Chapter 5

The journal entry to record a credit sale is

Accounts Receivable Sales Revenue

Which one of the following is shown on a multiple-step but not on a single-step income statement?

Gross Profit

Which of the following would not be classified as a contra account?

Inventory

Under a perpetual inventory system, acquisition of merchandise for resale is debited to the

Inventory account.

In a perpetual inventory system, the amount of the discount allowed for paying for merchandise purchased within the discount period is credited to

Inventory.

The journal entry to record a return of merchandise purchased on account under a perpetual inventory system would credit

Inventory.

Which of the following is a true statement about inventory systems?

Perpetual inventory systems require more detailed inventory records.

A credit granted to a customer for returned goods requires a debit to

Sales Returns and Allowances and a credit to Accounts Receivable.

All of the following are contra revenue accounts except

Sales Revenue

Income from operations appears on

a multiple-step income statement.

As an incentive for customers to pay their accounts promptly, a business may offer its customers

a sales discount.

If a customer agrees to retain merchandise that is defective because the seller is willing to reduce the selling price, this transaction is known as a sales

allowance

A perpetual inventory system would likely be used by a(n)

automobile dealership.

The Sales Returns and Allowances account is classified as a(n)

contra revenue account.

Two categories of expenses for merchandising companies are

cost of goods sold and operating expenses.

The respective normal account balances of Sales Revenue, Sales Returns and Allowances, and Sales Discounts are

credit, debit, debit.

Sales Returns and Allowances is increased when

goods that were sold on credit are returned.

Sales revenue less cost of goods sold is called

gross profit

Income from operations will always result if

gross profit exceeds operating expenses.

After gross profit is calculated, operating expenses are deducted to determine

net income.

Net income is gross profit less

operating expenses

Detailed records of goods held for resale are not maintained under a

periodic inventory system.

The primary source of revenue for a wholesaler is

sale of merchandise

Gross profit does not appear

single step income statement

The credit terms offered to a customer by a business firm are 3.8/10, n/30, which means that

the customer can deduct a 3.8% discount if the bill is paid within 10 days of the invoice date.

In a perpetual inventory system, cost of goods sold is recorded

with each sale