Question 1

Most companies report their sales revenue and contra-revenue accounts as well as net sales on their externally reported income statements.

Accepted Answer

A) True 
 B)False

Question 2

BC Company has a gross profit percentage of 61% while AB Company has a gross profit percentage of 37%.Which of the following is true?

Accepted Answer

A)  BC Company will report a higher net income than AB Company.
B)  AB Company must have a greater sales volume than BC Company.
C)  BC Company must be more efficient at controlling selling,general,and administrative expenses than AB Company.
D)  None of the answers are acceptable.E) A) and D)
F) A) and C)

Question 3

A perpetual inventory system updates inventory records every time an item is

Accepted Answer

A)  bought or sold.
B)  bought or returned.
C)  sold or returned.
D)  All of the choices are correct.E) None of the above
F) B) and C)

Question 4

Which of the following is an activity common to the operations of merchandising,manufacturing,and service companies?

Accepted Answer

A)  Producing product.
B)  Incurring operating expenses.
C)  Buying goods or raw materials.
D)  Selling goods or physical product.E) A) and C)
F) B) and D)

Question 5

Which of the following is an activity in the operations of a manufacturer,but not in the operations of a merchandising or service company?

Accepted Answer

A)  Selling goods to consumers.
B)  Receiving cash.
C)  Selling goods to other firms.
D)  Buying raw materials.E) A) and D)
F) B) and C)

Question 6

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) B) and C)
F) All of the above

Question 7

The company gives a sales discount for prompt payment to customers.

Accepted Answer

A)  debited (Dr) 
B)  Bedited (Cr) 
C)  Ceither (N) D) A) and B)
E) All of the above

Question 8

BetterBuy sells $50,000 of TVs to a customer.The terms include a 2% discount if paid in 7 days and a 1% discount if paid in 8-14 days.BetterBuy receives the money in 12 days.How would the transaction be recorded by BetterBuy?

Accepted Answer

A)  Debit Inventory for $500 and credit Accounts Payable for $500.
B)  Debit Cash for $49,500,credit Accounts receivable for $50,000,and debit sales discounts for $500.
C)  Debit Accounts receivable for $50,000,credit Cash for $49,500,and credit sales discounts for $500.
D)  Debit Accounts Payable for $500 and credit Inventory for $500. E) All of the above
F) B) and C)

Question 9

Coca-Cola reported net sales revenues of $19.8 billion and cost of goods sold of $6.0 billion.Its gross profit percentage was:

Accepted Answer

A)  30.3%.
B)  69.7%.
C)  43.5%.
D)  None of the answers are acceptable. E) C) and D)
F) All of the above

Question 10

BetterBuy sells a computer from inventory for $599 on credit.BetterBuy originally bought the computer from IBM for $395.What are the journal entries Betterbuy would record?

Accepted Answer

A)  Debit Cash for $599,credit Sales for $599; debit Inventory for $395 and credit Cost of Goods Sold for $395.
B)  Debit Accounts Receivable for $599,credit Inventory for $395,and credit Retained Earnings for $204.
C)  Debit Accounts Receivable for $599,credit Sales for $599; debit Cost of Goods Sold for $395 and credit Inventory for $395.
D)  Debit Inventory for $395,debit Cost of Goods Sold for $204,and credit Accounts Receivable for $599.E) A) and D)
F) B) and D)

Question 11

Companies using a perpetual inventory system:

Accepted Answer

A)  never physically count their inventory.
B)  must physically count their inventory at least once a week.
C)  still need to count the physical inventory occasionally.
D)  always know the actual amount in inventory from their accounting records.E) A) and B)
F) None of the above

Question 12

It is possible for a company to increase both its gross profit percentage and net income without increasing the dollar amount of sales.

Accepted Answer

A) True 
 B)False

Question 13

Purrfect Pets announces that its gross profit rose 5% and its net income fell.Which of the following statements is true?

Accepted Answer

A)  This is not possible given that net income is determined by gross profit.
B)  This must mean that other expenses have risen more than 5%.
C)  This must mean that other expenses fell.
D)  This must mean that sales revenue fell.E) B) and C)
F) A) and D)

Question 14

The following merchandise transactions occurred during December for two different companies: Rippen and Burnen.Both companies use a perpetual inventory system.
On December 3,Rippen Corporation sold merchandise on account to Burnen Corp.for $480,000,terms 2/10,n/30.This merchandise originally cost Rippen $320,000.
On December 8,Burnen Corp.returned merchandise to Rippen Corporation for a credit of $30,000.Rippen returned this merchandise to inventory at its original cost of $20,000.
December 12,Burnen Corp.paid Rippen Corporation for the amount owed.
Required:
a.Prepare the journal entries to record these transactions on the books of Rippen Corporation.
b.Prepare the journal entries to record these transactions on the books of Burnen Corp.

Accepted Answer

a.Journal entries to record these transa...

Question 15

Which of the following statements is true?

Accepted Answer

A)  Because gross profit percentages are so consistent from period to period they are not very useful for analyzing one company over time.
B)  Because gross profit percentages are so variable across industries they are most useful in comparing companies from different industries.
C)  Because gross profit percentages are so variable across industries they are more useful in analyzing one company over time.
D)  Because gross profit percentages are so consistent across industries they are most useful in comparing companies from different industries.E) B) and D)
F) A) and C)

Question 16

Perpetual inventory systems often use technology such as bar codes,optical scanners,and computers.

Accepted Answer

A) True 
 B)False

Question 17

Which is the best form of inventory control for inventory?

Accepted Answer

A)  Establish responsibility.
B)  Use a periodic inventory system.
C)  Use a perpetual inventory system.
D)  Document procedures.E) C) and D)
F) None of the above

Question 18

The terms "sales discounts" and "purchase discounts" are used interchangeably by a company.

Accepted Answer

A) True 
 B)False

Question 19

Recording sales returns and allowances in a separate account is an important internal control that allows management to evaluate the volume of returns and allowances as a potential indicator of the quality of their products.

Accepted Answer

A) True 
 B)False

Question 20

The company sells $4600 of goods to consumers.

Accepted Answer

A)  debited (Dr) 
B)  Bedited (Cr) 
C)  Ceither (N) D) A) and B)
E) A) and C)

Exam 6: Merchandising Operations and the Multi-Step Income Statement

Recording sales returns and allowances in a separate account is an important internal control that allows management to evaluate the volume of returns and allowances as a potential indicator of the quality of their products.

Correct Answer
verified

Most companies report their sales revenue and contra-revenue accounts as well as net sales on their externally reported income statements.

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

The terms "sales discounts" and "purchase discounts" are used interchangeably by a company.

Correct Answer
verified

Which of the following statements is true?

Correct Answer
verified

Companies using a perpetual inventory system:

Correct Answer
verified

BetterBuy sells a computer from inventory for $599 on credit.BetterBuy originally bought the computer from IBM for $395.What are the journal entries Betterbuy would record?

Correct Answer
verified

BC Company has a gross profit percentage of 61% while AB Company has a gross profit percentage of 37%.Which of the following is true?

Correct Answer
verified

The company sells $4600 of goods to consumers.

Correct Answer
verified

Perpetual inventory systems often use technology such as bar codes,optical scanners,and computers.

Correct Answer
verified

Purrfect Pets announces that its gross profit rose 5% and its net income fell.Which of the following statements is true?

Correct Answer
verified

It is possible for a company to increase both its gross profit percentage and net income without increasing the dollar amount of sales.

Correct Answer
verified

BetterBuy sells $50,000 of TVs to a customer.The terms include a 2% discount if paid in 7 days and a 1% discount if paid in 8-14 days.BetterBuy receives the money in 12 days.How would the transaction be recorded by BetterBuy?

Correct Answer
verified

Which is the best form of inventory control for inventory?

Correct Answer
verified

The company gives a sales discount for prompt payment to customers.

Correct Answer
verified

Coca-Cola reported net sales revenues of $19.8 billion and cost of goods sold of $6.0 billion.Its gross profit percentage was:

Correct Answer
verified

Which of the following is an activity in the operations of a manufacturer,but not in the operations of a merchandising or service company?

Correct Answer
verified

Correct Answer
verified
a.Journal entries to record these transa...
View Answer

Which of the following is an activity common to the operations of merchandising,manufacturing,and service companies?

Correct Answer
verified

A perpetual inventory system updates inventory records every time an item is

Correct Answer
verified

Exam 6: Merchandising Operations and the Multi-Step Income Statement

Recording sales returns and allowances in a separate account is an important internal control that allows management to evaluate the volume of returns and allowances as a potential indicator of the quality of their products.

Correct AnswerverifiedShow Answer

Most companies report their sales revenue and contra-revenue accounts as well as net sales on their externally reported income statements.

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

The terms "sales discounts" and "purchase discounts" are used interchangeably by a company.

Correct AnswerverifiedShow Answer

Which of the following statements is true?

Correct AnswerverifiedShow Answer

Companies using a perpetual inventory system:

Correct AnswerverifiedShow Answer

BetterBuy sells a computer from inventory for $599 on credit.BetterBuy originally bought the computer from IBM for $395.What are the journal entries Betterbuy would record?

Correct AnswerverifiedShow Answer

BC Company has a gross profit percentage of 61% while AB Company has a gross profit percentage of 37%.Which of the following is true?

Correct AnswerverifiedShow Answer

The company sells $4600 of goods to consumers.

Correct AnswerverifiedShow Answer

Perpetual inventory systems often use technology such as bar codes,optical scanners,and computers.

Correct AnswerverifiedShow Answer

Purrfect Pets announces that its gross profit rose 5% and its net income fell.Which of the following statements is true?

Correct AnswerverifiedShow Answer

It is possible for a company to increase both its gross profit percentage and net income without increasing the dollar amount of sales.

Correct AnswerverifiedShow Answer

BetterBuy sells $50,000 of TVs to a customer.The terms include a 2% discount if paid in 7 days and a 1% discount if paid in 8-14 days.BetterBuy receives the money in 12 days.How would the transaction be recorded by BetterBuy?

Correct AnswerverifiedShow Answer

Which is the best form of inventory control for inventory?

Correct AnswerverifiedShow Answer

The company gives a sales discount for prompt payment to customers.

Correct AnswerverifiedShow Answer

Coca-Cola reported net sales revenues of $19.8 billion and cost of goods sold of $6.0 billion.Its gross profit percentage was:

Correct AnswerverifiedShow Answer

Which of the following is an activity in the operations of a manufacturer,but not in the operations of a merchandising or service company?

Correct AnswerverifiedShow Answer

Correct Answerverifieda.Journal entries to record these transa...View AnswerShow Answer

Which of the following is an activity common to the operations of merchandising,manufacturing,and service companies?

Correct AnswerverifiedShow Answer

A perpetual inventory system updates inventory records every time an item is

Correct AnswerverifiedShow Answer

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a.Journal entries to record these transa...
View Answer

Correct Answer
verified

Correct Answer
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