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WorksheetsAC41 Lec Ch. 7-8 Merchandising Operations Quiz
Total questions: 84
Worksheet time: 2hrs 56mins
Name
Class
Date
1.
Retailers and wholesalers are both considered merchandisers.
a)
TRUE
b)
FALSE
2.
The steps in the accounting cycle are different for a merchandising company than for a service company.
a)
TRUE
b)
FALSE
3.
Sales minus operating expenses equals gross profit.
a)
TRUE
b)
FALSE
4.
Under a perpetual inventory system, the cost of goods sold is determined each time a sale occurs.
a)
TRUE
b)
FALSE
5.
A periodic inventory system requires a detailed inventory record of inventory items.
a)
TRUE
b)
FALSE
6.
Freight terms of FOB Destination means that the seller pays the freight costs.
a)
TRUE
b)
FALSE
7.
Freight costs incurred by the seller on outgoing merchandise are an operating expense to the seller.
a)
TRUE
b)
FALSE
8.
Sales revenues are earned during the period cash is collected from the buyer.
a)
TRUE
b)
FALSE
9.
The Sales Returns and Allowances account and the Sales Discount account are both classified as expense accounts.
a)
TRUE
b)
FALSE
10.
The revenue recognition principle applies to merchandisers by recognizing sales revenues when they are earned.
a)
TRUE
b)
FALSE
11.
Sales Allowances and Sales Discounts are both designed to encourage customers to pay their accounts promptly.
a)
TRUE
b)
FALSE
12.
To grant a customer a sales return, the seller credits Sales Returns and Allowances.
a)
TRUE
b)
FALSE
13.
A company's unadjusted balance in Merchandise Inventory will usually not agree with the actual amount of inventory on hand at year-end.
a)
TRUE
b)
FALSE
14.
For a merchandising company, all accounts that affect the determination of income are closed to the Income Summary account.
a)
TRUE
b)
FALSE
15.
A merchandising company has different types of adjusting entries than a service company.
a)
TRUE
b)
FALSE
16.
Nonoperating activities exclude revenues and expenses that result from secondary or auxiliary operations.
a)
TRUE
b)
FALSE
17.
Selling expenses relate to general operating activities such as personnel management.
a)
TRUE
b)
FALSE
18.
Net sales appears on both the multiple-step and single-step forms of an income statement.
a)
TRUE
b)
FALSE
19.
A multiple-step income statement provides users with more information about a company’s income performance.
a)
TRUE
b)
FALSE
20.
The multiple-step form of income statement is easier to read than the single-step form.
a)
TRUE
b)
FALSE
21.
Merchandise inventory is classified as a current asset in a classified balance sheet.
a)
TRUE
b)
FALSE
22.
Gain on sale of equipment and interest expense are reported under other revenues and gains in a multiple-step income statement.
a)
TRUE
b)
FALSE
23.
The gross profit section for a merchandising company appears on both the multiple-step and single-step forms of an income statement.
a)
TRUE
b)
FALSE
24.
In a multiple-step income statement, income from operations excludes other revenues and gains and other expenses and losses.
a)
TRUE
b)
FALSE
25.
A single-step income statement reports all revenues, both operating and other revenues and gains, at the top of the statement.
a)
TRUE
b)
FALSE
26.
If net sales are $800,000 and cost of goods sold is $600,000, the gross profit rate is 25%.
a)
TRUE
b)
FALSE
27.
Gross profit represents the merchandising profit of a company.
a)
TRUE
b)
FALSE
28.
Gross profit is a measure of the overall profitability of a company.
a)
TRUE
b)
FALSE
29.
Gross profit rate is computed by dividing cost of goods sold by net sales.
a)
TRUE
b)
FALSE
30.
Purchase Returns and Allowances and Purchase Discounts are subtracted from Purchases to produce net purchases.
a)
TRUE
b)
FALSE
31.
Freight-in is an account that is subtracted from the Purchases account to arrive at cost of goods purchased.
a)
TRUE
b)
FALSE
32.
Under a periodic inventory system, the acquisition of inventory is charged to the Purchases account.
a)
TRUE
b)
FALSE
33.
Under a periodic inventory system, freight-in on merchandise purchases should be charged to the Inventory account.
a)
TRUE
b)
FALSE
34.
In a worksheet, cost of goods sold will be shown in the trial balance (Dr.), adjusted trial balance (Dr.) and income statement (Dr.) columns.
a)
TRUE
b)
FALSE
35.
Merchandise inventory is reported as a long-term asset on the balance sheet.
a)
TRUE
b)
FALSE
36.
Under a perpetual inventory system, inventory shrinkage and lost or stolen goods are more readily determined.
a)
TRUE
b)
FALSE
37.
The terms 2/10, n/30 state that a 2% discount is available if the invoice is paid within the first 10 days of the next month.
a)
TRUE
b)
FALSE
38.
Sales should be recorded in accordance with the matching principle.
a)
TRUE
b)
FALSE
39.
Sales returns and allowances and sales discounts are subtracted from sales in reporting net sales in the income statement.
a)
TRUE
b)
FALSE
40.
A merchandising company using a perpetual inventory system will usually need to make an adjusting entry to ensure that the recorded inventory agrees with physical inventory count.
a)
TRUE
b)
FALSE
41.
If a merchandising company sells land at more than its cost, the gain should be reported in the sales revenue section of the income statement.
a)
TRUE
b)
FALSE
42.
The major difference between the balance sheets of a service company and a merchandising company is inventory.
a)
TRUE
b)
FALSE
43.
Income from operations is gross profit less
a)
a. administrative expenses.
b)
b. operating expenses.
c)
c. other expenses and losses.
d)
d. selling expenses.
44.
An enterprise which sells goods to customers is known as a
a)
a. proprietorship.
b)
b. corporation.
c)
c. retailer.
d)
d. service firm.
45.
Which of the following would not be considered a merchandising company?
a)
a. Retailer
b)
b. Wholesaler
c)
c. Service firm
d)
d. Dot Com firm
46.
A merchandising company that sells directly to consumers is a
a)
a. retailer.
b)
b. wholesaler.
c)
c. broker.
d)
d. service company.
47.
Two categories of expenses for merchandising companies are
a)
a. cost of goods sold and financing expenses.
b)
b. operating expenses and financing expenses.
c)
c. cost of goods sold and operating expenses.
d)
d. sales and cost of goods sold.
48.
The primary source of revenue for a wholesaler is
a)
a. investment income.
b)
b. service fees.
c)
c. the sale of merchandise.
d)
d. the sale of fixed assets the company owns.
49.
Sales revenue less cost of goods sold is called
a)
a. gross profit.
b)
b. net profit.
c)
c. net income.
d)
d. marginal income.
50.
After gross profit is calculated, operating expenses are deducted to determine
a)
a. gross margin.
b)
b. net income.
c)
c. gross profit on sales.
d)
d. net margin.
51.
Cost of goods sold is determined only at the end of the accounting period in
a)
a. a perpetual inventory system.
b)
b. a periodic inventory system.
c)
c. both a perpetual and a periodic inventory system.
d)
d. neither a perpetual nor a periodic inventory system.
52.
Which of the following expressions is incorrect?
a)
a. Gross profit – operating expenses = net income
b)
b. Sales – cost of goods sold – operating expenses = net income
c)
c. Net income + operating expenses = gross profit
d)
d. Operating expenses – cost of goods sold = gross profit
53.
Detailed records of goods held for resale are not maintained under a a. perpetual inventory system.
a)
a. perpetual inventory system.
b)
b. periodic inventory system.
c)
c. double entry accounting system.
d)
d. single entry accounting system.
54.
A perpetual inventory system would likely be used by a(n)
a)
a. automobile dealership.
b)
b. hardware store.
c)
c. drugstore.
d)
d. convenience store.
55.
Which of the following is a true statement about inventory systems?
a)
a. Periodic inventory systems require more detailed inventory records.
b)
b. Perpetual inventory systems require more detailed inventory records.
c)
c. A periodic system requires cost of goods sold be determined after each sale.
d)
d. A perpetual system determines cost of goods sold only at the end of the accounting period.
56.
In a perpetual inventory system, cost of goods sold is recorded
a)
a. on a daily basis.
b)
b. on a monthly basis.
c)
c. on an annual basis.
d)
d. with each sale.
57.
If a company determines cost of goods sold each time a sale occurs, it
a)
a. must have a computer accounting system.
b)
b. uses a combination of the perpetual and periodic inventory systems.
c)
c. uses a periodic inventory system.
d)
d. uses a perpetual inventory system.
58.
Under a perpetual inventory system, acquisition of merchandise for resale is debited to the
a)
a. Merchandise Inventory account.
b)
b. Purchases account.
c)
c. Supplies account.
d)
d. Cost of Goods Sold account.
59.
The journal entry to record a return of merchandise purchased on account under a perpetual inventory system would credit
a)
a. Accounts Payable.
b)
b. Purchase Returns and Allowances.
c)
c. Sales.
d)
d. Merchandise Inventory.
60.
The Merchandise Inventory account is used in each of the following except the entry to record
a)
a. goods purchased on account.
b)
b. the return of goods purchased.
c)
c. payment of freight on goods sold.
d)
d. payment within the discount period.
61.
A buyer would record a payment within the discount period under a perpetual inventory system by crediting
a)
a. Accounts Payable.
b)
b. Merchandise Inventory.
c)
c. Purchase Discounts.
d)
d. Sales Discounts.
62.
If a purchaser using a perpetual system agrees to freight terms of FOB shipping point, then the
a)
a. Merchandise Inventory account will be increased.
b)
b. Merchandise Inventory account will not be affected.
c)
c. seller will bear the freight cost.
d)
d. carrier will bear the freight cost.
63.
Freight costs paid by a seller on merchandise sold to customers will cause an increase
a)
a. in the selling expense of the buyer.
b)
b. in operating expenses for the seller.
c)
c. to the cost of goods sold of the seller.
d)
d. to a contra-revenue account of the seller.
64.
Bryan Company purchased merchandise from Cates Company with freight terms of FOB shipping point. The freight costs will be paid by the
a)
a. seller.
b)
b. buyer.
c)
c. transportation company.
d)
d. buyer and the seller.
65.
Flynn Company purchased merchandise inventory with an invoice price of $5,000 and credit terms of 2/10, n/30. What is the net cost of the goods if Flynn Company pays within the discount
a)
a. $5,000
b)
b. $4,900
c)
c. $4,500
d)
d. $4,600
66.
Stine Company purchased merchandise with an invoice price of $2,000 and credit terms of 2/10, n/30. Assuming a 360 day year, what is the implied annual interest rate inherent in the credit terms?
a)
a. 20%
b)
b. 24%
c)
c. 36%
d)
d. 72%
67.
If a company is given credit terms of 2/10, n/30, it should a. hold off paying the bill until the end of the credit period, while investing the money at 10% annual interest during this time.
a)
a. hold off paying the bill until the end of the credit period, while investing the money at 10% annual interest during this time.
b)
b. pay within the discount period and recognize a savings.
c)
c. pay within the credit period but don't take the trouble to invest the cash while waiting to pay the bill.
d)
d. recognize that the supplier is desperate for cash and withhold payment until the end of the credit period while negotiating a lower sales price.
68.
In a perpetual inventory system, the amount of the discount allowed for paying for merchandise purchased within the discount period is credited to
a)
a. Merchandise Inventory.
b)
b. Purchase Discounts.
c)
c. Purchase Allowance.
d)
d. Sales Discounts.
69.
In a perpetual inventory system, the Cost of Goods Sold account is used
a)
a. only when a cash sale of merchandise occurs.
b)
b. only when a credit sale of merchandise occurs.
c)
c. only when a sale of merchandise occurs.
d)
d. whenever there is a sale of merchandise or a return of merchandise sold.
70.
Sales revenues are usually considered earned when
a)
a. cash is received from credit sales.
b)
b. an order is received.
c)
c. goods have been transferred from the seller to the buyer.
d)
d. adjusting entries are made.
71.
A sales invoice is a source document that
a)
a. provides support for goods purchased for resale.
b)
b. provides evidence of incurred operating expenses.
c)
c. provides evidence of credit sales.
d)
d. serves only as a customer receipt.
72.
Sales revenue
a)
a. may be recorded before cash is collected.
b)
b. will always equal cash collections in a month.
c)
c. only results from credit sales.
d)
d. is only recorded after cash is collected.
73.
The journal entry to record a credit sale is
a)
a. (Dr) Cash; (Cr) Sales
b)
b. (Dr) Cash ; (Cr)Service Revenue
c)
c. (Dr) Accounts Receivable; (Cr) Service Revenue
d)
d.(Dr) Accounts Receivable; (Cr) Sales
74.
A credit memorandum is prepared when
a)
a. an employee does a good job.
b)
b. goods are sold on credit.
c)
c. goods that were sold on credit are returned.
d)
d. customers refuse to pay their accounts.
75.
The Sales Returns and Allowances account is classified as a(n)
a)
a. asset account.
b)
b. contra asset account.
c)
c. expense account.
d)
d. contra revenue account.
76.
A credit memorandum is used as documentation for a journal entry that requires a debit to
a)
a. Sales and a credit to Cash.
b)
b. Sales Returns and Allowances and a credit to Accounts Receivable.
c)
c. Accounts Receivable and a credit to a contra-revenue account.
d)
d. Cash and a credit to Sales Returns and Allowances.
77.
If a customer agrees to retain merchandise that is defective because the seller is willing to reduce the selling price, this transaction is known as a sales
a)
a. discount.
b)
b. return.
c)
c. contra asset.
d)
d. allowance.
78.
A credit sale of $900 is made on July 15, terms 2/10, n/30, on which a return of $50 is granted on July 18. What amount is received as payment in full on July 24?
a)
a. $900
b)
b. $833
c)
c. $850
d)
d $882
79.
When goods are returned that relate to a prior cash sale,
a)
a. the Sales Returns and Allowances account should not be used.
b)
b. the cash account will be credited.
c)
c. Sales Returns and Allowances will be credited.
d)
d. Accounts Receivable will be credited.
80.
The Sales Returns and Allowances account does not provide information to management about
a)
a. possible inferior merchandise.
b)
b. the percentage of credit sales versus cash sales.
c)
c. inefficiencies in filling orders.
d)
d. errors in overbilling customers.
81.
A Sales Returns and Allowances account is not debited if a customer
a)
a. returns defective merchandise.
b)
b. receives a credit for merchandise of inferior quality.
c)
c. utilizes a prompt payment incentive.
d)
d. returns goods that are not in accordance with specifications.
82.
As an incentive for customers to pay their accounts promptly, a business may offer its customers
a)
a. a sales discount.
b)
b. free delivery.
c)
c. a sales allowance.
d)
d. a sales return.
83.
The credit terms offered to a customer by a business firm are 2/10, n/30, which means that
a)
a. the customer must pay the bill within 10 days.
b)
b. the customer can deduct a 2% discount if the bill is paid between the 10th and 30th day from the invoice date.
c)
c. the customer can deduct a 2% discount if the bill is paid within 10 days of the invoice date.
d)
d. two sales returns can be made within 10 days of the invoice date and no returns thereafter.
84.
A sales discount does not
a)
a. provide the purchaser with a cash saving.
b)
b. reduce the amount of cash received from a credit sale.
c)
c. increase a contra-revenue account.
d)
d. increase an operating expense account.
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