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In a single-step income statement, all data are classified under two categories: (1) Revenues, or (2) Expenses. If the income statement is recast in a multiple-step format, what additional information or intermediate components of income would be presented?

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The items reported in a multiple-step in...

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Interest expense would be classified on a multiple-step income statement under the heading


A) Other expenses and losses.
B) Other revenues and gains.
C) Operating expenses.
D) Cost of goods sold.

E) B) and C)
F) A) and D)

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Which of the following expressions is incorrect?


A) Gross profit - Operating expenses = Net income
B) Sales revenue - cost of goods sold - Operating expenses = Net income
C) Net income + Operating expenses = Gross profit
D) Operating expenses - Cost of goods sold = Gross profit

E) A) and B)
F) C) and D)

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Rains Company is a furniture retailer. On January 14, 2014, Rains purchased merchandise inventory at a cost of $48,000. Credit terms were 2/10, n/30. The inventory was sold on account for $80,000 on January 21, 2014. Credit terms were 1/10, n/30. The accounts payable was settled on January 23, 2014 and the accounts receivables were settled on January 30, 2014. Which statement is correct?


A) Cash flows were affected on January 14 and January 21.
B) Gross profit percentage is 60%.
C) On January 30, 2014, customers should remit cash in the amount of $79,200.
D) There is not enough information available to answer this question.

E) B) and D)
F) All of the above

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Merchandise is sold for $5,000 with terms 1/10, n/30. If $1,000 of the merchandise is returned prior to payment and the invoice is paid within the discount period, the amount of the sales discount is $40.

A) True
B) False

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Gross profit does not appear


A) on a multiple-step income statement.
B) on a single-step income statement.
C) to be relevant in analyzing the operation of a merchandising company.
D) on either a multiple-step or single-step income statement.

E) A) and D)
F) B) and C)

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A sales invoice is used as documentation for a journal entry that requires a debit to


A) Cash and a credit to Sales Revenue.
B) Sales Returns and Allowances and a credit to Accounts Receivable.
C) Accounts Receivable and a credit to Sales Revenue.
D) Cash and a credit to Sales Returns and Allowances.

E) B) and C)
F) A) and D)

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The following information is available for Quayle Company: The following information is available for Quayle Company: Instructions 1. Use the above information to prepare a multiple-step income statement for the year ended December 31, 2014. 2. Compute the profit margin. Instructions 1. Use the above information to prepare a multiple-step income statement for the year ended December 31, 2014. 2. Compute the profit margin.

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1.
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2. Profit marg...

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What is a difference between merchandising companies and service enterprises?


A) Merchandising companies must prepare multiple-step income statements and service enterprises must prepare single-step income statements.
B) Merchandising companies generally have a longer operating cycle than service enterprises.
C) Cost of goods sold is an expense for service enterprises but not for merchandising companies.
D) All are differences.

E) B) and D)
F) A) and B)

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The entry to record a sale of $1,200 with terms of 2/10, n/30 will include a


A) debit to Sales Discounts for $24.
B) debit to Sales Revenue for $1,176.
C) credit to Accounts Receivable for $1,200.
D) credit to Sales Revenue for $1,200.

E) A) and B)
F) B) and D)

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The trial balance of Rachel Company at the end of its fiscal year, August 31, 2014, includes these accounts: Inventory $29,200; Purchases $144,000; Sales Revenue $190,000; Freight-In $8,000; Sales Returns and Allowances $3,000; Freight-Out $1,000; and Purchases Returns and Allowances $5,000. The ending inventory is $25,000. Instructions Prepare a cost of goods sold section for the year ending August 31.

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When the terms of sale include a sales discount, it usually is advisable for the buyer to pay within the discount period.

A) True
B) False

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The entry to record the return of goods from a customer would include a


A) debit to Sales Revenue.
B) credit to Sales Revenue.
C) debit to Sales Returns and Allowances.
D) credit to Sales Returns and Allowances.

E) B) and D)
F) A) and B)

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Cash register tapes provide evidence of credit sales.

A) True
B) False

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A sales discount does not


A) provide the purchaser with a cash saving.
B) reduce the amount of cash received from a credit sale.
C) increase a contra revenue account.
D) increase an operating expense account.

E) B) and D)
F) None of the above

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Alice Gray believes revenues from credit sales may be earned before they are collected in cash. Do you agree? Explain.

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Agree. In accordance with the revenue re...

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On September 1, Pennington Supply had an inventory of 20 backpacks at a cost of $25 each. The company uses a perpetual inventory system. During September, the following transactions and events occurred. Sept. 4 Purchased 50 backpacks at $25 each from Sievert, terms 2/10, n/30. 6 Received credit of $100 for the return of 4 backpacks purchased on September 4 that were defective. 9 Sold 25 backpacks for $40 each to Lilly Books, terms 2/10, n/30. 13 Sold 15 backpacks for $40 each to Stoner Office Supply, terms n/30. 14 Paid Sievert in full, less discount. Instructions Journalize the September transactions for Pennington Supply.

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Under IFRS, companies can apply revaluation to


A) land, buildings, and intangible assets.
B) land, buildings, but not intangible assets.
C) intangible assets, but not land.
D) no assets.

E) B) and C)
F) All of the above

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Financial information is presented below: Financial information is presented below: The gross profit rate would be A) .68. B) .39. C) .32. D) .34. The gross profit rate would be


A) .68.
B) .39.
C) .32.
D) .34.

E) None of the above
F) B) and D)

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Under a perpetual inventory system


A) accounting records continuously disclose the amount of inventory.
B) increases in inventory resulting from purchases are debited to purchases.
C) there is no need for a year-end physical count.
D) the account purchase returns and allowances is credited when goods are returned to vendors.

E) B) and C)
F) A) and C)

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