Question 1

In a transaction where purchased merchandise has been returned,the buyer will increase the Sales Returns and Allowances account and the seller will increase the Purchases Returns and Allowances account.

Accepted Answer

A) True 
 B)False

Question 2

Refer to X.Bonds Company.If the income statement were prepared in a multiple-step format,gross profit would be:

Accepted Answer

A)  $240,000.
B)  $126,000.
C)  $260,000.
D)  $185,000.E) A) and D)
F) B) and D)

Question 3

Merchandise subject to terms 2/10,n/30,FOB shipping point,is sold on account to a customer for $35,000.The seller issued a credit memorandum for $8,000 prior to payment.What is the amount of the cash discount allowable?

Accepted Answer

A)  $700
B)  $540
C)  $860
D)  $350E) A) and B)
F) A) and C)

Question 4

The sales discount account is a contra account to Sales.

Accepted Answer

A) True 
 B)False

Question 5

Purchases discounts are discounts given to the seller.

Accepted Answer

A) True 
 B)False

Question 6

The arrangements between buyer and seller as to when payments for merchandise are to be made are called:

Accepted Answer

A)  credit terms.
B)  net cash.
C)  cash on demand.
D)  gross cash.E) None of the above
F) B) and D)

Question 7

Repayments of bonds would be shown as a cash outflow in the investing section of the statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 8

The document issued by the seller that informs the buyer of the details of sales returns is called a debit memorandum.

Accepted Answer

A) True 
 B)False

Question 9

Under the perpetual inventory system,the cost of merchandise sold is recorded when sales are made.

Accepted Answer

A) True 
 B)False

Question 10

When purchases of merchandise are made for cash,under the perpetual inventory system,the transaction:

Accepted Answer

A)  increases Cash; decreases Merchandise Inventory.
B)  increases Merchandise Inventory; decreases Cash.
C)  increases Merchandise Inventory; decreases Cash Discounts.
D)  increases Merchandise Inventory; decreases Purchases.E) B) and C)
F) C) and D)

Question 11

Discounts taken by the buyer for early payment of an invoice are called purchases discounts by the buyer.

Accepted Answer

A) True 
 B)False

Question 12

Sales discounts is used in accounting for transactions with customers.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A)  decrease in Bank Credit Card Sales,increase in Credit Card Expense,and increase in Sales.
B)  increase in Cash,increase in Credit Card Expense,and increase in Sales.
C)  increase in Cash,decrease in Credit Card Expense,and increase in Sales.
D)  decrease in Sales,increase in Credit Card Expense,and decrease in Cash.E) B) and D)
F) B) and C)

Question 14

What is the term applied to the excess of net revenue from sales over the cost of merchandise sold?

Accepted Answer

A)  Gross profit
B)  Income from operations
C)  Net income
D)  Gross salesE) B) and C)
F) None of the above

Question 15

State the section(s)of the statement of cash flows prepared by the indirect method (operating activities,investing activities,financing activities,or not reported)and the amount that would be reported for each of the following transactions:

Accepted Answer

(a) Investing activities,$145,000 ($75,0...

Question 16

The following data for the year ended June 30,2016,were extracted from the accounting records of Roof Co.:

Accepted Answer

Roof Co. Income Statement For ...

Question 17

Revenue from sources other than the primary operating activity of a business is called other income.

Accepted Answer

A) True 
 B)False

Question 18

Under a perpetual inventory system,

Accepted Answer

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 purchase returns and allowances account is credited when goods are returned to vendors.E) None of the above
F) C) and D)

Question 19

When someone purchases merchandise and incurs the cost of transportation,these costs of purchasing inventory are added to the cost of the inventory.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following would not affect the operating activities section of the statement of cash flows,using the indirect method?

Accepted Answer

A)  Decrease in merchandise inventory
B)  Payment on a note payable
C)  Decrease in unearned rent
D)  Depreciation expenseE) A) and B)
F) B) and D)

Exam 4: Accounting for Merchandising Businesses

Discounts taken by the buyer for early payment of an invoice are called purchases discounts by the buyer.

Correct AnswerverifiedShow Answer

Which of the following would not affect the operating activities section of the statement of cash flows,using the indirect method?

Correct AnswerverifiedShow Answer

The arrangements between buyer and seller as to when payments for merchandise are to be made are called:

Correct AnswerverifiedShow Answer

Under the perpetual inventory system,the cost of merchandise sold is recorded when sales are made.

Correct AnswerverifiedShow Answer

State the section(s)of the statement of cash flows prepared by the indirect method (operating activities,investing activities,financing activities,or not reported)and the amount that would be reported for each of the following transactions:

Correct Answerverified(a) Investing activities,$145,000 ($75,0...View AnswerShow Answer

Repayments of bonds would be shown as a cash outflow in the investing section of the statement of cash flows.

Correct AnswerverifiedShow Answer

When someone purchases merchandise and incurs the cost of transportation,these costs of purchasing inventory are added to the cost of the inventory.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

What is the term applied to the excess of net revenue from sales over the cost of merchandise sold?

Correct AnswerverifiedShow Answer

The document issued by the seller that informs the buyer of the details of sales returns is called a debit memorandum.

Correct AnswerverifiedShow Answer

The sales discount account is a contra account to Sales.

Correct AnswerverifiedShow Answer

Refer to X.Bonds Company.If the income statement were prepared in a multiple-step format,gross profit would be:

Correct AnswerverifiedShow Answer

In a transaction where purchased merchandise has been returned,the buyer will increase the Sales Returns and Allowances account and the seller will increase the Purchases Returns and Allowances account.

Correct AnswerverifiedShow Answer

When purchases of merchandise are made for cash,under the perpetual inventory system,the transaction:

Correct AnswerverifiedShow Answer

Merchandise subject to terms 2/10,n/30,FOB shipping point,is sold on account to a customer for $35,000.The seller issued a credit memorandum for $8,000 prior to payment.What is the amount of the cash discount allowable?

Correct AnswerverifiedShow Answer

Sales discounts is used in accounting for transactions with customers.

Correct AnswerverifiedShow Answer

The following data for the year ended June 30,2016,were extracted from the accounting records of Roof Co.:

Correct AnswerverifiedRoof Co. Income Statement For ...View AnswerShow Answer

Purchases discounts are discounts given to the seller.

Correct AnswerverifiedShow Answer

Revenue from sources other than the primary operating activity of a business is called other income.

Correct AnswerverifiedShow Answer

Under a perpetual inventory system,

Correct AnswerverifiedShow Answer

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(a) Investing activities,$145,000 ($75,0...
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Roof Co. Income Statement For ...
View Answer

Correct Answer
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