Merchandising Operations Quiz

What is the primary difference in revenue generation between a service entity and a merchandising entity?

• A service entity earns revenue by selling products, while a merchandising entity earns revenue by providing services.

• A service entity earns revenue by selling services, while a merchandising entity earns revenue by selling products (merchandise inventory).

• Both entities earn revenue by selling tangible products.

• Both entities earn revenue by providing intangible services.

Which of the following accounts is unique to the balance sheet of a merchandising entity compared to a service entity?

• Cash

• Accounts Receivable

• Prepaid Expenses

• Inventory

Which of the following represents the major expense for a merchandiser?

• Salaries expense

• Amortization expense

• Cost of goods sold

• Rent expense

When does the cost of inventory become an expense for a seller?

• When the inventory is purchased.

• When the inventory is received from the supplier.

• When the inventory is paid for.

• When the inventory is sold to customers.

How is gross margin calculated?

• Sales Revenue - Operating Expenses

• Net Sales + Cost of Goods Sold

• Net Sales - Cost of Goods Sold

• Sales Revenue - Sales Discounts

Which of the following best describes Net Sales?

• The total selling price of merchandise sold.

• Sales Revenue plus Sales Returns and Allowances.

• Sales Revenue less Sales Returns and Allowances and Sales Discounts.

• Sales Revenue less Cost of Goods Sold.

In the context of inventory, what does "The sum of all the costs incurred to bring the asset to its intended use, net of all discounts" represent?

• Selling price

• Market value

• The cost of an asset

• Gross margin

Which of the following costs would typically be included in the cost of inventory for a merchandising business?

• Advertising costs

• Sales commissions

• Freight out

• Customs/duties paid on purchased goods

What is the primary characteristic of a perpetual inventory system?

• Inventory is counted only once a year for financial statement preparation.

• The business keeps a continuous, running record of inventory and cost of goods sold.

• It is primarily used by businesses that sell relatively inexpensive goods.

• Cost of Goods Sold is calculated at the end of the accounting period using a formula.

Which of the following is recorded in a perpetual inventory system?

• Only units purchased.

• Only units sold.

• Only the quantity of inventory on hand.

• Units purchased, units sold, and the quantity of inventory on hand.