Chap 5 part 1

Which of the following would not be considered a merchandising company?

• Retailer

• Wholesaler

• Service firm

• Dot Com firm

A merchandising company that sells directly to consumers is a

• retailer.

• wholesaler.

• broker.

• service company.

Two categories of expenses for merchandising companies are

• cost of goods sold and financing expenses.

• operating expenses and financing expenses.

• cost of goods sold and operating expenses.

• sales and cost of goods sold.

The primary source of revenue for merchandising companies is

• investment income.

• service fees.

• the sale of merchandise.

• the sale of fixed assets the company owns.

Sales revenue less cost of goods sold is called

• gross profit.

• net profit.

• net income.

• marginal income.

After gross profit is calculated, operating expenses are deducted to determine

• gross margin.

• net income.

• gross profit on sales.

• net margin.

Cost of goods sold is determined only at the end of the accounting period in

• a perpetual inventory system.

• a periodic inventory system.

• both a perpetual and a periodic inventory system.

• neither a perpetual nor a periodic inventory system.

Which of the following expressions is incorrect?

• Gross profit – operating expenses = net income

• Sales – cost of goods sold – operating expenses = net income

• Net income + operating expenses = gross profit

• Operating expenses – cost of goods sold = gross profit

Detailed records of the cost of each inventory purchase and sale are not maintained under a

• perpetual inventory system.

• periodic inventory system.

• double entry accounting system.

• single entry accounting system.

Which of the following is a true statement about inventory systems?

• Periodic inventory systems require more detailed inventory records.

• Perpetual inventory systems require more detailed inventory records.

• A periodic system requires cost of goods sold be determined after each sale.

• A perpetual system determines cost of goods sold only at the end of the accounting period.