Question 1

If the buyer is to pay the freight costs of delivering merchandise, delivery terms are stated as

Accepted Answer

A)   FOB shipping point
B)   FOB destination
C)   FOB n/30
D)   FOB buyerE) B) and C)
F) C) and D)

Question 2

Match each of the following items a-h)  with the appropriate definition below.
-Expense account for recording shipping costs paid by the seller.

Accepted Answer

A)  Freight
B)  Delivery Expense
C)  Merchandise Inventory
D)  Sales discount
E)  Purchases Returns and AllowancesF) Debit memoG) Purchases discountH) Trade discountI) B) and E)
J) B) and D)

Question 3

Merchandise inventory is classified on the balance sheet as a

Accepted Answer

A)   current liability
B)   current asset
C)   long-term asset
D)   long-term liabilityE) None of the above
F) All of the above

Question 4

Sales to customers who use bank credit cards, such as MasterCard and Visa, are generally treated as

Accepted Answer

A)   sales on account
B)   sales returns
C)   cash sales
D)   sales when the credit card company remits the cashE) C) and D)
F) B) and D)

Question 5

The most important differences between a service business and a retail business are reflected in their operating cycles and financial statements.
a. True
b. False

Accepted Answer

A) True 
 B)False

Question 6

Most companies will not take a purchase discount, because 1% or 2% discounts are insignificant.

Accepted Answer

A) True 
 B)False

Question 7

As we compare a merchandising business to a service business, the financial statement that changes the most is the balance sheet.

Accepted Answer

A) True 
 B)False

Question 8

The single-step income statement is easier to prepare, but a criticism of this format is that gross profit and income from operations are not readily available.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following accounts will only be found in the chart of accounts of a merchandising company?

Accepted Answer

A)   Sales
B)   Accounts Receivable
C)   Merchandise Inventory
D)   Accounts PayableE) A) and D)
F) B) and D)

Question 10

Under the perpetual inventory system, when a sale is made, both the sale and cost of merchandise sold are recorded.

Accepted Answer

A) True 
 B)False

Question 11

Match each of the following terms a-h)  with the correct definition below.
-Inventory system that updates the merchandise inventory account for every purchase and sale transaction.

Accepted Answer

A)  Credit terms
B)  FOB destination
C)  FOB shipping point
D)  Periodic inventory system
E)  Perpetual inventory systemF) Inventory shrinkageG) Single-step income statementH) Multiple-step income statementI) C) and D)
J) D) and F)

Question 12

In the merchandising income statement, sales will be reduced by administrative expenses to arrive at operating income.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is not a difference between a retail business and a service business?

Accepted Answer

A)   in what is sold
B)   the inclusion of gross profit on the income statement
C)   accounting equation
D)   merchandise inventory included on the balance sheetE) A) and B)
F) B) and D)

Question 14

In a multiple-step income statement, the dollar amount for income from operations is always the same as net income.

Accepted Answer

A) True 
 B)False

Question 15

Sales to customers who use bank credit cards such as MasterCard and Visa are usually recorded by a

Accepted Answer

A)   debit to Bank Credit Card Sales, debit to Credit Card Expense, and a credit to Sales
B)   debit to Cash and a credit to Sales
C)   debit to Cash, credit to Credit Card Expense, and a credit to Sales
D)   debit to Sales, debit to Credit Card Expense, and a credit to CashE) B) and C)
F) None of the above

Question 16

In a perpetual inventory system, the Merchandise Inventory account is only used to reflect the beginning inventory.

Accepted Answer

A) True 
 B)False

Question 17

When merchandise is sold for $600 plus 6% sales tax, the Sales account should be credited for $636.

Accepted Answer

A) True 
 B)False

Question 18

Merchandise with a list price of $4,700 is purchased on account, terms FOB shipping point, 1/10, n/30. The seller prepaid freight costs of $100. Prior to payment, $1,600 of the merchandise is returned. The invoice is paid within the discount period.
Record the foregoing transactions of the buyer in the sequence indicated below, assuming a perpetual inventory system is used.
a) Purchased the merchandise.
b) Recorded receipt of the credit memo for merchandise returned.
c) Paid the amount owed.

Accepted Answer

a)Merchandise Inventory
4,753
...

Question 19

Kaden Co. sells merchandise on credit to Jase Co. in the amount of $9,600. The invoice is dated on July 15 with terms of 1/15, net 45. If Jase Co. chooses not to take the discount, by when should the payment be made?

Accepted Answer

A)   July 30
B)   August 29
C)   August 15
D)   July 25E) A) and B)
F) C) and D)

Question 20

A deduction allowed to wholesalers and retailers from the price of merchandise listed in catalogs is called cash discounts.

Accepted Answer

A) True 
 B)False

Exam 5: Accounting for Merchandising Businesses

As we compare a merchandising business to a service business, the financial statement that changes the most is the balance sheet.

Correct Answer
verified

In the merchandising income statement, sales will be reduced by administrative expenses to arrive at operating income.

Correct Answer
verified

In a perpetual inventory system, the Merchandise Inventory account is only used to reflect the beginning inventory.

Correct Answer
verified

Match each of the following terms a-h) with the correct definition below. -Inventory system that updates the merchandise inventory account for every purchase and sale transaction.

Correct Answer
verified

The single-step income statement is easier to prepare, but a criticism of this format is that gross profit and income from operations are not readily available.

Correct Answer
verified

Merchandise inventory is classified on the balance sheet as a

Correct Answer
verified

If the buyer is to pay the freight costs of delivering merchandise, delivery terms are stated as

Correct Answer
verified

Match each of the following items a-h) with the appropriate definition below. -Expense account for recording shipping costs paid by the seller.

Correct Answer
verified

The most important differences between a service business and a retail business are reflected in their operating cycles and financial statements. a. True b. False

Correct Answer
verified

Which of the following accounts will only be found in the chart of accounts of a merchandising company?

Correct Answer
verified

When merchandise is sold for $600 plus 6% sales tax, the Sales account should be credited for $636.

Correct Answer
verified

Sales to customers who use bank credit cards, such as MasterCard and Visa, are generally treated as

Correct Answer
verified

Most companies will not take a purchase discount, because 1% or 2% discounts are insignificant.

Correct Answer
verified

In a multiple-step income statement, the dollar amount for income from operations is always the same as net income.

Correct Answer
verified

Under the perpetual inventory system, when a sale is made, both the sale and cost of merchandise sold are recorded.

Correct Answer
verified

Sales to customers who use bank credit cards such as MasterCard and Visa are usually recorded by a

Correct Answer
verified

Correct Answer
verified
a)Merchandise Inventory
4,753
...
View Answer

Kaden Co. sells merchandise on credit to Jase Co. in the amount of $9,600. The invoice is dated on July 15 with terms of 1/15, net 45. If Jase Co. chooses not to take the discount, by when should the payment be made?

Correct Answer
verified

Which of the following is not a difference between a retail business and a service business?

Correct Answer
verified

A deduction allowed to wholesalers and retailers from the price of merchandise listed in catalogs is called cash discounts.

Correct Answer
verified

Exam 5: Accounting for Merchandising Businesses

As we compare a merchandising business to a service business, the financial statement that changes the most is the balance sheet.

Correct AnswerverifiedShow Answer

In the merchandising income statement, sales will be reduced by administrative expenses to arrive at operating income.

Correct AnswerverifiedShow Answer

In a perpetual inventory system, the Merchandise Inventory account is only used to reflect the beginning inventory.

Correct AnswerverifiedShow Answer

Match each of the following terms a-h) with the correct definition below. -Inventory system that updates the merchandise inventory account for every purchase and sale transaction.

Correct AnswerverifiedShow Answer

The single-step income statement is easier to prepare, but a criticism of this format is that gross profit and income from operations are not readily available.

Correct AnswerverifiedShow Answer

Merchandise inventory is classified on the balance sheet as a

Correct AnswerverifiedShow Answer

If the buyer is to pay the freight costs of delivering merchandise, delivery terms are stated as

Correct AnswerverifiedShow Answer

Match each of the following items a-h) with the appropriate definition below. -Expense account for recording shipping costs paid by the seller.

Correct AnswerverifiedShow Answer

The most important differences between a service business and a retail business are reflected in their operating cycles and financial statements. a. True b. False

Correct AnswerverifiedShow Answer

Which of the following accounts will only be found in the chart of accounts of a merchandising company?

Correct AnswerverifiedShow Answer

When merchandise is sold for $600 plus 6% sales tax, the Sales account should be credited for $636.

Correct AnswerverifiedShow Answer

Sales to customers who use bank credit cards, such as MasterCard and Visa, are generally treated as

Correct AnswerverifiedShow Answer

Most companies will not take a purchase discount, because 1% or 2% discounts are insignificant.

Correct AnswerverifiedShow Answer

In a multiple-step income statement, the dollar amount for income from operations is always the same as net income.

Correct AnswerverifiedShow Answer

Under the perpetual inventory system, when a sale is made, both the sale and cost of merchandise sold are recorded.

Correct AnswerverifiedShow Answer

Sales to customers who use bank credit cards such as MasterCard and Visa are usually recorded by a

Correct AnswerverifiedShow Answer

Correct Answerverifieda)Merchandise Inventory4,753...View AnswerShow Answer

Kaden Co. sells merchandise on credit to Jase Co. in the amount of $9,600. The invoice is dated on July 15 with terms of 1/15, net 45. If Jase Co. chooses not to take the discount, by when should the payment be made?

Correct AnswerverifiedShow Answer

Which of the following is not a difference between a retail business and a service business?

Correct AnswerverifiedShow Answer

A deduction allowed to wholesalers and retailers from the price of merchandise listed in catalogs is called cash discounts.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
a)Merchandise Inventory
4,753
...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
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