A 28 T/F 4
T/F: A buyer who acquires merchandise under credit terms of 1/10, n/30 has 30 days after the invoice to take advantage of the cash discount
False
T/F: A criticism of a single-step income statement is that net income is NOT available for analysis
False
T/F: A sale of $600 on account subject to a sales tax of 5% would increase account receivable by $570
False
T/F: A buyer who acquires merchandise under credit terms of 1/10, n30, has 10 days after the invoice to take advantage of the cash discount
True
T/F: A criticism of the single-step income statement is that gross profit and income from operations are NOT readily available for analysis
True
T/F: Available discounts taken by the buyer for early payment of an invoice are termed sales discounts by the seller
True
T/F: Cost of merchandise sold is used in accounting for transactions by sellers of merchandise
True
T/F: Discounts taken by the buyer for the early payment of an invoice are called purchase discounts by the buyer
True
T/F: Freight in is the amount paid by the seller to deliver merchandise sold to a customer
True
T/F: If payment is due by the end of the month in which the sale is made, the invoice terms are expressed as 'n/eom'
True
T/F: In a multiple step income statement, sales will be reduced by sales discounts and sales returns and allowances to arrive at net sales
True
T/F: In a perpetual inventory system, merchandise returned to vendors reduces the merchandise inventory account
True
T/F: Interest expense is an example of an expense classified under "other expense"
True
T/F: Merchandise is sold for $2500, 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
True
T/F: Net income or loss may appear on the income statement of both a service business and merchandising business
True
T/F: On the income statement from a single-step form, the total of all expenses is deducted from the total of all revenues
True
T/F: Operating expenses are subtracted from fees earned for a service business and from gross profit
True
T/F: Purchases of merchandise increase the merchandise inventory account under the perpetual inventory system
True
T/F: Revenue from sources other than the primary operating activity of a business is called other income.
True
T/F: Sales discounts is used in accounting for transactions with customers
True
T/F: Sales returns and allowances are granted by the seller to customers for damaged or defective merchandise
True
T/F: The effect of a sales return and allowance is a reduction in sales revenue and a decrease in cash or accounts receivable
True
T/F: The indirect method of preparing the statement of cash flows reconciles net income with net cash flows from operating activities
True
T/F: The merchandise inventory account is found on the balance sheet
True
T/F: The sales discount account is a contra account to sales
True
T/F: Under the perpetual inventory system, the cost of merchandise sold is recorded when sales are made
True
T/F: If merchandise costing $2500, terms FOB destination, 2/10, n/30, with transportation costs of $100, is paid within 10 days, the amount of the purchase discount is $52
False
T/F: If merchandise costing $2500, terms of FOB destination, 2/10, n/30, with prepaid transportation costs of $100, is paid within 10 days, the amount of the purchases discount is $48
False
T/F: It is usual for the credit period to begin with the date the merchandise is received by the buyer
False
T/F: Net sales = sales + cost of merchandise sold
False
T/F: On the income statement, sales discounts are normally deducted from sales to yield the cost of merchandise sold
False
T/F: On the income statement, sales returns and allowances and sales discounts are added to gross sales to yield net sales.
False
T/F: On the income statement, the merchandise inventory at the beginning of the period is added to sales to yield the cost of merchandise sold during the period
False
T/F: Purchase discounts reduce sales
False
T/F: Purchases discounts are discounts given to the seller
False
T/F: Sales discounts are granted by the seller to customers for payment at the end of the month
False
T/F: Sales returns and allowances is a contra-asset account
False
T/F: Sales to customers who use bank credit cards, such as MasterCard and VISA, are generally treated as credit sales
False
T/F: The document issued by the seller that informs the buyer of the details of sales returns is called a debit memorandum
False
T/F: The the ownership of merchandise passes to the buyer when the seller delivers the merchandise for shipment, the terms are stated FOB destination
False
T/F: When merchandise that was sold is returned, the seller decreases accounts payable
False
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.
True
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
True
T/F: When the terms of the sale are FOB shipping point, the buyer should pay the transportation charges
True
