Question Details

Business A 654 CHAPTER 5 PART 2

TRUE-FALSE STATEMENTS
	1.	Retailers and wholesalers are both considered merchandisers.


	2.	The steps in the accounting cycle are different for a merchandising company than for a service company.


	3.	Sales minus operating expenses equals gross profit.


	4.	Under a perpetual inventory system, the cost of goods sold is determined each time a sale occurs.


	5.	A periodic inventory system requires a detailed inventory record of inventory items.


	6.	Freight terms of FOB Destination means that the seller pays the freight costs.


	7.	Freight costs incurred by the seller on outgoing merchandise are an operating expense to the seller.


	8.	Sales revenues are earned during the period cash is collected from the buyer.


	9.	The Sales Returns and Allowances account and the Sales Discount account are both classified as expense accounts.


	10.	The revenue recognition principle applies to merchandisers by recognizing sales revenues when the performance obligation is satisfied.


	11.	Sales Returns and Allowances and Sales Discounts are both designed to encourage customers to pay their accounts promptly.


	12.	To grant a customer a sales return, the seller credits Sales Returns and Allowances.


	13.	A company's unadjusted balance in Inventory will usually not agree with the actual amount of inventory on hand at year-end.


  14.	For a merchandising company, all accounts that affect the determination of income are closed to the Income Summary account.


	15.	A merchandising company has different types of adjusting entries than a service company.


	16.	Nonoperating activities exclude revenues and expenses that result from secondary or auxiliary operations.


	17.	Operating expenses are different for merchandising and service enterprises.


	18.	Net sales appears on both the multiple-step and single-step forms of an income statement.


	19.	A multiple-step income statement provides users with more information about a company- income performance.

	20.	The multiple-step form of income statement is easier to read than the single-step form.