ACCT 2810 Chapter 4 (Exam2)
(T/F) A buyer who acquires merchandise under credit terms of 1/10, n/30 has 30 days after the invoice date to take advantage of the cash discount.
F
Office salaries and depreciation of office equipment and office supplies are examples of ________ expenses.
administrative
To determine cash payments for operating expenses for the cash flow statement using the direct method, a decrease in prepaid expenses is added to operating expenses other than depreciation.
F
(T/F) Freight is in the amount paid by the seller to deliver merchandise sold to a customer.
F
(T/F) If the ownership of merchandise passes to the buyer when the seller delivers the merchandise for shipment, the terms are stated as FOB destination.
F
(T/F) Sales returns and allowances is a contra-asset account.
F
(T/F) Sales to customers who use bank credit cards, such as MasterCard and VISA, are generally treated as credit sales.
F
(T/F) The document issued by the seller that informs the buyer of the details of sales returns is called a debit memorandum.
F
(T/F) When merchandise that was sold is returned, the seller decreases accounts payable.
F
Repayments of bonds would be shown as a cash outflow in the investing section of the statement of cash flows.
F
In the periodic system, inventory purchases are recorded in the _______ account.
purchases
(T/F) Purchase discounts reduce sales.
F
contra-asset account
account where the balance will be a credit balance or zero balance
A service business income statement will not have ___________.
cost of goods sold
Merchandise shrinkage will _______ Retained Earnings.
decrease
gross profit equation
gross profit = net sales - cost of goods sold (c0gs)
In the perpetual system, inventory purchases are recorded in the ______ account.
inventory
NBC Company had $32,000 in net sales, $15,000 in cost of merchandise sold, $18,000 in operating expenses, and $2,000 in other income. NBC's gross profit is $_____.
17,000
East, Inc. had beginning inventory of $10,000, purchases of $25,000, and ending inventory of $5,000. What is East's cost of merchandise sold?
30,000
Merchandise is sold for $2,500, terms FOB destination, 2/10, n/30, with transportation costs of $150. If $500 of the merchandise is returned prior to payment and the invoice is paid within the discount period, the amount of the sales discount is $____.
40
If merchandise costing $2,500, terms FOB destination, 2/10, n/30, with transportation costs of $100, is paid within 10 days, the amount of the purchases discount is $____.
50
What are the sections of the multiple-step income statement?
Revenue from sales, cost of merchandise sold, gross profit, income from operations, other income and expenses
(T/F) Available discounts taken by the buyer for early payment of an invoice are termed sales discounts by the seller.
T
(T/F) If cash dividends of $145,000 were declared during the year and the decrease in dividends payable from the beginning to the end of the year was $7,000, the statement of cash flows would report $152,000 in the financing activities section.
T
(T/F) If merchandise sold on account is returned to the seller, the seller may inform the customer of the details by using a credit memorandum.
T
(T/F) If the payment is due by the end of the month in which the sale is made, the invoice terms are expressed as n/eom.
T
(T/F) In a multiple-step income statement, sales will be reduced by sales discounts and sales returns to arrive at net sales.
T
(T/F) Interest expense is an expense classified under "other expense."
T
(T/F) Office salaries is Not an example of selling expenses.
T
(T/F) Salespersons' salaries is Not an administrative expense.
T
(T/F) Selling and administrative expenses are found after the gross profit on the multi-step income statement.
T
(T/F) The credit period begins the day the merchandise is shipped.
T
(T/F) The indirect method of preparing the statement of cash flows reconciles net income with net cash flows from operating activities.
T
(T/F) The sales discount account is a contra account to Sales.
T
(T/F) When someone purchases merchandise and incurs the cost of transportation, these costs of purchasing inventory are added to the cost of the inventory.
T
(T/F) When the seller offers a sales discount, even if borrowing has to be done, it is generally advantageous for the buyer to pay within the discount period.
T
includes office salaries, depreciation of office equipment, and office supplies used
administrative expenses
When the perpetual inventory system is used, the inventory sold is shown on the income statement as ____________.
cost of merchandise sold
cost of goods sold (cogs)
cost paid for merchandise
The income from operations section of the multiple-step income statement is determined by subtracting operating expenses from _________.
gross profit
One criticism of the single-step income statement is that ________ and _______ from operations are not available for analysis.
gross profit, income
When recording the cost of merchandise sold for cash using the perpetual inventory system, the effect on the accounts is _________ in Cost of Merchandise sold and ______ in Merchandise Inventory.
increase, decrease
Sales to customers who use bank cards such as MasterCard and Visa are normally recorded as a(n) _______ in cash and _______ in sales.
increase, increase
perpetual system
inventory records are updated at point of sale
periodic system
inventory records are updated periodically
In the periodic system, there is no entry to adjust _______ at point of sale. Ending _______ count is used to determine ____ at the end of the period.
inventory, inventory, COGS
The credit terms of a sale are normally indicated on the ______.
invoice
income statement for a merchandising operation
net sales - cost of goods sold = gross profit = operating expenses = operating income +/- other income expenses = net income
Operating cycle - service business
perform service and recognize revenue, bill client, collection
The cost of merchandise sold section of the multiple-step income statement includes _____________ and _____________, which are subtracted from purchases to arrive at __________.
purchases returns and allowances, purchase discounts, net purchases
operating cycle - merchandising business
purchasing, products, sales, accounts receivable, collection
The effect of a sales return and allowance is a _______ in sales revenue and a ______ in cash or accounts receivable.
reduction, decrease
service businesses
revenue activities involving providing services to customers
merchandising operations
revenue activities involving the buying and selling of merchandise
other income
revenue from sources other than the primary operating activity of a business
Generally, the revenue account for a merchandising business is entitled ______.
sales
net sales
sales revenue not including returns and discounts
The revenue from sales section of the multiple-step income statement consists of... (4 things)
sales, sales returns and allowances, sales discounts, net sales
includes sale salaries, store supplies used, depreciation of store equipment, delivery expense, and advertising
selling expenses
Operating expenses are classified as either ____________ or __________.
selling expenses, administrative expenses
basic structure of income statement for a service business
service revenue (fees earned) - operating expenses = operating income +/- other income/expenses = net income
benefit of the perpetual system
shows what inventory is available at any point in the period
