Accounting - Gateway Ch. 5 Review

When goods are sold on terms FOB shipping point the :

• buyer normally pays the transportation costs.

• seller normally pays the transportation costs.

• shipping company bears the transportation cost.

• buyer and the seller split the transportation costs.

Cerfus Company had sales of $500,000. Cost of goods sold was $300,000. Calculate the gross profit.

• $800,000

• $200,000

• $500,000

• $300,000

Which of the following will appear on the balance sheet of a merchandiser, but not on the balance sheet of a service company?

• Accounts receivable

• Cash

• Furniture

• Merchandise Inventory

Cost of Goods Sold is a(n)

• revenue account

• expense account

• asset

• liability

For a merchandiser, the term "inventory" refers to ________.

• equipment used in production

• goods held for sale to customers

• the cost of goods sold

• raw materials used in production

An entity that buys goods and sells them to consumers at a markup is a

• retailer

• wholesaler

• manufacturer

• producer

Merchandise inventory is included in a merchandising company's current assets.

• True

• False

Which of the following will appear on the income statement of a merchandiser but not of a service company?

• Salaries Expense

• Cost of Goods Sold

• Depreciation Expense

• Supplies Inventory

Gross profit is the difference between net sales revenue and

• cost of merchandise inventory

• operating expenses

• purchase expense

• cost of goods sold

Credit terms of a merchandising company are 2/10, net 40. This means that the buyer can receive a discount of 2% if the invoice is paid within 40 days of the invoice date.

• True

• False