of Merchandise Sold section on the income statement?

Accepted Answer

A)  Purchases
B)  Transportation In
C)  Sales Returns and Allowances
D)  Merchandise InventoryE) B) and C)
F) A) and B)

Question 15

If the ownership of merchandise passes to the buyer when the seller delivers the merchandise for shipment,the terms are stated as FOB destination.

Accepted Answer

A) True 
 B)False

Question 16

A.Bonds Company
The following is a single-step income statement for the A.Bonds Company:
 
-Refer to A.Bonds Company.If the income statement were prepared in a multiple-step format,income from operations would be

Accepted Answer

A)  $101,000.
B)  $113,500.
C)  $118,500.
D)  $152,500.E) A) and D)
F) A) and C)

Question 17

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.E) All of the above
F) C) and D)

Question 18

Which expenses are subtracted from gross profit to arrive at income from operations?

Accepted Answer

A)  All expenses
B)  Cost of merchandise sold
C)  Operating expenses
D)  Sales expensesE) All of the above
F) B) and D)

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

Orange Co.sells merchandise on credit to Zea Co.in the amount of $9,000.The invoice is dated on September 15 with terms of 1/15,net 45.What is the amount of the discount,and up to what date must the invoice be paid in order for the buyer to take advantage of the discount?

Accepted Answer

A)  $180,September 30
B)  $180,September 25
C)  $90,September 30
D)  $90,September 25E) B) and C)
F) A) and B)

Exam 4: Accounting for Merchandising Businesses

Sales to customers who use bank credit cards,such as MasterCard and VISA,are generally treated as credit sales.

Correct AnswerverifiedShow Answer

The sales discount account is a contra account to Sales.

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Sales discounts are granted by the seller to customers for payment at the end of the month.

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Which of the following accounts will NOT be found in the Cost of Merchandise Sold section on the income statement?

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A.Bonds Company The following is a single-step income statement for the A.Bonds Company: -Refer to A.Bonds Company.If the income statement were prepared in a multiple-step format,income from operations would be

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Which of the following would be subtracted from gross profit to reach operating income?

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

Correct AnswerverifiedShow Answer

The credit terms of a sale are normally indicated on a(n)

Correct AnswerverifiedShow Answer

A sale of $600 on account subject to a sales tax of 5% would increase account receivable by $570.

Correct AnswerverifiedShow Answer

Orange Co.sells merchandise on credit to Zea Co.in the amount of $9,000.The invoice is dated on September 15 with terms of 1/15,net 45.What is the amount of the discount,and up to what date must the invoice be paid in order for the buyer to take advantage of the discount?

Correct AnswerverifiedShow Answer

If a $20,000 sale is made on January 1,with terms of 2/10,n/30,how much would the discount be if payment is made on January 9?

Correct AnswerverifiedShow Answer

The indirect method of preparing the statement of cash flows reconciles net income with net cash flows from operating activities.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which expenses are subtracted from gross profit to arrive at income from operations?

Correct AnswerverifiedShow Answer

Sales Discounts is used in accounting for transactions with customers.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Multiple-step income statements show:

Correct AnswerverifiedShow Answer

Revenue from sources other than the primary operating activity of a business is called other income.

Correct AnswerverifiedShow Answer

Refer to Deana,Inc.If Deana,Inc.had $20,000 in beginning inventory,and sold goods costing $300,000,what is the ending inventory balance?

Correct AnswerverifiedShow Answer

If the ownership of merchandise passes to the buyer when the seller delivers the merchandise for shipment,the terms are stated as FOB destination.

Correct AnswerverifiedShow Answer

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