Question Details

Business A 654 CHAPTER 5 PART 7

CHAPTER 5 ACCOUNTING FOR MERCHANDISING OPERATIONS

101.	Carter Company sells merchandise on account for $4,000 to Hannah Company with credit terms of 2/10, n/30. Hannah Company returns $600 of merchandise that was damaged, along with a check to settle the account within the discount period. What entry does Carter Company make upon receipt of the check?
a.	Cash		3,400
		Accounts Receivable			3,400
b.	Cash		3,332
	Sales Returns and Allowances		668
		Accounts Receivable			4,000
c. 	Cash		3,332
	Sales Returns and Allowances		600
	Sales Discounts		68
		Accounts Receivable			4,000
d.	Cash		3,920
	Sales Discounts		80
		Sales Returns and Allowances			600
		Accounts Receivable			3,400


	102.	Which of the following would not be classified as a contra account?
a.	Sales Revenue
b.	Sales Returns and Allowances
c.	Accumulated Depreciation
d.	Sales Discounts


	103.	Which of the following accounts has a normal credit balance?
a.	Sales Returns and Allowances
b.	Sales Discounts
c.	Sales Revenue
d.	Selling Expense


	104.	With respect to the income statement,
a.	contra-revenue accounts do not appear on the income statement.
b.	sales discounts increase the amount of sales.
c.	contra-revenue accounts increase the amount of operating expenses.
d.	sales discounts are included in the calculation of gross profit.


	105.	When a seller grants credit for returned goods, the account that is credited is
a.	Sales Revenue.
b.	Sales Returns and Allowances.
c.	Inventory.
d.	Accounts Receivable.


	106.	The respective normal account balances of Sales Revenue, Sales Returns and Allowances, and Sales Discounts are
a.	credit, credit, credit.
b.	debit, credit, debit.
c.	credit, debit, debit.
d.	credit, debit, credit.


107.	All of the following are contra revenue accounts except
a.	sales revenue.
b.	sales allowances.
c.	sales discounts.
d.	sales returns.


	108.	A merchandising company using a perpetual system will make
a.	the same number of adjusting entries as a service company does.
b.	one more adjusting entry than a service company does.
c.	one less adjusting entry than a service company does.
d.	different types of adjusting entries compared to a service company.


	109.	In preparing closing entries for a merchandising company, the Income Summary account will be credited for the balance of
a.	sales revenue.
b.	inventory.
c.	sales discounts.
d.	freight-out.


	110.	A merchandising company using a perpetual system may record an adjusting entry by
a.	debiting Income Summary.
b.	crediting Income Summary.
c.	debiting Cost of Goods Sold.
d.	debiting Sales Revenue.


	111.	The operating cycle of a merchandiser is
a.	always one year in length.
b.	generally longer than it is for a service company.
c.	about the same as for a service company.
d.	generally shorter than it is for a service company.


	112.	When the physical count of Rosanna Company inventory had a cost of $4,350 at year end and the unadjusted balance in Inventory was $4,500, Rosanna will have to make the following entry:
a.	Cost of Goods Sold		150
		Inventory			150
b.	Inventory		150
		Cost of Goods Sold			150
c.	Income Summary		150
		Inventory			150
d.	Cost of Goods Sold		4,500
		Inventory			4,500


	113.	Arquette Company's financial information is presented below.
	Sales Revenue	$     ????	Cost of Goods Sold	540,000
	Sales Returns and Allowances	40,000	Gross Profit	????
	Net Sales	900,000
The missing amounts above are:
    Sales Revenue    	Gross Profit
a.	$940,000	$360,000
b.	$860,000	$360,000
c.	$940,000	$420,000
d.	$860,000	$420,000


114.	The sales revenue section of an income statement for a retailer would not include
a.	Sales discounts.
b.	Sales revenue.
c.	Net sales.
d.	Cost of goods sold.


	115.	The operating expense section of an income statement for a wholesaler would not include
a.	freight-out.
b.	utilities expense.
c.	cost of goods sold.
d.	insurance expense.


	116.	Income from operations will always result if
a.	the cost of goods sold exceeds operating expenses.
b.	revenues exceed cost of goods sold.
c.	revenues exceed operating expenses.
d.	gross profit exceeds operating expenses.


117.	Indicate which one of the following would appear on the income statement of both a merchandising company and a service company.
a.	Gross profit
b.	Operating expenses
c.	Sales revenues
d.	Cost of goods sold



	118.	Conrad Company reported the following balances at June 30, 2014:
Sales Revenue	$16,200
Sales Returns and Allowances	600
Sales Discounts	300
Cost of Goods Sold	7,500
Net sales for the month is
a.	$7,800
b.	$15,300.
c.	$15,600.
d.	$16,200.

119.	Income from operations appears on
a.	both a multiple-step and a single-step income statement.
b.	neither a multiple-step nor a single-step income statement.
c.	a single-step income statement.
d.	a multiple-step income statement.


120.	Gross profit does not appear
a.	on a multiple-step income statement.
b.	on a single-step income statement.
c.	to be relevant in analyzing the operation of a merchandiser.
d.	on the income statement if the periodic inventory system is used because it cannot be calculated.