Question 1

The agreed cost of an item to be purchased by a business on credit is $4,000and 7% provincial sales tax (PST) . When this transaction isrecorded, what amount will be credited to accounts payable?

Accepted Answer

A)  $4,240
B)  $4,200
C)  $4,480
D)  $4,000
E)  None of these answers is correct.F) D) and E)
G) A) and C)

Question 2

An income statement on which the cost of goods sold and operating expenses are added together and subtracted from net sales in one step to get net income is a(n) :

Accepted Answer

A)  Single-step income statement.
B)  Balanced income statement.
C)  Multiple-step income statement.
D)  Merchandise income statement.
E)  Unclassified income statement.F) A) and C)
G) All of the above

Question 3

Classified multiple-step income statements

Accepted Answer

A)  Are required by Canada Revenue Agency.
B)  Are generally used for internal reporting.
C)  List cost of goods sold as an operating expense.
D)  Do not report gross profit.
E)  Are required for the perpetual system.F) A) and B)
G) A) and C)

Question 4

A journal entry with a debit to cash of $980, a debit to Sales Discounts of $20, and a credit to Accounts Receivable of $1,000 means that a customer has taken a 10% cash discount for early payment.

Accepted Answer

A) True 
 B)False

Question 5

Trade discounts are entered into the accounting system

Accepted Answer

A) True 
 B)False

Question 6

Transportation-in increases cost of goods purchased

Accepted Answer

A) True 
 B)False

Question 7

Calculate the gross profit ratio for the year ended December 31, 2015. Interpret the ratio.

Accepted Answer

Gross profit ratio =

This te...

Question 8

The agreed cost of an item to be purchased by a business on credit is $4,000and 7% provincial sales tax (PST) . When this transaction isrecorded, what amount will be debited to advertising expense?

Accepted Answer

A)  $4,000
B)  $4,480
C)  $4,280
D)  $4,200
E)  None of these answers is correct.F) B) and D)
G) B) and C)

Question 9

A credit memorandum informs a customer of a credit to its Accounts Payable account from a sales return or allowance.

Accepted Answer

A) True 
 B)False

Question 10

A merchandising company

Accepted Answer

A)  Earns net income from buying and selling merchandise.
B)  Reports cost of goods sold on the income statement.
C)  Buys products from manufacturers and sells them to consumers.
D)  Buys products from manufacturers and sells to retailers.
E)  All of these answers are correct.F) All of the above
G) A) and C)

Question 11

In a periodic inventory system

Accepted Answer

A)  A continuous record of the amount of inventory on hand is maintained.
B)  The company records the cost of new merchandise in the permanent Purchases account.
C)  The cost of merchandise on hand is determined by relating the quantities on hand to records showing each item's original cost.
D)  The inventory value is not based on a physical count.
E)  None of these answers apply.F) D) and E)
G) A) and B)

Question 12

Merchandise inventory is

Accepted Answer

A)  Products a company owns for resale to customers.
B)  Includes supplies.
C)  Included on a service company's balance sheet.
D)  Reported on the income statement as an expense.
E)  Reported on the balance sheet under plant and equipment.F) A) and B)
G) C) and E)

Question 13

Each sales transaction for sellers using a perpetual inventory system involves recognizing revenue and cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 14

For a merchandiser, each sales transaction involves

Accepted Answer

A)  Recognizing cash discounts.
B)  Recognizing the cost of merchandise sold to a customer.
C)  Recognizing purchase discounts.
D)  Revenue received in the form of a liability from a customer.
E)  Recording accounts payable.F) D) and E)
G) A) and C)

Question 15

Discuss the difference between the periodic and perpetual inventory systems

Accepted Answer

Under the periodic system the cost of in...

Question 16

Gross profit is also called gross margin

Accepted Answer

A) True 
 B)False

Question 17

A periodic inventory system

Accepted Answer

A)  Was historically used by companies that sold large quantities of low-value items.
B)  Gives more timely information.
C)  Does not use a Purchases account.
D)  Is widely used in practice.
E)  Provides point of sale data.F) C) and D)
G) A) and E)

Question 18

When a single goods and services tax (GST)or Harmonized Sales Tax (HST)account is used, a credit balance in the account means that the government owes money to thebusiness.

Accepted Answer

A) True 
 B)False

Question 19

Is Roller Skate Store using a periodic or perpetual inventory system? Explain

Accepted Answer

A perpetual system is used sin...

Question 20

Describe the attributes of inventory as an asset of a merchandising company

Accepted Answer

Merchandise inventor...

Exam 5: Accounting for Merchandising Activities

A journal entry with a debit to cash of $980, a debit to Sales Discounts of $20, and a credit to Accounts Receivable of $1,000 means that a customer has taken a 10% cash discount for early payment.

Correct AnswerverifiedShow Answer

Trade discounts are entered into the accounting system

Correct AnswerverifiedShow Answer

Transportation-in increases cost of goods purchased

Correct AnswerverifiedShow Answer

In a periodic inventory system

Correct AnswerverifiedShow Answer

Is Roller Skate Store using a periodic or perpetual inventory system? Explain

Correct AnswerverifiedA perpetual system is used sin...View AnswerShow Answer

An income statement on which the cost of goods sold and operating expenses are added together and subtracted from net sales in one step to get net income is a(n) :

Correct AnswerverifiedShow Answer

A merchandising company

Correct AnswerverifiedShow Answer

Discuss the difference between the periodic and perpetual inventory systems

Correct AnswerverifiedUnder the periodic system the cost of in...View AnswerShow Answer

For a merchandiser, each sales transaction involves

Correct AnswerverifiedShow Answer

Classified multiple-step income statements

Correct AnswerverifiedShow Answer

Each sales transaction for sellers using a perpetual inventory system involves recognizing revenue and cost of goods sold.

Correct AnswerverifiedShow Answer

Describe the attributes of inventory as an asset of a merchandising company

Correct AnswerverifiedMerchandise inventor...View AnswerShow Answer

A periodic inventory system

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A credit memorandum informs a customer of a credit to its Accounts Payable account from a sales return or allowance.

Correct AnswerverifiedShow Answer

Merchandise inventory is

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Gross profit is also called gross margin

Correct AnswerverifiedShow Answer

The agreed cost of an item to be purchased by a business on credit is $4,000and 7% provincial sales tax (PST) . When this transaction isrecorded, what amount will be credited to accounts payable?

Correct AnswerverifiedShow Answer

Calculate the gross profit ratio for the year ended December 31, 2015. Interpret the ratio.

Correct AnswerverifiedGross profit ratio = This te...View AnswerShow Answer

The agreed cost of an item to be purchased by a business on credit is $4,000and 7% provincial sales tax (PST) . When this transaction isrecorded, what amount will be debited to advertising expense?

Correct AnswerverifiedShow Answer

When a single goods and services tax (GST)or Harmonized Sales Tax (HST)account is used, a credit balance in the account means that the government owes money to thebusiness.

Correct AnswerverifiedShow Answer

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A perpetual system is used sin...
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Under the periodic system the cost of in...
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Merchandise inventor...
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Gross profit ratio =
This te...
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