CHAPTER 5 REVIEW: ACCOUNTING FOR MERCHANDISING BUSINESSES – Flashcards

For a merchandising business, the revenue account is called: A) gross profit B) gross sales C) earnings D) sales E) net income

The difference between the revenues and the cost of merchandise sold is referred to as the: A) gross profit B) gross sales C) earnings D) net income E) sales

The proper classification of merchandise inventory on the balance sheet is as a: A) fixed asset B) current liability C) current asset D) long-term asset

The chart of accounts for a merchandising business generally: A) is the same for a service business B) never has a cost of goods sold account C) has no inventory accounts D) requires different accounts than a service business E) is always standardized by the FASB

When inventory transactions occur and are continuously recorded in an inventory account, the inventory system is called: A) retail B) wholesale C) perpetual D) periodic E) physical

The amount of cash expected by a seller depends on all of the following EXCEPT: A) sales price and trade discounts B) discount terms and timing of payment C) returns and allowances D) FOB terms and sales tax E) advertising expense

Merchandise with a selling price of $2,000 and a cost of $1,100 was sold on account. The seller would debit: A) cost of merchandise sold $2,000 B) sales $2,000 C) merchandise inventory$1,100 D) accounts receivable $2,000 E) merchandise inventory $2,000

If the multiple sections of a balance sheet are presented in a downward sequence, the form is referred to as the: A) accounting form B) account form C) report form D) horizontal form E) comparative form

If Company (A) has a ratio of sales to asset of 2.20 in 2015 and 2.30 in 2016, then you cold most likely say that the company has: A) been less efficient in using its assets B) increased its assets C) improved the utilization of its assets to generate sales in 2016 D) increased its sales by 10%

The statement of stockholders' equity for the current year would include: A) operating expenses B) merchandise inventory C) net income D) cost of merchandise sold E) sales

Merchandise inventory is reported as a(n): A) expense. B) current asset. C) long-term asset. D) current liability.

During the month, merchandise is sold for $80,500 cash and for $119,000 on account. The cost of merchandise sold is $101,500. What is the amount of gross profit: A) $199,500 B) $80,500 C) $119,000 D) $98,000

Gross profit is: A) none of these choices are correct. B) profit before deducting operating expenses. C) profit after deducting other expenses. D) profit after deducting operating expenses.

Cost of merchandise sold is reported as a(n): A) expense. B) current asset. C) long-term asset. D) current liability.

The Banks Company sold merchandise on account for $35,000 with terms 2/10, n/30. The cost of merchandise sold was $27,600. If the invoice is paid in the discount period, what is the amount of cash received by Banks Company: A) $34,300 B) $35,000 C) $27,600 D) $27,048

Garden Company purchased merchandise on account from Parker Company for $88,000 with terms 1/15, net 45. Garden Company returned $12,000 of the merchandise and received full credit from Parker Company. If Garden Company pays within the discount period, what is the amount of cash required for payment: A) $87,120 B) $75,240 C) $88,000 D) $76,000

Garden Company sold merchandise to Mamouth Industries on account for $3,450 with terms 2/10, n/30. The cost of merchandise sold was $1,850. Garden Company refunded Mamouth Industries $900 for returned merchandise. The cost of merchandise sold was $600. Which of the following will be recorded by Mamouth Industries in the journal entry for the return using the perpetual inventory system: A) debit to Accounts Payable, $600. B) credit to Merchandise Inventory, $882. C) credit to Accounts Payable, $882. D) debit to Merchandise Inventory, $600.

Credit terms are terms for: A) none of these choices are correct. B) when the payments for merchandise are to made. C) both of these choices are correct. D) when the returns of merchandise are to made.

Income from operations is gross profit: A) plus cost of merchandise sold. B) less inventory. C) less cost of merchandise sold. D) less operating expenses.

Other income is: A) none of these choices are correct. B) added to income from operations. C) deducted from sales. D) deducted from income from operations.

Determine net income using the following amounts: rent revenue is $1,560 interest expense is $2,970; and income from operations is $75,120: A) $79,650 B) $70,590 C) $73,710 D) $76,530

The second closing entry for a merchandising business will include which of the following: A) retained earnings B) sales C) cost of merchandise sold D) dividends

After the first two closing entries have been posted, Income Summary has a debit of $153,690 and a credit of $98,475. Which of the following is true: A) net income equals $55,215. B) total revenues equal $153,690. C) total expenses equal $98,475. D) net loss equals $55,215.

The first closing entry for a merchandising business will include which of the following: A) retained Earnings B) rent Expense C) sales D) dividends

The third closing entry transfers net income or loss to the income summary account:A) is prepared to close the retained earnings account. B) is prepared to close the dividends account. C) is to transfer the net income or loss to the retained D) earnings account.

The operating cycle of a business is comprised of: A) collection activity. B) purchase activity. C) sales activity. D) all of these choices are correct.

In a perpetual inventory system: A) the inventory records cannot be computerized. B) each purchase and sale of inventory is recorded in the inventory account. C) the amount of inventory for sale and the amount sold are not listed in the inventory account. D) none of these choices are correct.

In the multiple-step income statement, cost of merchandise sold is subtracted from: A) sales. B) gross profit. C) operating expenses. D) selling expenses.