04 - SB: Review of the Merchandising Business (10 - 14 mins)

In the operating cycle for a merchandiser with credit sales, after purchasing merchandise inventory for sale to customers, the next step is to make a ________ sale.

Credit

To compute net income for a merchandiser, you will start with net sales, subtract cost of goods sold and subtract other _______

expenses

The cash operating cycle for a merchandiser begins with cash purchases of merchandise and ends with _____. Multiple choice question. accounts payable receipt of cash credit sales accounts receivable

receipt of cash

Which of the statements below explain why perpetual inventory systems are becoming more popular? (Check all that apply.) Multiple select question. 1. Managers have immediate access to detailed information on sales and inventory levels. 2. Technological advances have made it easier to use. 3. Managers are incurring less pressure to use it because of purchasing trends. 4. It is more cost effective as it decreases the cost of goods sold reported on the income statement.

1. Managers have immediate access to detailed information on sales and inventory levels. 2. Technological advances have made it easier to use.

Cost of goods sold is characterized by which of the following statements? (Check all that apply.) Multiple select question. 1. Cost of goods sold is an asset reported on the balance sheet. 2. Cost of goods sold is used to figure gross profit. 3. Cost of goods sold includes the expenses of buying and preparing an item for sale. 4. Cost of goods sold is also called cost of sales. 5. Cost of goods sold is an expense reported on the income statement. 6. Cost of goods sold is the money received from selling merchandise.

2. Cost of goods sold is used to figure gross profit. 3. Cost of goods sold includes the expenses of buying and preparing an item for sale. 4. Cost of goods sold is also called cost of sales. 5. Cost of goods sold is an expense reported on the income statement.

Which of the statements below are correct regarding cost of goods sold? Multiple choice question. 1. Cost of goods sold is the price received from selling a product. 2. Cost of goods sold can be determined by subtracting the cost of a merchandise sold from its sales price. 3. Cost of goods sold is the expense of buying and preparing merchandise. 4. Cost of goods sold is an asset account reported on the balance sheet.

3. Cost of goods sold is the expense of buying and preparing merchandise.

Complete the following statement. Merchandise inventory that is still available for sale is considered a(n) _______ (asset/expense/revenue) and is reported on the income statement _________ (balance sheet/income statement) and merchandise that is sold during the period is considered a(n) ________ (asset/expense/liability) and reported on the balance sheet ________ (balance sheet/income statement).

Blank 1: Asset Blank 2: Balance Sheet Blank 3: Expense Blank 4: Income Statement

How do you compute net income for a merchandiser. Multiple choice question. Revenues - expenses. Net sales - cost of goods sold - other expenses. Cost of goods sold - other expenses. Net sales - cost of goods sold.

Net sales - cost of goods sold - other expenses.

Determine which of the following statements about merchandise is correct. Multiple choice question. 1. Merchandise is sold by customers. 2. Merchandise is acquired for use in the company, just like supplies. 3. Merchandise is acquired for resale to customers. 4. Merchandise is considered an expense in the period it is purchased.

3. Merchandise is acquired for resale to customers.

Which statement below correctly explains what merchandise inventory is? Multiple choice question. 1. Merchandise inventory is subtracted from net sales on the income statement to determine gross profit for the period. 2. Merchandise inventory is increased when products are sold to customers. 3. Merchandise inventory is an expense account reported on the income statement and contains the cost of products purchased for sale. 4. Merchandise inventory is an asset reported on the balance sheet and contains the cost of products purchased for sale.

4. Merchandise inventory is an asset reported on the balance sheet and contains the cost of products purchased for sale.

Merchandise consists of _________ that a company acquires to resell to_______.

Blank 1: Products/Goods Blank 2: Customers/Consumers

Explain how to compute gross profit by completing the following sentence. Gross profit is calculated by taking the net _______ (sales/costs) of a product and ________ (adding/subtracting) the cost of the goods sold.

Blank 1: Sales Blank 2: Subtracting

Which of the following costs are included in merchandise inventory? (Check all that apply.) Multiple select question. 1. Purchase costs 2. Trade discounts given to customers 3. Advertising costs 4. Costs necessary to ready the merchandise for sale 5. Shipping fees

1. Purchase costs 4. Costs necessary to ready the merchandise for sale 5. Shipping fees

Determine which of the definitions below describes gross profit. Multiple choice question. 1. The difference between net sales and the cost of the goods sold 2. The original cost of the merchandise when purchased from the supplier 3. The amount of money received on the sale of goods 4. The total money paid by the merchandiser to its supplier including freight costs

1. The difference between net sales and the cost of the goods sold

Determine which statements below are correct regarding merchandise available for sale during a period.(Check all that apply.) Multiple select question. 1. Cost of goods sold + Beginning inventory = Merchandise available for sale 2. Ending inventory + Cost of goods sold = Merchandise available for sale 3. Beginning inventory + Net purchases = Merchandise available for sale 4. Beginning inventory + Ending inventory = Merchandise available for sale

2. Ending inventory + Cost of goods sold = Merchandise available for sale 3. Beginning inventory + Net purchases = Merchandise available for sale

Identify the two types of inventory systems from the choices below. Multiple choice question. 1. Tracking inventory system and tagged inventory system 2. Perpetual inventory system and periodic inventory system 3. Cost inventory system and profit inventory system

2. Perpetual inventory system and periodic inventory system