1. The steps in the accounting cycle are different for a merchandising company than for a service company.
A) True
B) False
2. A periodic inventory system requires a detailed inventory record of inventory items.
A) True
B) False
3. The Sales Returns and Allowances account and the Sales Discount account are both classified as expense accounts.
A) True
B) False
4. For a merchandising company, all accounts that affect the determination of income are closed to the Income Summary account.
A) True
B) False
5. A multiple-step income statement provides users with more information about a company's income performance.
A) True
B) False
6. If net sales are $800,000 and cost of goods sold is $600,000, the gross profit rate is 25%.
A) True
B) False
7. Under a periodic inventory system, freight-in on merchandise purchases should be charged to the Inventory account.
A) True
B) False
8. 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
9. An enterprise which sells goods to customers is known as a
A) proprietorship.
B) corporation.
C) retailer.
D) service firm.
10. Sales revenue less cost of goods sold is called
A) gross profit.
B) net profit.
C) net income.
D) marginal income.
11. Detailed records of goods held for resale are not maintained under a
A) perpetual inventory system.
B) periodic inventory system.
C) double entry accounting system.
D) single entry accounting system.
12. Under a perpetual inventory system, acquisition of merchandise for resale is debited to the
A) Merchandise Inventory account.
B) Purchases account.
C) Supplies account.
D) Cost of Goods Sold account.
13. A buyer would record a payment within the discount period under a perpetual inventory system by crediting
A) Accounts Payable.
B) Merchandise Inventory.
C) Purchase Discounts.
D) Sales Discounts.
14. Bryan Company purchased merchandise from Cates Company with freight terms of FOB shipping point. The freight costs will be paid by the
A) seller.
B) buyer.
C) transportation company.
D) buyer and the seller.
15. 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 period?
A) $5,000
B) $4,900
C) $4,500
D) $4,600
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