question

Which of the following businesses is a merchandising business?

answer

Kohl's

question

Gross profit is determined by subtracting the cost of merchandise sold from what?*

answer

Net sales

question

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

answer

As a current asset

question

Generally, the revenue account for a merchandising business is entitled*

answer

Sales.

question

The difference between sales and cost of merchandise sold for a merchan- dising business is *

answer

gross profit.

question

What is subtracted from sales to arrive at net sales?*

answer

Both sales discounts and sales returns and allowances

question

East, Inc. had beginning inventory of $10,000, purchases of $25,000, and ending inventory of $5,000. What is East's cost of merchandise sold?*

answer

$30,000

question

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

answer

Operating expenses

question

Which of the following is NOT an example of selling expenses?*

answer

Office staff salaries

question

Which of the following is NOT an administrative expense?*

answer

Salespersons' salaries

question

NBC Company had $32,000 in net sales, $15,000 in cost of merchandise sold, $18,000 in operating expenses, and $2,000 in other income. What is NBC Company's gross profit?*

answer

$17,000

question

For a merchandising firm, the inventory sold is shown on the income statement as?*

answer

cost of merchandise sold.

question

Inventory NOT sold at the end of the period is reported as*

answer

merchandise inventory.

question

Which of the following are subtracted from sales to arrive at net sales?*

answer

Sales returns

question

Gross profit is equal to:*

answer

sales less (sales discounts and sales returns and allowances) less cost of merchan- dise sold.

question

The arrangements between buyer and seller as to when payments for merchandise are to be made are called*

answer

credit terms.

question

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?*

answer

$400

question

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

answer

percent of the cash discount.

question

Sales to customers who use bank credit cards such as MasterCard and Visa are usually recorded by a(n):*

answer

increase in Cash, increase in Credit Card Expense, and increase in Sales

question

In recording the cost of merchandise sold for cash using a perpetual inventory system, the effect on the accounts is*

answer

increase Cost of Merchandise Sold; decrease Merchandise Inventory.

question

When merchandise that was sold on account is returned, which accounts are affected?*

answer

Sales returns, accounts receivable, merchandise inventory, and cost of goods sold

question

If merchandise sold on account is returned to the seller, the seller may inform the customer of the details by issuing a

answer

credit memorandum.

question

Merchandise subject to terms 1/10, n/30, FOB shipping point, is sold on account to a customer for $20,000. The seller issued a credit memorandum for $5,000 prior to payment. What is the amount of the cash discount allowable?*

answer

$150

question

Based on the following information, what would be recorded as purchases discount if the invoice is paid within the discount period? 1. $5,000 of merchandise inventory was ordered on April 2, 2010. 2. $2,000 of this merchandise was received on April 5, 2010. 3. On April 6, 2010, an invoice dated April 4, 2010, with terms of 2/10, net 30 for $2,150 which included a $150 prepaid freight cost, was received. 4. On April 10, 2010, $500 of the merchandise was returned to the seller.*

answer

$30

question

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

answer

number of days in the discount period.

question

Under the perpetual inventory system, a retailer's purchase of merchandise inventory:*

answer

increases Merchandise Inventory; decreases Cash.

question

The amount of the total cash paid to the seller for merchandise purchased would normally include:*

answer

the list price plus the sales tax.

question

A sales invoice included the following information: merchandise price, $5,000; terms 1/10, n/eom. Assuming that a credit for merchandise returned of $600 is granted prior to payment, and that the invoice is paid within the discount period, what is the amount of cash received by the seller?*

answer

$4,356

question

A sales invoice included the following information: merchandise price, $6,000; terms 2/10, n/eom. Assuming that a credit for merchandise returned of $600 is granted prior to payment, and that the invoice is paid within the discount period, what is the amount of cash received by the seller?*

answer

$5,292

question

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?*

answer

$135

question

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

answer

FOB shipping point.

question

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

answer

FOB destination.

question

If title to merchandise purchases passes to the buyer when the goods are shipped from the seller, the terms are*

answer

FOB shipping point.

question

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

answer

FOB destination.

question

Merchandise with an invoice price of $6,000 is purchased subject to terms of 2/10, n/30, FOB destination. Transportation costs paid by the seller totaled $125. What is the net cost of the merchandise?*

answer

$5,880

question

Which term indicates that merchandise is free of transportation charges to the buyer?

answer

FOB destination

question

Inventory shortage is recorded when:*

answer

there is a difference between a physical count of inventory and inventory records.

ACCT 2810 – Chapter 4 – Flashcards

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