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Exam 4: Accounting for Merchandising Businesses

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Question 71

Multiple Choice

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Which financial statement reconciles net income with net cash flows from operating activities?

A) Balance sheet
B) Statement of retained earnings
C) Statement of cash flows
D) Income statement

E) All of the above
F) A) and D)

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Question 72

Multiple Choice

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Merchandise subject to terms 1/10,n/30,FOB shipping point,is sold on account to a customer for $17,500.The seller issued a credit memorandum for $4,000 prior to payment.What is the amount of the cash discount allowable?

A) $215
B) $175
C) $135
D) $140

E) A) and D)
F) A) and C)

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Question 73

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On the income statement,sales discounts are normally deducted from sales to yield the cost of merchandise sold.

If the buyer is to pay the delivery expense of delivering merchandise,delivery terms are stated as

Since merchandise inventory is normally sold within a year,how is it reported on the balance sheet?

In credit terms of 1/10,n/30,the "1" represents the

On the income statement,sales returns and allowances and sales discounts are added to gross sales to yield net sales.

Purchase discounts reduce sales.

When the seller offers a sales discount,even if borrowing has to be done,it is generally advantageous for the buyer to pay within the discount period.

Selected data from the ledger of Wiles Co.after adjustment at June 30,the end of the fiscal year,are listed as follows: Prepare a single-step income statement for the year ended June 30,2010.

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

Details of invoices for purchases of merchandise are as follows: Merchandise Transportation Terms Returns and Allowances a.$1,000 $25 FOB shipping point,1/10,n/30 $200 b.5,000 --- FOB destination,n/30 400 c.4,000 50 FOB shipping point,2/10,n/30 150 d.5,000 --- FOB destination,1/10,n/30 --- Determine the amount to be paid in full settlement of each of the invoices,assuming that credit for returns and allowances was received prior to payment and that all invoices were paid within the discount period.

Office salaries,depreciation of office equipment,and office supplies are examples of what type of expense?

Gold Co.sold merchandise to Bronze Co.on account,$23,000,terms 2/15,net 45.The cost of the merchandise sold is $18,500.Gold Co.issued a credit memorandum for $2,500 for merchandise returned that originally cost $1,900.Bronze Co.paid the invoice within the discount period.What is the amount of net income earned by Gold Co.on the transactions?

When merchandise is purchased to resell to customers,it is recorded in the account entitled

In a transaction where purchased merchandise has been returned,the buyer will increase the Sales Returns and Allowances account and the seller will increase the Purchases Returns and Allowances account.

Where are selling and administrative expenses found on the multi-step income statement?

Net income or loss may appear on the income statement of both a service business and a merchandising business.

Using a perpetual inventory system,the purchase of $30,000 of merchandise on account would include a(n)

If the seller is to pay the delivery expense of delivering merchandise,the delivery terms are stated as