ch 5

1.

1 point

An advantage of the single-step income statement over the multiple-step form is

its comprehensiveness.

its simplicity.

the amount of information it provides.

its use in computing ratios.

2.

1 point

Which of the following is classified in an income statement as a nonoperating activity?

Advertising expense

Interest expense

Freight-out

Cost of goods sold

3.

1 point

The entry to record the return of goods from a customer would include a

credit to Sales Returns and Allowances.

debit to Sales Returns and Allowances.

debit to Sales Revenue.

credit to Sales Revenue.

4.

1 point

Which of the following is classified in an income statement as a nonoperating activity?

Paying for a purchase of inventory

Receiving an allowance for merchandise damaged in shipment

Returning merchandise

Receiving dividend revenue from an investment

5.

1 point

Which of the following statements about a periodic inventory system is true?

The increased use of computerized systems has increased the use of the periodic system.

Companies continuously maintain detailed records of the cost of each inventory purchase and sale.

Companies determine cost of goods sold only at the end of the accounting period.

The periodic system provides better control over inventories than a perpetual system.

6.

1 point

Which of the following items does not result in an entry to the Inventory account under a perpetual system?

A purchase of merchandise

A return of Inventory to the supplier

Payment of freight costs for goods shipped to a customer

Payment of freight costs for goods received from a supplier

7.

1 point

Under what system is cost of goods sold determined at the end of an accounting period?

Double entry inventory system

Periodic inventory system

Perpetual inventory system

Single entry inventory system

8.

1 point

Which one of the following will result in gross profit?

Operating expenses less cost of goods sold

Operating expenses less net income

Sales revenue less cost of goods sold

Sales revenue less operating expenses

9.

1 point

Which of the following is not considered in computing net cost of purchases?

Freight paid on purchased goods

Freight paid on goods shipped to customers

Purchases returns and allowances

Purchases

10.

1 point

Sales Returns and Allowances is a contra-revenue account.

True

False

11.

1 point

The entry to record a sale of $2100 with terms of 2/12, n/30 will include a

debit to Sales Discounts for $42.

Purchacredit to Sales Revenue for $2100. credit to Sales Revenue for $2100.

debit to Sales Revenue for $2058.

credit to Accounts Receivable for $2100.

12.

1 point

Gross profit is the difference between net sales and cost of goods sold.

True

False

13.

1 point

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

each time a sale occurs.

on a daily basis.

on an annual basis.

on a monthly basis.

14.

1 point

Jax Company uses a perpetual inventory system and on November 30 purchased merchandise for which it must pay the shipping charges. Which of the following is one part of the required journal entry when Jax pays the shipping charges of $200?

A debit to Inventory for $200

A debit to Cash for $200

A debit to Delivery Expense for $200

A debit to Freight-out for $200

15.

1 point

What is an advantage of using the multiple-step income statement?

Net income will be higher than net income computed using the single-step income statement.

Gross profit is not a separate item.

It highlights the components of net income.

It is easier to prepare than the single-step income statement.

16.

1 point

Which inventory system will likely be used by a company with merchandise that has a high unit value?

Single entry inventory system

Double entry inventory system

Perpetual inventory system

Periodic inventory system

17.

1 point

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

the Purchases account.

the Inventory account.

the Supplies account.

the Cost of Goods Sold account.

18.

1 point

The operating cycle of a merchandising company is ordinarily ___________________ that of a service firm.

the same as

has fewer steps than

shorter than

longer than

19.

1 point

Which of the following accounts is classified as a contra revenue account?

Sales Returns and Allowances

Purchase Discounts

Sales Revenue

Cost of Goods Sold

20.

1 point

Gross profit does not appear

on a multiple-step income statement.

to be relevant in analyzing the operation of a merchandising company.

on either a multiple-step or single-step income statement.

on a single-step income statement.

21.

1 point

Which of the following items does not result in an adjustment in the merchandise inventory account under a perpetual system?

A return of merchandise inventory to the supplier

Payment of freight costs for goods shipped to a customer

Payment of freight costs for goods received from a supplier

A purchase of merchandise

22.

1 point

Which of the following would appear on both a single-step and a multiple-step income statement?

Gross profit

Income from operations

Cost of goods sold

Other expenses and losses

23.

1 point

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

contra asset.

discount.

return

24.

1 point

A decline in a company’s gross profit could be caused by all of the following except

selling products with a lower markup.

increasing competition resulting in a lower selling price.

paying lower prices to its suppliers.

clearance of discontinued inventory.

25.

1 point

When credit terms of 1/15, n/60 are offered, how long is the discount period?

1 day

45 days

60 days

15 days

26.

1 point

Which of the following is a merchandiser that sells directly to consumers?

customer

wholesaler

service enterprise

Retailer

27.

1 point

Discount term of 2/10, n/30 mean that a 10% cash discount is available if payment is made within 30 days.

True

False

28.

1 point

Net income will result if gross profit exceeds

cost of goods sold.

purchases.

operating expenses.

cost of goods sold plus operating expenses.

29.

1 point

The primary difference between a periodic and perpetual inventory system is that a periodic system

provides better control over inventories.

keeps a record showing the inventory on hand at all time.

on an anndetermines the inventory on hand only at the end of the accounting period. determines the inventory on hand only at the end of the accounting period.

records the cost of the sale on the date the sale is made.

30.

1 point

Which of these accounts normally have a debit balance?

Sales Discounts only

Sales Returns and Allowances only

Both Sales Discounts and Sales Returns and Allowances

Neither Sales Discount nor Sales Returns and Allowances

31.

1 point

Which of the following statements is correct?

A perpetual inventory system computes cost of goods sold only at the end of the accounting period.

A perpetual inventory system provides better control over inventories than does a periodic inventory system.

A periodic inventory system provides better control over inventories than does a perpetual inventory system.

A periodic inventory system computes cost of goods sold each time a sale occurs.