4A28_mini Quiz 2-session 5

Sales revenue minus operating expenses equals gross profit.

• true

• false

Under a perpetual inventory system, cost of goods sold is determined each time a sale occurs.

• true

• false

The terms 2/10, net/30 mean that a 2 percent discount is allowed on payments made within the 10 days discount period.

• false

• true

Travis Corporation purchases merchandise on account from Jackson Company, terms 2/10, n/30. Travis and Jackson both use periodic inventory systems. If Travis pays within the discount period, Jackson will

• credit the amount of the discount to Cash.

• debit the amount of the discount to Sales Discounts.

• credit the amount of the discount to Purchases Discounts

• credit the amount of the discount to Sales Revenue.

Which of the following statements about comprehensive income is not true?

• Comprehensive income includes net income

• Comprehensive income is a more inclusive measure of earnings than net income.

• An example of an item reported in comprehensive income but not net income is gains and losses on foreign currency translations

• Unrealized gains and losses from fair value adjustments are included in net income but not comprehensive income

Financial information is presented below:

Operating expenses                        $  40,000

Sales revenue                                    200,000

Cost of goods sold                             150,000

The profit margin would be

• 0.75

• 0.25

• 0.05

• 0.95

Financial information is presented below:

Operating expenses                         $ 45,000

Sales returns and allowances               3,000

Sales discounts                                     7,000

Sales revenue                                    160,000

Cost of goods sold                               96,000

The amount of net sales on the income statement would be

•       $153,000.

• $150,000.

• c.   $160,000.

•       $157,000.

Adams Company is a retailer and uses a perpetual inventory system. Which statement is correct?

• Freight paid to get merchandise to Adams Company’s store is debited to Freight Expense.

• A return of merchandise by one of Adams Company’s customers is credited to Inventory.

• Returns of merchandise by Adams Company to a manufacturer are credited to Inventory.

• Discounts taken by Adams Company’s customers are credited to Inventory.

When using a perpetual inventory system, why are discounts credited to Inventory?

• The discounts are debited to discount expense and thus the credit has to be made to merchandise inventory.

• The discounts reduce the cost of the inventory

• The discounts are a reduction of business expenses.

• None of these answers choices are correct.

A credit sale of $3,800 is made on April 25, terms 2/10, net/30, on which a return of $200 is granted on April 28. What amount will be received as payment in full if collected on May 4?

• $3,528

• $3,724

• $3,880

• $3,600