Chapter 5
As we compare a merchandise business to a service business, the financial statement that changes the most is the Balance Sheet.
False
Gross profit minus selling expenses equals net income.
False
In a multi-step income statement the dollar amount for income from operations is always the same as net income.
False
In a perpetual inventory system, the Merchandise Inventory account is only used to reflect the beginning inventory.
False
Net sales is equal to sales minus cost of merchandise sold.
False
Under the periodic inventory system, the cost of goods sold is equal to the beginning merchandise inventory plus the cost of goods purchased plus the ending merchandise inventory.
False
In a periodic inventory system, the cost of goods purchased includes the cost of transportation-in.
True
In the periodic inventory system, purchases of merchandise for resale are debited to the Purchases account
True
The ending merchandise inventory for 2005 is the same as the beginning merchandise inventory for 2006.
True
Assume Juniper Natural Dyes made Net Sales Revenue of $90,000 and Cost of Goods Sold totaled $58,000. What was Juniper Natural Dyes's gross profit percentage for this period? (Round to the nearest whole percent.) a. 36% b. 3.4 times c. 64% d. 17%
a. 36%
Suppose Dave's Discount's Merchandise Inventory account showed a balance of $8,000 before the year-end adjustments. the physical count of goods on hand totaled $7,400. Dave uses a perpetual inventory system. To adjust the accounts, which entry would the company make? Date Accounts and Explanation Debit Credit a. Cost of Goods Sold 600 Merchandise Inventory 600 b. Merchandise Inventory 600 Accounts Receivable 600 c. Accounts Payable 600 Merchandise Inventory 600 d. Merchandise Inventory 600 Costs of Goods Sold 600
a. Cost of Goods Sold 600 Merchandise Inventory 600
3. Adjust and close the accounts of a merchandising business Which of the following accounts would be closed at the end of the year using the perpetual inventory systems? a. Cost of goods sold b. Merchandise Inventory c. Accounts receivable d. Accounts payable
a. Cost of goods sold
Which of the following accounts would be closed at the end of the year using the perpetual inventory system? a. Costs of Goods Sold b. Merchandize Inventory c.. Accounts Receivable d. Accounts Payable
a. Costs of Goods Sold
1. Describe merchandising operations and the two types of merchandise inventory systems The two main inventory accounting systems are the a. Perpetual and periodic b. Purchase and sale c. Returns and allowances d. Cash and accrual
a. Perpetual and periodic
4. Periodic inventory system
a. an inventory system that requires businesses to obtain a physical count of inventory to determine quants on hand.
The two main inventory accounting systems are the a. perpetual and periodic b. purchase and sale c. returns and allowances d. cash and accrual
a. perpetual and periodic
Austin Sound sold inventory for $300,000 terms 2/10, n/30. Cost of goods sold was $152,000. How much sales revenue will Austin Sound report from the sale? a. $152,000 b. $294,000 c. $148,960 d. $300,000
b. $294,000
5. Operating expenses
b. Expenses, other than Cost of Goods Sold, that are incurred in the entity's major ongoing operations
JC Manufacturing purchased inventory for $5,300 and also paid a $260 freight bill JC Manufacturing returned 45% of the goods to the seller and later took a 2% purchase discount. Assume JC Manufacturing uses a perpetual inventory system. What is JC Manufacturing's final cost of the inventory that it kept? (Round to nearest whole number.) a. $2,997 b. $2,337 c. $3,117 d. $2,857
c. $3,117
2. Account for the purchase and sale of merchandise inventory using a perpetual inventory system Prof. Shu's Catering sold inventory for $1,000, terms 2/10, n/30. COGS was $500. How much is the sales revenue will Prof. Shu's Catering report from the sale? a. $500 b. $1,000 c. $980 d. $1,500
c. $980
5. Use the gross profit percentage to evaluate business performance Assume Prof. Shu's Catering made Net Sales Revenue of 1,000, and COGS totaled $600. What was the gross profit percentage? a. 25% b. 37.5% c. 40% d. 60%
c. 40%
6. Gross profit
c. Excess of Net Sales Revenue over Cost of Goods Sold
The journal entry for the purchase of inventory on account using the perpetual inventory system is Date Accounts and Explanation Debit Credit a. Merchandise Inventory xxx Accounts Receivable xxx b. Accounts Payable xxx Merchandise Inventory xxx c. Merchandise Inventory xxx Accounts Payable xxx d. Merchandise Inventory xxx Cash xxx
c. Merchandise Inventory xxx Accounts Payable xxx
League Automobiles sold an automobile for $24,000 on account. The cost of the automobile was $13,440. The sale of the automobile came with one year of free oil changes valued at $360. What would be the journal entry to record the sale? Date Accounts and Explanation Debit Credit a. Accounts Receivable 24,000 Sales Revenue 24,000 Cost of Goods Sold 13,440 Merchandise Inventory 13,440 b. Accounts Receivable 24,360 Sales Revenue 24,360 Unearned Revenue 360 Cost of Goods Sold 13,440 Merchandise Inventory 13,440 c. Accounts Receivable 24,000 Sales Revenue 23,640 Service Revenue 360 Cost of Goods Sold 13,440 Merchandise Inventory 13,440 d. Accounts Receivable 24,000 Sales Revenue 23,640 Unearned Revenue 360 Cost of Goods Sold 13,440 Merchandise Inventory 13,440
d. Accounts Receivable 24,000 Sales Revenue 23,640 Unearned Revenue 360 Cost of Goods Sold 13,440 Merchandise Inventory 13,440
Which account does a merchandiser use that a service company does not use? a. Cost of Goods Sold b. Merchandise Inventory c. Sales Revenue d. All of the above
d. All of the above
What is the order of the subtotals that appear on a multi-step income statement? a. Gross Profit, Operating Income, Net Income, Total oOther Income and Expenses b. Operating Income, Gross Profit, Net Income Total oOther Income and Expenses c. Total Other Income and Expenses, Operating Income, Gross Profit, Net Income d. Gross Profit, Operating Income, Total Other Income and Expenses, Net Income
d. Gross Profit, Operating Income, Total Other Income and Expenses, Net Income
4. Prepare a merchandiser's financial statements What is the order of the subtotals that appear on a multi-step income statement? a. Gross profit, operating income, net income, other income and expenses b. Operating income, gross profit, net income, other income and expenses c. Other income and expenses, operating income, gross profit, net income d. Gross profit, operating income, other income and expenses, net income
d. Gross profit, operating income, other income and expenses, net income
The journal entry for the purchase of inventory on account using the periodic inventory system is Date Accounts and Explanation Debit Credit a. Purchases xxx Accounts Receivable xxx b. Accounts Payable xxx Merchandise Inventory xxx c. Merchandise Inventory xxx Accounts Payable xxx d. Purchases xxx Accounts Payable xxx
d. Purchases xxx Accounts Payable xxx
1. Cost of Goods Sold
d. the cost of merchandise inventory that the business has sold to customers
3. Vendor
e. The individual or business from whom a company purchases goods
2. Perpetual inventory system
f. An inventory system that keeps a running computerized records of merchandise inventory