exam 1 pt. 2

Keisha Dress Shops experienced the following events during its third accounting period. (1) Sold merchandise that cost $92,000 for $140,000 cash. (2) Paid $30,000 of operating expenses. (3) Paid a $4,000 cash dividend. Based on this information, the amount of the gross margin is

$48,000

Which of the following shows the effects of purchasing inventory on account? Balance Sheet Income Statement Statement of Cash Flows Assets = Liab. + Equity Rev. - Exp. = Net Inc. A. + = + + NA NA - + = - NA B. + = NA + + NA - NA = NA + OA C. + = + + NA NA - NA = NA NA D. + = + + NA NA - NA = NA + OA

Option C

Edwards Shoe Store sold shoes that cost the company $5,700 for $8,200. Which of the following shows how the recognition of the cost of goods sold will affect the Company's financial statement? (Ignore the effects of the associated revenue recognition.) Balance Sheet Income Statement Statement of Cash Flows Assets = Liab. + Equity Rev. - Exp. = Net Inc. A. − = NA + − NA - + = − − OA B. − = NA + − NA - NA = NA NA C. + = NA + + + - NA = + + OA D. − = NA + − NA - + = − NA

Option D

Inventory is

an asset account that appears on the balance sheet.

Paying cash to purchase inventory is

an asset exchange transaction.

Product costs are expensed when they are incurred. This statement is

false

The gross margin appears on a

multistep income statement.

When a merchandising company pays cash to purchase inventory

none of the answers are correct; the amount of total assets increases. the amount of expenses increases. the amount of total assets decreases.

When a merchandising company sells inventory it will

recognize revenue and expense.