Question 1

A company has net sales of $612,850 and cost of goods sold of $441,252.The company's gross profit percentage is:

Accepted Answer

A)  72%.
B)  3.57%.
C)  0.389%.
D)  28%.E) All of the above
F) None of the above

Question 2

BetterBuy sells $50,000 of TVs to a customer.The terms include a 2% discount if paid in 7 days and a 1% discount if paid in 8-14 days.BetterBuy receives the money in 12 days.How would the transaction be recorded by BetterBuy?

Accepted Answer

A)  Debit Inventory for $500 and credit Accounts Payable for $500.
B)  Debit Cash for $49,500,credit Accounts receivable for $50,000,and debit sales discounts for $500.
C)  Debit Accounts receivable for $50,000,credit Cash for $49,500,and credit sales discounts for $500.
D)  Debit Accounts Payable for $500 and credit Inventory for $500.
E)  The discount would be $500 (.01*50,000) .The customer would pay $49,500 in cash.The discount is debited to Sales Discount and Account Receivable is credited for $50,000 (the original amount of the sale) .F) C) and E)
G) C) and D)

Question 3

Your company purchases $50,000 of inventory from a wholesaler that allows you 45 days to pay.In addition,the wholesaler offers a 3% discount if payment is made within 12 days.These payment terms would be expressed as:

Accepted Answer

A)  .03/12,n/45.
B)  n/45,3/12.
C)  n/45,.03/12.
D)  3/12,n/45.E) A) and B)
F) A) and C)

Question 4

When goods are sold to a customer with credit terms of 2/15,n/30,the customer will:

Accepted Answer

A)  receive a 15% discount if they pay within 2 days.
B)  receive a 2% discount if they pay 15% of the amount due within 30 days.
C)  receive a 15% discount if they pay within 30 days.
D)  receive a 2% discount if they pay within 15 days.E) A) and B)
F) A) and C)

Question 5

A store holding a "25% off" sale will probably hope that the lower gross profit percentage will be offset by higher sales.
BT: Comprehension

Accepted Answer

A) True 
 B)False

Question 6

Internal controls are concerned with:

Accepted Answer

A)  only manual systems of accounting.
B)  the extent of government regulations.
C)  protecting against theft of assets and enhancing the reliability of accounting information.
D)  preparing income tax returns.E) B) and C)
F) A) and B)

Question 7

A company buys footwear and clothing from manufacturers,which it resells to discount stores in a large urban area.This company is an example of a:

Accepted Answer

A)  wholesale merchandising company.
B)  service company.
C)  retail merchandising company.
D)  secondary service company.E) B) and C)
F) None of the above

Question 8

BC Company has a gross profit percentage of 61% while AB Company has a gross profit percentage of 37%.Which of the following is true?

Accepted Answer

A)  BC Company will report a higher net income than AB Company.
B)  AB Company must have a greater sales volume than BC Company.
C)  BC Company must be more efficient at controlling selling,general,and administrative expenses than AB Company.
D)  None of the above.E) A) and C)
F) A) and B)

Question 9

If a company achieves a small increase in its gross profit percentage from one year to the next,the company:

Accepted Answer

A)  will always have a higher net income.
B)  must be obtaining products at a lower cost per unit.
C)  must have increased its sales revenue.
D)  none of the above.E) All of the above
F) B) and C)

Question 10

The receipt of cash is one of the operating activities of:

Accepted Answer

A)  companies that sell goods but not companies that sell services.
B)  companies that sell to consumers but not companies that sell to other companies.
C)  merchandising,manufacturing,and service companies.
D)  companies that sell goods they bought from others but not companies that make the goods they sell.E) A) and D)
F) None of the above

Question 11

At the beginning of the quarter Purrfect Pets has $30,000 in inventory.During the quarter the company purchases $7,900 of new inventory,has purchase returns of $700,and purchase discounts of $200.At the end of the quarter the balance in the Inventory account is $26,500.What is the cost of goods sold?

Accepted Answer

A)  $10,500.
B)  $11,400.
C)  $3,500.
D)  $11,900.E) None of the above
F) B) and C)

Question 12

On October 31,2007,your company's records say that the company has $16,451.03 in its chequing account.A review of the bank statement shows you have three outstanding cheques total-ling $5,643.01,and the bank has paid you interest of $12.19 and charged you $9.00 in fees.The bank statement dated October 31,2007 would report a balance of:

Accepted Answer

A)  $22,090.85.
B)  $10,811.21.
C)  $22,097.23.
D)  $16,454.22E) A) and B)
F) A) and D)

Question 13

Recording sales returns and allowances in a separate account is an important internal control that allows management to evaluate the volume of returns and allowances as a potential indicator of the quality of their products.
BT: Comprehension

Accepted Answer

A) True 
 B)False

Question 14

Companies using a perpetual inventory system:

Accepted Answer

A)  never physically count their inventory.
B)  must physically count their inventory at least once a week.
C)  still need to count the physical inventory occasionally.
D)  always know the actual amount in inventory from their accounting records.E) B) and C)
F) A) and D)

Question 15

Which of the following bank reconciliation items would not result in an adjusting journal entry in the company's books?

Accepted Answer

A)  Service charge.
B)  Outstanding cheques.
C)  A customer's cheque returned NSF.
D)  Interest earned on deposits.E) All of the above
F) A) and B)

Question 16

The gross profit percentage is computed by dividing operating income by net sales.
BT: Knowledge

Accepted Answer

A) True 
 B)False

Question 17

Transportation costs associated with acquiring inventory should be included in the inventory account if a perpetual inventory system is used.
BT: Knowledge

Accepted Answer

A) True 
 B)False

Question 18

A company must solely be a service company,a merchandising company,or a manufacturer.
BT: Knowledge

Accepted Answer

A) True 
 B)False

Question 19

Gross margin is net sales minus cost of goods sold.
BT: Knowledge

Accepted Answer

A) True 
 B)False

Question 20

Which of the following items on a bank reconciliation would require an adjusting journal entry on the company's books?

Accepted Answer

A)  An error by the bank.
B)  Outstanding cheques.
C)  A bank service charge.
D)  A deposit in transit.E) A) and D)
F) A) and C)

Exam 6: Merchandising Operations and the Multistep Income Statement

Gross margin is net sales minus cost of goods sold. BT: Knowledge

Correct Answer
verified

The receipt of cash is one of the operating activities of:

Correct Answer
verified

A company must solely be a service company,a merchandising company,or a manufacturer. BT: Knowledge

Correct Answer
verified

A company buys footwear and clothing from manufacturers,which it resells to discount stores in a large urban area.This company is an example of a:

Correct Answer
verified

Companies using a perpetual inventory system:

Correct Answer
verified

Correct Answer
verified

When goods are sold to a customer with credit terms of 2/15,n/30,the customer will:

Correct Answer
verified

Recording sales returns and allowances in a separate account is an important internal control that allows management to evaluate the volume of returns and allowances as a potential indicator of the quality of their products. BT: Comprehension

Correct Answer
verified

Correct Answer
verified

Which of the following bank reconciliation items would not result in an adjusting journal entry in the company's books?

Correct Answer
verified

A store holding a "25% off" sale will probably hope that the lower gross profit percentage will be offset by higher sales. BT: Comprehension

Correct Answer
verified

A company has net sales of $612,850 and cost of goods sold of $441,252.The company's gross profit percentage is:

Correct Answer
verified

Transportation costs associated with acquiring inventory should be included in the inventory account if a perpetual inventory system is used. BT: Knowledge

Correct Answer
verified

The gross profit percentage is computed by dividing operating income by net sales. BT: Knowledge

Correct Answer
verified

BC Company has a gross profit percentage of 61% while AB Company has a gross profit percentage of 37%.Which of the following is true?

Correct Answer
verified

BetterBuy sells $50,000 of TVs to a customer.The terms include a 2% discount if paid in 7 days and a 1% discount if paid in 8-14 days.BetterBuy receives the money in 12 days.How would the transaction be recorded by BetterBuy?

Correct Answer
verified

If a company achieves a small increase in its gross profit percentage from one year to the next,the company:

Correct Answer
verified

Your company purchases $50,000 of inventory from a wholesaler that allows you 45 days to pay.In addition,the wholesaler offers a 3% discount if payment is made within 12 days.These payment terms would be expressed as:

Correct Answer
verified

Internal controls are concerned with:

Correct Answer
verified

Which of the following items on a bank reconciliation would require an adjusting journal entry on the company's books?

Correct Answer
verified

Exam 6: Merchandising Operations and the Multistep Income Statement

Gross margin is net sales minus cost of goods sold. BT: Knowledge

Correct AnswerverifiedShow Answer

The receipt of cash is one of the operating activities of:

Correct AnswerverifiedShow Answer

A company must solely be a service company,a merchandising company,or a manufacturer. BT: Knowledge

Correct AnswerverifiedShow Answer

A company buys footwear and clothing from manufacturers,which it resells to discount stores in a large urban area.This company is an example of a:

Correct AnswerverifiedShow Answer

Companies using a perpetual inventory system:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When goods are sold to a customer with credit terms of 2/15,n/30,the customer will:

Correct AnswerverifiedShow Answer

Recording sales returns and allowances in a separate account is an important internal control that allows management to evaluate the volume of returns and allowances as a potential indicator of the quality of their products. BT: Comprehension

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following bank reconciliation items would not result in an adjusting journal entry in the company's books?

Correct AnswerverifiedShow Answer

A store holding a "25% off" sale will probably hope that the lower gross profit percentage will be offset by higher sales. BT: Comprehension

Correct AnswerverifiedShow Answer

A company has net sales of $612,850 and cost of goods sold of $441,252.The company's gross profit percentage is:

Correct AnswerverifiedShow Answer

Transportation costs associated with acquiring inventory should be included in the inventory account if a perpetual inventory system is used. BT: Knowledge

Correct AnswerverifiedShow Answer

The gross profit percentage is computed by dividing operating income by net sales. BT: Knowledge

Correct AnswerverifiedShow Answer

BC Company has a gross profit percentage of 61% while AB Company has a gross profit percentage of 37%.Which of the following is true?

Correct AnswerverifiedShow Answer

BetterBuy sells $50,000 of TVs to a customer.The terms include a 2% discount if paid in 7 days and a 1% discount if paid in 8-14 days.BetterBuy receives the money in 12 days.How would the transaction be recorded by BetterBuy?

Correct AnswerverifiedShow Answer

If a company achieves a small increase in its gross profit percentage from one year to the next,the company:

Correct AnswerverifiedShow Answer

Your company purchases $50,000 of inventory from a wholesaler that allows you 45 days to pay.In addition,the wholesaler offers a 3% discount if payment is made within 12 days.These payment terms would be expressed as:

Correct AnswerverifiedShow Answer

Internal controls are concerned with:

Correct AnswerverifiedShow Answer

Which of the following items on a bank reconciliation would require an adjusting journal entry on the company's books?

Correct AnswerverifiedShow Answer

Correct Answer
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