Chapter 5- Smartbook questions

True or false: A single-step income statement shows only one subtotal for expenses. True false question. True False

True

Jello's Market purchased $1,000 of goods on account with terms of 2/10,n/30. They returned $200 of the goods due to defect the next day. If Jello pays for the purchase within the discount period and uses the perpetual inventory system, the required journal entry to record the payment would:

debit Accounts Payable $800; credit Merchandise Inventory $16; and credit Cash $784

Toys R Fun purchased $4,000 of merchandise and paid immediately. To record this transaction, Toys R Fun's accountant would debit the ____________________(Merchandise Inventory/Accounts Payable/Cash) account and credit the _________________________________________ (Cash/Merchandise Inventory/Accounts Payable) account.

Correct Answer Blank 1: Merchandise Inventory Blank 2: Cash

X-Mart uses the perpetual inventory system to account for its merchandise. On May 1, it sold $1,400 of merchandise on credit with terms of 1/10, n/40. Demonstrate the required journal entry to record the receipt of payment on May 25 by selecting all of the correct actions below. (Check all that apply.)

Correct Answer Credit Accounts Receivable $1,400. Debit Cash $1,400.

X-Mart uses the perpetual inventory system to account for its merchandise. On May 1, it sold $1,400 of merchandise on credit. The original cost of the merchandise to X-Mart was $500. Demonstrate the required journal entry to record the sale and the cost of the sale by selecting all of the correct actions below. (Check all that apply.)

Correct Answer Credit Merchandise Inventory $500. Debit Cost of Goods Sold $500. Debit Accounts Receivable $1,400. Credit Sales $1,400.

X-Mart purchased $300 of merchandise and paid immediately. Demonstrate the journal entry to record this transaction, assuming the perpetual inventory system is used. Debit Purchases $300; credit Cash $300. Debit Merchandise Inventory $300; credit Sales $300. Debit Merchandise Inventory $300; credit Cash $300. Credit Merchandise Inventory $300; debit Cash $300.

Correct Answer Debit Merchandise Inventory $300; credit Cash $300.

Which of the statements below summarizes what the acid-test ratio measures? Multiple choice question. The acid-test ratio measures a merchandiser's ability to pay its current liabilities. The acid-test ratio measures the efficiency of capital spending. The acid-test ratio measures the profitability of a company. The acid-test ratio measures the marketability of a company's merchandise

Correct Answer The acid-test ratio measures a merchandiser's ability to pay its current liabilities.

Sales is a(n) ______ account. Multiple choice question. asset revenue liability expense

Correct Answer revenue

A cash discount can be summarized as a discount given to___________________ (buyers/creditors/sellers) to encourage them to pay ______________________________(earlier/later/less/more).

Correct Answer Blank 1: buyers Blank 2: earlier

X-Mart uses the perpetual inventory system to account for its merchandise. On June 1, it sold $7,000 of merchandise for cash. The original cost of the merchandise to X-Mart was $500. Demonstrate the required journal entry to record the cost of the sale by selecting all of the correct actions below. (Check all that apply.)

Correct Answer Debit Cost of Goods Sold $500. Credit Merchandise Inventory $500.

A journal entry for a sale of merchandise on account will result in all of the following: (Check all that apply). Multiple select question. Debit to Cost of Goods Sold Credit to Cost of Goods Sold Credit to Sales Credit to Merchandise Inventory Debit to Accounts Receivable Debit to Sales

Correct Answer Debit to Cost of Goods Sold Credit to Sales Credit to Merchandise Inventory Debit to Accounts Receivable

Credit terms of n/60 were printed on an invoice. Explain what this means. Multiple choice question. The credit period ends on the 60th of the month. The discount period lasts 60 days from the invoice date. The buyer will receive a 15% discount.. The credit terms stand for net 60 days.

Correct Answer The credit terms stand for net 60 days.

A multiple-step income statement will have all of the following main parts except: Multiple choice question. net sales gross profit income from operations net income

Correct Answer net sales Reason: A multiple-step income statement will have all of the following main parts except net sales. The multiple-step income statement will have gross profit, income from operations, and net income.

True or false: Merchandise inventory is generally converted to cash more quickly than accounts receivable. True false question. True or false

false

On May 14, X-Mart purchased $500 of merchandise with terms of 3/15,n/40. If payment is made on May 28, calculate the purchase discount that may be taken by X-Mart. Multiple choice question. $70 $15 $75 $20

Correct Answer $15

What is a purchase return? Multiple choice question. A purchase return is the cash discount given for early payment of an invoice. A purchase return refers to merchandise a seller acquires, but then returns to the buyer. A purchase return refers to merchandise a buyer purchases, but then returns to the seller. A purchase return is designed to shorten the payment period between the buyer and the seller.

Correct Answer A purchase return refers to merchandise a buyer purchases, but then returns to the seller.

A purchase return refers to merchandise a _________________________(buyer/seller/creditor) purchased, but then returns to the __________________________ (buyer/seller/creditor) for a refund of the purchase price or reduction in the amount owed.

Correct Answer Blank 1: buyer Blank 2: seller

A merchandiser has four closing journal entries at the end of an accounting cycle. Select the correct entries below. (Check all that apply.) Multiple select question. Close the income summary account. Close the withdrawals account. Close asset accounts. Close the merchandise inventory account. Close expense accounts. Close revenue accounts.

Correct Answer Close the income summary account. Close the withdrawals account. Close expense accounts. Close revenue accounts.

Identify the statements below which are correct regarding a merchandiser's income statement. (Check all that apply). Cost of goods sold is subtracted from net sales to determine gross profit. Accounts receivable is included on the statement. Total assets is the last line on the statement. Expenses are subtracted from gross profit to calculate net income. Merchandise inventory is reported on the statement.

Correct Answer Cost of goods sold is subtracted from net sales to determine gross profit. Expenses are subtracted from gross profit to calculate net income.

On June 5, Jo's Market sold $1,000 of goods on credit with terms of 2/10,n/30. How will Jo's Market record the customer's payment on June 8? Multiple choice question. Credit Accounts Receivable $1,000; debit Cash $980; and credit Merchandise Inventory $20 Debit Cash $980; debit Sales Discounts $20; and credit Accounts Receivable $1,000 Debit Cash $1,000 and credit Accounts Receivable $1,000 Debit Accounts Receivable $1,000; credit Merchandise Inventory $20; and credit Cash $980

Correct Answer Debit Cash $980; debit Sales Discounts $20; and credit Accounts Receivable $1,000

X-Mart uses the perpetual inventory system to account for its merchandise. On May 1, it sold $1,400 of merchandise on credit. The original cost of the merchandise to X-Mart was $500. Demonstrate the required journal entry to record the cost of the sale by selecting all of the correct actions below. (Check all that apply.)

Correct Answer Debit Cost of Goods Sold $500. Credit Merchandise Inventory $500.

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

Correct Answer Merchandise is acquired for resale to customers.

Credit terms of 1/10, n/30 means. The buyer will receive a 1% discount if they pay within 10 days of the date of the invoice. The buyer will receive a 90% discount if they pay within 1 day. The buyer will receive a 10% discount if they pay within 10 days of the date of the invoice. The buyer will receive a 10% discount if they pay within 30 days.

Correct Answer The buyer will receive a 1% discount if they pay within 10 days of the date of the invoice.

Demonstrate how to prepare a multiple-step income statement by ranking the items below in the order they would appear on a multiple-step income statement of a merchandiser.

1. Sales 2. Cost of Goods Sold 3. Gross Profit 4. Operating Expenses 5. Income from Operations 6. Other Revenues and Expenses

Gross profit is computed as net ___________________minus cost of goods sold.

Correct Answer Blank 1: sales

Explain how to determine gross profit on an income statement by selecting the correct statement below. Multiple choice question. Sales is subtracted from cost of goods sold. Cost of goods sold is added to sales discounts. Cost of goods sold is subtracted from net sales. Cost of goods sold is added to net sales.

Correct Answer Cost of goods sold is subtracted from net sales.

Sally Beauty Warehouse uses the perpetual inventory system to account for its merchandise. On Nov 2, it sold $700 of merchandise on credit with terms of 2/15,n/30. Demonstrate the required journal entry to record the receipt of payment from the customer on Nov 13, by selecting all of the correct actions below. (Check all that apply.) Multiple select question. Debit Cash $686. Debit Accounts Receivable $700. Debit Sales Discounts $14. Credit Sales Discounts $14. Debit Cash $700. Credit Accounts Receivable $700.

Correct Answer Debit Cash $686. Debit Sales Discounts $14. Credit Accounts Receivable $700.

Merchandise inventory can be described as: (Check all that apply.) an account increased with a debit. an asset account. an account appearing on a balance sheet of a service company. an account appearing on a balance sheet of a merchandiser. an expense account. products that a company owns and intends to sell.

Correct Answer an account increased with a debit. an asset account. an account appearing on a balance sheet of a merchandiser. products that a company owns and intends to sell.

Sales Discounts is a ______ account. Multiple choice question. revenue expense contra revenue contra asset asset

Correct Answer contra revenue

The Merchandise Inventory account on a classified balance sheet is reported in the: Multiple choice question. current assets section current liabilities section intangible assets section plant assets section

Correct Answer current assets section

Which are the two classifications of operating expenses on a multiple-step income statement? Multiple choice question. Operating; non-operating Selling; general and administrative Selling; costs of goods sold Selling; managerial

Correct Answer Selling; general and administrative

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

Correct Answer Net sales - cost of goods sold - other expenses.

Given the partial list of accounts below, the entry to close the temporary debit balance accounts would include a: Account Debit Credit Sales $20,000 Sales Returns and Allowances $1000 Sales Discounts $ 500 Cost of Goods Sold $1,900 Wages Expense $ 300 Merchandise Inventory $5,000 Supplies $ 700 Multiple choice question. debit to Income Summary, $3,700. debit to Income Summary, $8,700. debit to Income Summary, $2,200. debit to Income Summary, $9,400

Correct Answer debit to Income Summary, $3,700. Reason: Close Sales Discounts, Sales Returns and Allowances, Cost of Goods Sold and Wages Expense. $1,000+500+1,900+300=$3,700.

Select all that apply Which of the statements below summarize why a buyer would desire a purchase allowance? (Check all that apply.) The seller could not pay within the discount period. Purchased merchandise was defective or unacceptable. In order to keep defective, but still marketable merchandise, the buyer would need a reduction in the purchase price.

Correct Answer Purchased merchandise was defective or unacceptable. In order to keep defective, but still marketable merchandise, the buyer would need a reduction in the purchase price.

Calculate the total cost of merchandise purchased using the information in the following table: Invoice cost of merchandise purchases $40,000 Purchase discounts received $ 3,000 Cost of transportation-in (shipping) $ 500 Costs of purchase returns and allowances $ 100 Multiple choice question. $40,000 $37,600 $37,400 $36,500

Correct Answer $37,400

On June 5, X-Mart purchased $400 of merchandise with terms of 2/10,n/30. If payment is made on June 11, calculate the purchase discount that may be taken by X-Mart. $12 $8 $40 $0

Correct Answer $8

Jerry's Flowers had the following cost information related to its purchases of merchandise. Calculate the total cost of merchandise purchased using the information below: Invoice cost of merchandise purchases $100,000 Purchase discounts received $ 9,000 Cost of transportation-in (shipping) $ 500 Costs of purchase returns and allowances $ 400 $91,900 $109,900 $91,100 $90,100

Correct Answer $91,100 Reason: $100,000 - $9,000 - $400 + $500 = $91,100.

Recall the formula for calculating a company's acid-test ratio. Multiple choice question.

Correct Answer (Cash and cash equivalents plus Short-term investments plus Current receivables) divided by Current liabilities

The components of a merchandiser's income statement are shown below. In which order would they appear on the statement? Instructions

Correct Answer 1. Net sales 2. Cost of goods sold 3. Gross profit 4. Expenses 5. Net income

Review the following credit terms and identify the one that states that the buyer will receive a 3% discount if the payment is made within 15 days. Otherwise, full payment is expected within 45 days of the invoice date. 3/45, n/15 3/15,45 3/10, n/45 3/15, n/45

Correct Answer 3/15, n/45

Identify the statements below which summarize what cash discounts are. (Check all that apply.) A buyer views a cash discount as a purchase discount. A seller views a cash discount as a purchase discount. A seller views a cash discount as a sales discount. Cash discounts are described in credit terms. A reduced payment applies to the credit period. Sellers can grant a cash discount to encourage buyers to pay earlier. A reduced payment applies to the discount period.

Correct Answer A buyer views a cash discount as a purchase discount. A seller views a cash discount as a sales discount. Cash discounts are described in credit terms. Sellers can grant a cash discount to encourage buyers to pay earlier. A reduced payment applies to the discount period.

What is a sales return? A sales return is the cash discount given for early payment of an invoice. A sales return refers to merchandise that customers return to the seller after a sale. A sales return is designed to shorten the payment period between the buyer and the seller. A sales return refers to merchandise a seller acquires, but then returns to the buyer.

Correct Answer A sales return refers to merchandise that customers return to the seller after a sale.

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

Correct Answer Beginning inventory + Net purchases = Merchandise available for sale Ending inventory + Cost of goods sold = Merchandise available for sale

Merchandise inventory that is available for sale is a(n) __________________(asset/expense/revenue) and reported on the _____________________(balance sheet/income statement). Merchandise that is sold during the period is a(n)_______________________ (asset/expense/liability) and reported on the _________________ (balance sheet/income statement).

Correct Answer Blank 1: asset Blank 2: balance sheet Blank 3: expense Blank 4: income statement

A sales return refers to merchandise that___________________(customers/sellers/creditors) return to the___________________(customer/seller/creditor) for a refund of the purchase price or reduction in the amount owed.

Correct Answer Blank 1: customers or customer Blank 2: seller

To compute net income for a merchandiser, start with net sales, subtract cost of goods sold and subtract other_______________.

Correct Answer Blank 1: expenses

An invoice is referred to as a________________ invoice for a buyer and as a _________________invoice for the seller.

Correct Answer Blank 1: purchase Blank 2: sales

The discount period is the time between the invoice date and a specified date on which the payment amount owed can be ____________________________(increased/reduced) because of early payment.

Correct Answer Blank 1: reduced

Sales Discounts is a contra__________________(expense/revenue/asset) account and is increased with a______________________(debit/credit).

Correct Answer Blank 1: revenue Blank 2: debit

Sales is a(n) __________________(expense/revenue/asset) account and is reported on the __________________(income/balance)__________________ (statement/sheet).

Correct Answer Blank 1: revenue Blank 2: income Blank 3: statement

When a seller grants an allowance to a customer for defective goods that were purchased on credit and that were not returned, the seller records a debit to the______________----, _______________________, and ___________________ account.

Correct Answer Blank 1: sales Blank 2: returns Blank 3: allowances

Gross profit is calculated by taking the net____________ (sales/costs) of a product and _______________ (adding/subtracting) the cost of the goods sold.

Correct Answer Blank 1: sales Blank 2: subtracting

A______________________ discount benefits a seller through earlier cash receipts and reduced collection efforts.

Correct Answer Blank 1: sales or cash

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

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

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

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

Dogs R US uses the perpetual inventory system to account for its merchandise. A customer returned merchandise. Assuming that the purchase was originally bought on credit for $400 with a cost to Dogs R US of $100, demonstrate required journal entry of Dogs R US to record the return by selecting all of the correct actions below. (Check all that apply.) Credit Accounts Receivable $400. Debit Merchandise Inventory $100. Debit Sales Returns and Allowances $400. Debit Cost of Goods Sold $100. Debit Accounts Payable $400. Credit Merchandise Inventory $100. Credit Sales Returns and Allowances $400. Credit Cost of Goods Sold $100. Credit Cash $400.

Correct Answer Credit Accounts Receivable $400. Debit Merchandise Inventory $100. Debit Sales Returns and Allowances $400. Credit Cost of Goods Sold $100.

LOL Music Store uses the perpetual inventory system to account for its merchandise. On November 17, it purchased $1,000 of merchandise with terms of 2/5,n/60. If payment is made on December 21, demonstrate the required journal entry to record the payment by selecting all of the correct actions below. (Check all that apply.) Multiple select question. Credit Cash $980. Credit Cash $1,000. Debit Accounts Payable $1,000. Credit Accounts Payable $1,000. Credit Merchandise Inventory $20.

Correct Answer Credit Cash $1,000. Debit Accounts Payable $1,000.

LOL Music Store uses the perpetual inventory system to account for its merchandise. On November 17, it purchased $1,000 of merchandise with terms of 2/5,n/60. If payment is made on November 21, demonstrate the required journal entry to record the payment by selecting all of the correct actions below. (Check all that apply.) Multiple select question. Credit Cash $980. Credit Merchandise Inventory $20. Debit Accounts Payable $1,000. Credit Purchase Discounts $20. Credit Accounts Payable $1,000. Credit Cash $1,000. Debit Merchandise Inventory $20.

Correct Answer Credit Cash $980. Credit Merchandise Inventory $20. Debit Accounts Payable $1,000.

Sticky Company's merchandise inventory balance at year end is $15,050, but a physical count reveals that only $15,000 of inventory exists. The adjusting entry to record the shrinkage includes: Multiple select question. Credit to Cost of Goods Sold for $50 Credit to Merchandise Inventory for $50 Debit to Cost of Goods Sold for $50 Debit to Merchandise Inventory for $50

Correct Answer Credit to Merchandise Inventory for $50 Debit to Cost of Goods Sold for $50

On Dec. 7, Toys R Fun purchased $1,000 of merchandise with terms of 2/10,n/30. If payment is made on December 30, demonstrate the required journal entry for Toys R Fun to record the payment under the perpetual inventory system. Multiple choice question. Debit Accounts Payable $1,000; credit Cash $1,000. Debit Cash $1,000; Credit Accounts Payable $1,000. Debit Accounts Payable $1,000; credit Cash $980; credit Merchandise Inventory $20.

Correct Answer Debit Accounts Payable $1,000; credit Cash $1,000.

On Dec. 7, Toys R Fun purchased $1,000 of merchandise with terms of 2/10,n/30. If payment is made on December 30, demonstrate the required journal entry for Toys R Fun to record the payment under the perpetual inventory system. Multiple choice question. Debit Cash $1,000; Credit Accounts Payable $1,000. Debit Accounts Payable $1,000; credit Cash $980; credit Merchandise Inventory $20. Debit Accounts Payable $1,000; credit Cash $1,000.

Correct Answer Debit Accounts Payable $1,000; credit Cash $1,000.

On Dec. 7, Toys R Fun purchased $1,000 of merchandise with terms of 2/10,n/30. If payment is made on December 16, demonstrate the required journal entry for Toys R Fun to record the payment under the perpetual inventory system. Multiple choice question. Debit Accounts Payable $1,000; credit Cash $1,000; credit Purchase Discounts $20. Debit Accounts Payable $1,000; credit Cash $980; credit Merchandise Inventory $20. Debit Merchandise Inventory $20; debit Cash $980; credit Accounts Payable $1,000. Debit Accounts Payable $1,000; credit Cash $1,000.

Correct Answer Debit Accounts Payable $1,000; credit Cash $980; credit Merchandise Inventory $20.

On Dec. 20, X-Mart received a $100 allowance because the merchandise it purchased on account, earlier in the month, was of poor quality. Demonstrate the required journal entry on X-Mart's books for the allowance assuming the perpetual inventory method. Multiple choice question. Debit Accounts Payable $100; credit Merchandise Inventory $100. Debit Accounts Payable $100; credit Cash $100. Debit Accounts Payable $100; credit Purchase Returns $100. Debit Merchandise Inventory $100; credit Accounts Payable $100.

Correct Answer Debit Accounts Payable $100; credit Merchandise Inventory $100.

X-Mart uses the perpetual inventory system to account for its merchandise. On May 1, it purchased $400 of merchandise on account with terms of 2/15, n/40. On May 3, X-Mart returned $50 of merchandise due to defect. Assuming that the purchase was paid for within the discount period, demonstrate the required journal entry for X-Mart to record the payment by selecting all of the correct actions below. (Check all that apply.) Multiple select question. Credit Purchase Discounts $7. Debit Accounts Payable $350. Credit Cash $392. Credit Merchandise Inventory $7. Credit Cash $343. Debit Merchandise Inventory $7. Credit Accounts Payable $350.

Correct Answer Debit Accounts Payable $350. Credit Merchandise Inventory $7. Credit Cash $343.

Dogs R US uses the perpetual inventory system to account for its merchandise. On May 1, it returned $50 of merchandise due to a defect. Assuming that the purchase was originally bought on credit, demonstrate the required journal entry to record the return by selecting all of the correct actions below. (Check all that apply.) Multiple select question. Debit Accounts Payable $50. Debit Cash $50. Credit Purchase Returns $50. Credit Merchandise Inventory $50. Credit Accounts Payable $50. Debit Merchandise Inventory $50.

Correct Answer Debit Accounts Payable $50. Credit Merchandise Inventory $50.

X-Mart uses the perpetual inventory system to account for its merchandise. On May 1, it sold $1,400 of merchandise for cash. The original cost of the merchandise to X-Mart was $500. Demonstrate the required journal entry to record the sale and the cost of the sale by selecting all of the correct actions below. (Check all that apply.) Multiple select question. Debit Cash $1,400. Credit Sales $1,400. Debit Merchandise Inventory $500. Credit Cost of Goods Sold $500. Credit Accounts Receivable $1,400. Debit Cost of Goods Sold $500. Debit Sales $1,400. Credit Merchandise Inventory $500.

Correct Answer Debit Cash $1,400. Credit Sales $1,400. Debit Cost of Goods Sold $500. Credit Merchandise Inventory $500.

X-Mart uses the perpetual inventory system to account for its merchandise. On May 1, it sold $1,400 of merchandise on credit. The original cost of the merchandise to X-Mart was $500. Demonstrate the required journal entry to record the sale and the cost of the sale by selecting all of the correct actions below. (Check all that apply.) Multiple select question. Debit Sales $1,400. Debit Cost of Goods Sold $500. Credit Sales $1,400. Credit Accounts Receivable $1,400. Credit Cost of Goods Sold $500. Debit Accounts Receivable $1,400. Credit Merchandise Inventory $500. Debit Merchandise Inventory $500.

Correct Answer Debit Cost of Goods Sold $500. Credit Sales $1,400. Debit Accounts Receivable $1,400. Credit Merchandise Inventory $500.

X-Mart uses the perpetual inventory system to account for its merchandise. On June 1, it sold $7,000 of merchandise for cash. The original cost of the merchandise to X-Mart was $500. Demonstrate the required journal entry to record the sale and the cost of the sale by selecting all of the correct actions below. (Check all that apply.) Multiple select question. Debit Merchandise Inventory $500. Debit Sales $7,000. Debit Cost of Goods Sold $500. Credit Cash $7,000. Credit Cost of Goods Sold $500. Credit Sales $7,000. Credit Merchandise Inventory $500. Debit Cash $7,000.

Correct Answer Debit Cost of Goods Sold $500. Credit Sales $7,000. Credit Merchandise Inventory $500. Debit Cash $7,000.

Jerry's Flowers sold and shipped merchandise across the country to a buyer. The terms were FOB destination. Assuming it paid the bill immediately, demonstrate the journal entry required by Jerry's Flowers under the perpetual inventory system to record the freight charges. Multiple choice question. Debit Sales; credit Cash. Debit Delivery Expense; credit Cash. Debit Merchandise Inventory; credit Freight-Out. Debit Merchandise Inventory; credit Cash.

Correct Answer Debit Delivery Expense; credit Cash.

Dogs R US uses the perpetual inventory system to account for its merchandise. A customer returned merchandise. Assuming that the purchase was originally bought on credit for $400 with a cost to Dogs R US of $100, demonstrate required journal entry of Dogs R US to record the return by selecting all of the correct actions below. (Check all that apply.) Multiple select question. Debit Merchandise Inventory $100. Credit Accounts Receivable $400. Credit Cost of Goods Sold $100. Debit Cost of Goods Sold $100. Credit Sales Returns and Allowances $400. Credit Cash $400. Debit Accounts Payable $400. Credit Merchandise Inventory $100. Debit Sales Returns and Allowances $400.

Correct Answer Debit Merchandise Inventory $100. Credit Accounts Receivable $400. Credit Cost of Goods Sold $100. Debit Sales Returns and Allowances $400.

ABC Mart received a $20 freight bill for merchandise it purchased with freight terms of FOB shipping point. ABC Mart uses a perpetual inventory system. Assuming it paid the bill immediately, demonstrate the journal entry required to record the freight charges. Multiple choice question. Debit Freight In $20; credit Cash $20. Debit Freight In $20; credit Merchandise Inventory $20 Debit Merchandise Inventory $20; credit Cash $20. Debit Transportation In $20; credit Cash $20.

Correct Answer Debit Merchandise Inventory $20; credit Cash $20.

X-Mart uses the perpetual inventory system to account for its merchandise. A customer who purchased merchandise on account requested an allowance on a merchandise purchase due to its poor quality, but he did not return the goods back to X-Mart. Assuming that X-mart gives an allowance of $50 on the merchandise, demonstrate the required journal entry on X-Mart's books to record the allowance by selecting all of the correct actions below. (Check all that apply.) Multiple select question. Debit Sales Returns and Allowances $50. Debit Merchandise Inventory $50. Credit Cash $50. Credit Cost of Goods Sold $50. Credit Accounts Receivable $50. Debit Cost of Goods Sold $50. Credit Sales Returns and Allowances $50. Credit Merchandise Inventory $50.

Correct Answer Debit Sales Returns and Allowances $50. Credit Accounts Receivable $50.

On Jan 5, a customer returned merchandise that had been purchased earlier on credit. The original sale was for $500, and the cost to the seller was $150. Demonstrate the required journal entry to record the return on the books of the seller, assuming the goods can be sold to another customer. Multiple choice question. Debit Accounts Receivable $500 and credit Cash $500. Debit Sales Returns and Allowances $150; credit Accounts Receivable $150. Debit Sales Returns and Allowances $500; debit Merchandise Inventory $150; credit Accounts Receivable $500; and credit Cost of Goods Sold $150. Debit Accounts Receivable $500; credit Sales Returns and Allowances $500; credit Merchandise inventory $150; and credit Cost of Goods Sold $150.

Correct Answer Debit Sales Returns and Allowances $500; debit Merchandise Inventory $150; credit Accounts Receivable $500; and credit Cost of Goods Sold $150.

Select the statements below that correctly describe the flow of costs in a merchandiser's accounting cycle. (Check all that apply.) Multiple select question. Ending inventory + Cost of goods sold = Total merchandise available for sale. Beginning inventory + net purchases = Merchandise available for sale. Merchandise purchased is an expense and is reported on the income statement. Merchandise that is sold becomes an expense reported on the income statement. Merchandise that is purchased becomes an asset reported on the balance sheet. Merchandise that is sold becomes an asset reported on the balance sheet.

Correct Answer Ending inventory + Cost of goods sold = Total merchandise available for sale. Beginning inventory + net purchases = Merchandise available for sale. Merchandise that is sold becomes an expense reported on the income statement. Merchandise that is purchased becomes an asset reported on the balance sheet.

If the seller is responsible for the shipping costs of merchandise sold, the shipping terms will be specified as: Multiple choice question. FOB start FOB destination FOB shipping point FOB factory

Correct Answer FOB destination

Identify the items or sub-headings that would appear on a multiple-step income statement. (Check all that apply.) Multiple select question. Gross profit Selling expenses Income from operations General and administrative expenses Cost of goods sold Net sales Total assets

Correct Answer Gross profit Selling expenses Income from operations General and administrative expenses Cost of goods sold Net sales

Describe good cash management practices involving inventory purchases. (Check all that apply.) Multiple select question. Inventory should be purchased with cash whenever possible. Invoices should be paid on the last day of the discount period. Invoices should be paid on the first day of the discount period. Buyers should take advantage of early payment discounts.

Correct Answer Invoices should be paid on the last day of the discount period. Buyers should take advantage of early payment discounts.

Review the statements below and select the one that accurately describes a perpetual inventory system. It is an inventory system that automatically orders inventory from suppliers when it reaches a certain level. It is an inventory system that maintains a continuous level of inventory on the shelves of a merchandiser. It is an inventory system that updates the accounting records for merchandise transactions only at the end of a period. It is an inventory system that continually updates accounting records for merchandise transactions.

Correct Answer It is an inventory system that continually updates accounting records for merchandise transactions.

Question Mode Multiple Choice Question A single-step income statement can be identified by which of the following formats? Multiple choice question. It shows cost of goods sold as a subtraction from net sales to determine the subtotal cost of goods sold. It shows only one total for all expenses. It shows subheadings for operating and non-operating items. It lists a figure for gross profit.

Correct Answer It shows only one total for all expenses.

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

Correct Answer Merchandise inventory is an asset reported on the balance sheet and represents the cost of products purchased for sale.

Multiple Choice Question Which of the following equations correctly identify the cost flow of a merchandising company? Multiple choice question. Net purchases plus beginning inventory equals merchandise available for sale Beginning inventory plus cost of goods sold equals merchandise available for sale Net purchases minus beginning inventory equals merchandise available for sale Net purchases plus cost of goods sold equals merchandise available for sale

Correct Answer Net purchases plus beginning inventory equals merchandise available for sale

Determine which of the definitions below describes gross profit. Net sales minus cost of the goods sold The total money paid by the merchandiser to its supplier including freight costs The original cost of the merchandise when purchased from the supplier The amount of money received on the sale of goods

Correct Answer Net sales minus cost of the goods sold

Identify the two types of inventory systems from the choices below. Tracking inventory system and tagged inventory system Cost inventory system and profit inventory system Perpetual inventory system and periodic inventory system

Correct Answer Perpetual inventory system and periodic inventory system

Determine which of the definitions on the right go with the entity on the left. Instructions Retailer Wholesaler Merchandiser

Correct Answer Retailer>>>>>Buys products from manufacturers or wholesalers and sells them to consumers Wholesaler>>>>>Buys products from manufacturers and sells them to retailers Merchandiser>>>>>Earns net income by buying and selling merchandise

Identify the statements below that are correct regarding the closing entries for a merchandiser using the perpetual inventory system. (Check all that apply.) Multiple select question. Sales Discounts is closed with the expense accounts. Cost of goods sold is closed with the expense accounts. Merchandise Inventory is closed with the expense accounts. Sales Discounts is closed with the revenue accounts. Sales Returns and Allowances is closed with the expense accounts. The Withdrawals account is closed to Owner, Capital. Sales is closed as a revenue account. Cost of goods sold is closed with the revenue accounts. The Withdrawals account is closed to Income Summary.

Correct Answer Sales Discounts is closed with the expense accounts. Cost of goods sold is closed with the expense accounts. Sales Returns and Allowances is closed with the expense accounts. The Withdrawals account is closed to Owner, Capital. Sales is closed as a revenue account.

Which of the following costs are included in merchandise inventory? (Check all that apply.) Advertising costs Shipping fees charged by the vendor Trade discounts given to customers Purchase costs Taxes assessed on the merchandise Costs necessary to ready the merchandise for sale

Correct Answer Shipping fees charged by the vendor Purchase costs Taxes assessed on the merchandise Costs necessary to ready the merchandise for sale

Identify the statement below that is the correct definition of "shrinkage". Multiple choice question. Shrinkage is the term used to refer to the loss of inventory due to theft or deterioration. Shrinkage is the term used to describe the diminished floor space that an inventory item has in a store. Shrinkage is the discount received against the purchase price of merchandise.

Correct Answer Shrinkage is the term used to refer to the loss of inventory due to theft or deterioration.

Which of the statements below summarize why a seller would give a sales allowance? (Check all that apply.) The buyer purchased a large amount of merchandise and was eligible for a reduced purchase price. Sold merchandise was defective or unacceptable. The seller wants to keep a customer happy. In order to entice a customer to keep damaged or defective merchandise, the seller is willing to decrease the selling price. The buyer could not pay within the discount period.

Correct Answer Sold merchandise was defective or unacceptable. The seller wants to keep a customer happy. In order to entice a customer to keep damaged or defective merchandise, the seller is willing to decrease the selling price.

The buyer and seller of merchandise must agree on who is responsible for paying freight terms. Show your understanding of freight terms by selecting all of the correct statements below. (Check all that apply.) Multiple select question. Terms FOB shipping point means the buyer accepts ownership when the goods depart the seller's place of business. Terms FOB shipping point means the seller of the goods is responsible for freight charges. When the shipping costs are the responsibility of the buyer, then the Merchandise Inventory account is debited for the freight charges. Terms FOB destination means that the seller is responsible for shipping costs. Revenue for the sale will be recorded after the goods reach their destination, if the goods are shipped FOB destination. When the shipping costs are the responsibility of the seller, then the Merchandise Inventory account is debited.

Correct Answer Terms FOB shipping point means the buyer accepts ownership when the goods depart the seller's place of business. When the shipping costs are the responsibility of the buyer, then the Merchandise Inventory account is debited for the freight charges. Terms FOB destination means that the seller is responsible for shipping costs. Revenue for the sale will be recorded after the goods reach their destination, if the goods are shipped FOB destination.

Review the following statements and select the one that best describes a discount period. The discount period is the time between a sale and when payment is due from the buyer. The discount period is the time period in which a discount may be taken by the buyer. The discount period is another name for the credit terms of a sale.

Correct Answer The discount period is the time period in which a discount may be taken by the buyer.

Explain what the credit terms of 2/10, n/30 mean. (Check all that apply.) Multiple select question. The full payment is due within a 30-day credit period. The buyer can deduct 2% of the invoice amount if payment is made within 10 days of the invoice date. The full payment is due within 10 days. The buyer can take a discount of 10% if the invoice is paid with 30 days of the invoice date.

Correct Answer The full payment is due within a 30-day credit period. The buyer can deduct 2% of the invoice amount if payment is made within 10 days of the invoice date.

Question Mode Multiple Choice Question Review the statements below and select the one that explains the purpose of a sales discount. Multiple choice question. They increase the amount of money collected by the seller. They increase the time that the customer has to make payment. They decrease the time that the seller has to wait for payment. They increase the credit period allowed to customers.

Correct Answer They decrease the time that the seller has to wait for payment.

A purchase allowance can be described as: Multiple choice question. the implied interest paid when not taking advantage of a purchase discount a reduction in the cost of defective or unacceptable merchandise that a buyer acquires a discount given by the seller of merchandise for early payment the reduction in the sales price of an item because of the quantity purchased

Correct Answer a reduction in the cost of defective or unacceptable merchandise that a buyer acquires

A sales allowance can be described as: the implied interest paid when not taking advantage of a sales discount a reduction in the selling price of defective or unacceptable merchandise sold to customers a discount given by the seller of merchandise for early payment the reduction in the sales price of an item because of the quantity purchased

Correct Answer a reduction in the selling price of defective or unacceptable merchandise sold to customers

Question Mode Multiple Choice Question Given the partial list of accounts below, the entry to close the temporary credit balance accounts would include a: Account Debit Credit Sales $20,000 Sales Discounts $ 500 Cost of Goods Sold $1,900 Merchandise Inventory $5,000 Accounts Payable $ 500 Owner, Capital $10,000 Multiple choice question. credit to Income Summary, $19,500. credit to Income Summary, $30,500. credit to Income Summary, $30,000. credit to Income Summary, $20,000.

Correct Answer credit to Income Summary, $20,000.

Jo's Market makes a credit sale for $1,000 with terms of 2/10,n/30. The cost of the merchandise is $400. The required journal entry to record the sale and cost of the sale is:

Correct Answer debit Accounts Receivable $1,000; credit Sales $1,000; debit Cost of Goods Sold $400; and credit Merchandise Inventory $400

Jan's Jams makes a credit sale for $300 with terms of 2/10,n/30. The cost of the merchandise is $200. The required journal entry to record the sale and the cost of the sale is: Multiple choice question. debit Accounts Receivable $200; credit Sales $200; debit Cost of Goods Sold $300; and credit Merchandise Inventory $300 debit Accounts Receivable $300; credit Sales $300; debit Cost of Goods Sold $200; and credit Merchandise Inventory $200 debit Sales $300 and credit Cost of Goods Sold $300 debit Accounts Payable $300; and credit Sales $300

Correct Answer debit Accounts Receivable $300; credit Sales $300; debit Cost of Goods Sold $200; and credit Merchandise Inventory $200

On June 5, Jo's Market sold $1,000 of goods on credit with terms of 2/10, n/30. The required journal entry to record Jo's Market customer's payment on July 6 would be: debit Cash $1,000; credit Accounts Receivable $1,000 debit Accounts Receivable $1,000; credit Sales Discounts $20; and credit Cash $980 debit Accounts Receivable $1,000; credit Cash $1,000 debit Cash $980; debit Sales Discounts $20; and credit Accounts Receivable $1,000

Correct Answer debit Cash $1,000; credit Accounts Receivable $1,000

On June 5, Jo's Market sold $1,000 of goods on credit with terms of 2/10, n/30. The required journal entry to record Jo's Market customer's payment on July 6 would be: Multiple choice question. debit Cash $980; debit Sales Discounts $20; and credit Accounts Receivable $1,000 debit Accounts Receivable $1,000; credit Sales Discounts $20; and credit Cash $980 debit Cash $1,000; credit Accounts Receivable $1,000 debit Accounts Receivable $1,000; credit Cash $1,000

Correct Answer debit Cash $1,000; credit Accounts Receivable $1,000

Given the partial list of accounts below, the entry to close the temporary debit balance accounts would include a: Account Debit Credit Sales $20,000 Sales Returns and Allowances $1000 Sales Discounts $ 500 Cost of Goods Sold $1,900 Wages Expense $ 300 Merchandise Inventory $5,000 Supplies $ 700 Multiple choice question. debit to Income Summary, $8,700. debit to Income Summary, $9,400. debit to Income Summary, $2,200. debit to Income Summary, $3,700.

Correct Answer debit to Income Summary, $3,700.