Question 1

In a periodic inventory system,only one journal entry is required to record the sale of inventory.

Accepted Answer

A) True 
 B)False

Question 2

Inventory costing $3,000 is sold for $4,000 with terms 2/10,n/30.If the buyer pays within the discount period,what amount will be reported on the income statement as net sales?

Accepted Answer

A)  $3,920
B)  $4,000
C)  $1,000
D)  $3,200E) All of the above
F) A) and B)

Question 3

Eugene Co.has inventory it purchased for $6,000.It sells the inventory to a customer for $10,000,including installation.Installation sold separately costs $1,000 and the inventory sold separately costs $10,000.What amount of Sales Revenue is recognized by Eugene when delivery of the inventory has been made to the customer,but the installation has not been completed?

Accepted Answer

A)  $10,000
B)  $9,091
C)  $9,000
D)  $909E) B) and C)
F) C) and D)

Question 4

A company buys footwear and clothing from manufacturers,which it resells to discount stores in a large urban area.This company is an example of a:

Accepted Answer

A)  wholesale merchandising company.
B)  service company.
C)  retail merchandising company.
D)  secondary service company.E) A) and B)
F) All of the above

Question 5

Eugene Co.has inventory it purchased for $6,000.It sells the inventory to a customer for $10,000,including installation.Installation sold separately costs $1,000 and the inventory sold separately costs $10,000.What amount of Service Revenue is recognized by Eugene for installation once it has been completed?

Accepted Answer

A)  $909.
B)  $1,000.
C)  $10,000.
D)  $0,all the revenue is recorded as Sales Revenue since the installation was included in the contract.E) B) and C)
F) None of the above

Question 6

Verde Co.returned $500 of merchandise that was purchased on account.As a result of this transaction,assets will:

Accepted Answer

A)  decrease and liabilities will decrease.
B)  decrease and net income will decrease.
C)  stay the same and net income will decrease.
D)  stay the same and liabilities will decrease.E) A) and B)
F) A) and C)

Question 7

Berkley Company had beginning inventory of $4,000 and purchases of $20,000.If half of its inventory was sold,Berkley's goods available for sale will:

Accepted Answer

A)  be split between cost of goods sold and ending inventory.
B)  appear only as an expense on the income statement.
C)  appear only as an expense on the balance sheet.
D)  appear only as an asset on the income statement.E) C) and D)
F) A) and B)

Question 8

On June 15,Oakley Inc.sells inventory on account to Sunglass Hut (SH) for $1,000,terms 2/10,n/30.On June 20,SH returns to Oakley inventory that SH had purchased for $300.On June 24,SH completely fulfills its obligation to Oakley by making a cash payment.What is the amount of cash paid by SH to Oakley?

Accepted Answer

A)  $680
B)  $686
C)  $700
D)  $1,000E) B) and D)
F) A) and D)

Question 9

Which of the following is the equation for cost of goods sold?

Accepted Answer

A)  Beginning inventory + Purchases − Ending inventory
B)  Beginning inventory + Purchases + Ending inventory
C)  Net purchases − Ending inventory
D)  Ending inventory + Purchases − Beginning inventoryE) None of the above
F) B) and C)

Question 10

________ sell their inventory to ________ for resale to consumers.

Accepted Answer

A)  Wholesalers;retailers
B)  Retailers;wholesalers
C)  Manufacturers;wholesalers
D)  Manufacturers;service companiesE) C) and D)
F) B) and D)

Question 11

The journal entry to record taking a discount when paying for goods previously purchased on account:

Accepted Answer

A)  decreases assets and liabilities.
B)  increases assets and stockholders' equity.
C)  decreases liabilities and increases in stockholders' equity.
D)  decreases assets and stockholders' equity.E) A) and D)
F) B) and D)

Question 12

Match the term to the appropriate definition.There are more definitions than terms.
-Purchase Discount

Accepted Answer

A)  Presents important subtotals,such as gross profit,to help distinguish core operating results from other,less significant items that affect net income.
B)  A reduction in the cost of inventory purchases associated with unsatisfactory goods.
C)  Refunds and price reductions given to customers after goods have been sold and found unsatisfactory.
D)  A ratio indicating the percentage of profit earned on each dollar of sales,after considering the cost of products sold.
E)  Net sales minus cost of goods sold.It is a subtotal,not an account.F) A sales price reduction given to customers for prompt payment of their account balance.G) The sum of beginning inventory and purchases for the period.H) A cash discount received for prompt payment of a purchase on account.I) Assets acquired for resale to customers.J) The cost of inventory lost to theft,fraud,and error.K) A) and H)
L) C) and F)

Question 13

Companies using a perpetual inventory system:

Accepted Answer

A)  never physically count their inventory.
B)  must count their inventory at least once a week.
C)  still need to count their inventory at the end of the period.
D)  never know the amount of inventory shrinkage.E) B) and D)
F) A) and B)

Question 14

Lansing Company has a gross profit percentage of 61%,while Arbor Company has a gross profit percentage of 37%.Which of the following statements is correct?

Accepted Answer

A)  Lansing Company will report a higher net income than Arbor Company.
B)  Arbor Company must have a greater sales volume than Lansing Company.
C)  Lansing Company is more efficient at controlling selling,general,and administrative expenses than Arbor Company.
D)  Lansing Company and Arbor Company both earn enough on each sale to make a contribution to their operating costs.E) None of the above
F) All of the above

Question 15

Which of the following would not be considered a bundled product offering?

Accepted Answer

A)  Sale of a $50 pair of jeans
B)  $5 meal deal at Happy Jack
C)  $200 flight on an airline providing 2 free checked bags
D)  $30,000 new car with scheduled maintenance includedE) None of the above
F) All of the above

Question 16

Merchandisers record revenue when they:

Accepted Answer

A)  fulfill their performance obligations by transferring control of the goods to customers.
B)  deliver the goods and collect the cash from their customers.
C)  receive cash in advance from their customers.
D)  receive the order to deliver goods to customers.E) A) and B)
F) A) and C)

Question 17

Which of the following statements regarding periodic and perpetual inventory systems is correct?

Accepted Answer

A)  Perpetual inventory systems are inferior for determining optimal times to reorder inventory.
B)  Periodic inventory systems require a greater investment in technology.
C)  Perpetual inventory systems may assist in determining inventory lost due to shrinkage.
D)  Periodic inventory systems allow sales personnel to provide more immediate information regarding availability of inventory.E) A) and D)
F) A) and C)

Question 18

Beginning inventory plus purchases equals:

Accepted Answer

A)  ending inventory.
B)  cost of goods sold.
C)  goods available for sale.
D)  net purchases.E) B) and D)
F) None of the above

Question 19

Inventory cost consists of purchase price:

Accepted Answer

A)  plus freight-in.
B)  plus freight-out.
C)  less freight-in.
D)  less freight-out.E) A) and D)
F) None of the above

Question 20

Which line item would be found on a merchandiser's income statement and not on a service firm's?

Accepted Answer

A)  Inventory
B)  Service Revenue
C)  Depreciation Expense
D)  Cost of Goods SoldE) A) and B)
F) A) and C)

Exam 6: Merchandising Operations and the Multistep Income Statement

sell their inventory to for resale to consumers.

Correct Answer
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Inventory costing $3,000 is sold for $4,000 with terms 2/10,n/30.If the buyer pays within the discount period,what amount will be reported on the income statement as net sales?

Correct Answer
verified

Lansing Company has a gross profit percentage of 61%,while Arbor Company has a gross profit percentage of 37%.Which of the following statements is correct?

Correct Answer
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The journal entry to record taking a discount when paying for goods previously purchased on account:

Correct Answer
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Match the term to the appropriate definition.There are more definitions than terms. -Purchase Discount

Correct Answer
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Which line item would be found on a merchandiser's income statement and not on a service firm's?

Correct Answer
verified

A company buys footwear and clothing from manufacturers,which it resells to discount stores in a large urban area.This company is an example of a:

Correct Answer
verified

Verde Co.returned $500 of merchandise that was purchased on account.As a result of this transaction,assets will:

Correct Answer
verified

Merchandisers record revenue when they:

Correct Answer
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Berkley Company had beginning inventory of $4,000 and purchases of $20,000.If half of its inventory was sold,Berkley's goods available for sale will:

Correct Answer
verified

In a periodic inventory system,only one journal entry is required to record the sale of inventory.

Correct Answer
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Companies using a perpetual inventory system:

Correct Answer
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Which of the following would not be considered a bundled product offering?

Correct Answer
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Beginning inventory plus purchases equals:

Correct Answer
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Which of the following statements regarding periodic and perpetual inventory systems is correct?

Correct Answer
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Inventory cost consists of purchase price:

Correct Answer
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Which of the following is the equation for cost of goods sold?

Correct Answer
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Exam 6: Merchandising Operations and the Multistep Income Statement

________ sell their inventory to ________ for resale to consumers.

Correct AnswerverifiedShow Answer

Inventory costing $3,000 is sold for $4,000 with terms 2/10,n/30.If the buyer pays within the discount period,what amount will be reported on the income statement as net sales?

Correct AnswerverifiedShow Answer

Lansing Company has a gross profit percentage of 61%,while Arbor Company has a gross profit percentage of 37%.Which of the following statements is correct?

Correct AnswerverifiedShow Answer

The journal entry to record taking a discount when paying for goods previously purchased on account:

Correct AnswerverifiedShow Answer

Match the term to the appropriate definition.There are more definitions than terms. -Purchase Discount

Correct AnswerverifiedShow Answer

Which line item would be found on a merchandiser's income statement and not on a service firm's?

Correct AnswerverifiedShow Answer

A company buys footwear and clothing from manufacturers,which it resells to discount stores in a large urban area.This company is an example of a:

Correct AnswerverifiedShow Answer

Verde Co.returned $500 of merchandise that was purchased on account.As a result of this transaction,assets will:

Correct AnswerverifiedShow Answer

Merchandisers record revenue when they:

Correct AnswerverifiedShow Answer

Berkley Company had beginning inventory of $4,000 and purchases of $20,000.If half of its inventory was sold,Berkley's goods available for sale will:

Correct AnswerverifiedShow Answer

In a periodic inventory system,only one journal entry is required to record the sale of inventory.

Correct AnswerverifiedShow Answer

Companies using a perpetual inventory system:

Correct AnswerverifiedShow Answer

Which of the following would not be considered a bundled product offering?

Correct AnswerverifiedShow Answer

Beginning inventory plus purchases equals:

Correct AnswerverifiedShow Answer

Which of the following statements regarding periodic and perpetual inventory systems is correct?

Correct AnswerverifiedShow Answer

Inventory cost consists of purchase price:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is the equation for cost of goods sold?

Correct AnswerverifiedShow Answer

sell their inventory to for resale to consumers.

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