Question 1

During its first month of operations,Purrfect Pets purchased 6,000 bags of dog food at a cost of $5 a bag and sold all 6,000 bags of dog food on account with payment terms of 3/10,n/30 for $10 each.A total of 2,600 of these bags were sold to customers who paid within the discount period;the other customers paid after the discount period had ended.Sales allowances totaling $200 were granted to customers whose dogs did not like the dog food.
Required:
a.Calculate the gross profit for the month.
b.Calculate the gross profit percentage for the month.

Accepted Answer

a.
Sales revenue = 6,000 bags × $10 per ...

Question 2

Which of the following statements regarding gross profit percentage is not correct?

Accepted Answer

A)  It is possible for a company to increase both its gross profit percentage and net income without increasing the dollar amount of sales.
B)  A decreasing gross profit percentage means that the company is selling products for a greater markup over its cost.
C)  The gross profit percentage measures the percentage of profit earned on each dollar of sales.
D)  Gross profit percentages vary across industries.E) All of the above
F) B) and D)

Question 3

A company using a perpetual inventory system made the following entry: Debit Accounts Payable for $3,000,credit Inventory for $60,and credit Cash for $2,940.What does this entry reflect?

Accepted Answer

A)  A purchase of inventory at a discount.
B)  A return of inventory for credit.
C)  A sale of inventory on account.
D)  A payment within the discount period for inventory previously purchased on credit.E) B) and D)
F) A) and C)

Question 4

When a customer returns for credit a defective product it had purchased,the seller would record the transaction by:

Accepted Answer

A)  debiting Cash.
B)  debiting Sales Revenue.
C)  crediting Sales Revenue.
D)  debiting Cost of Goods Sold.E) None of the above
F) A) and B)

Question 5

Sales Revenue reports the:

Accepted Answer

A)  cost of merchandise available to sell.
B)  cost of merchandise purchased.
C)  cost times the quantity of goods sold.
D)  selling price times the quantity of goods sold.E) C) and D)
F) None of the above

Question 6

Which of the following is the most common wording for a measure of the company's income from regular operating activities,before considering the effects of interest,income taxes,and any nonrecurring items?

Accepted Answer

A)  Income from operations
B)  Income from core operations
C)  Income from peripheral operations
D)  Income before interest,taxes,and nonrecurring itemsE) A) and C)
F) A) and D)

Question 7

Which of the following statements about gross profit percentages is correct?

Accepted Answer

A)  Because gross profit percentages are so consistent from period to period,they are not very useful for analyzing one company over time.
B)  Because gross profit percentages are so variable across industries,they are most useful in comparing companies from different industries.
C)  Because gross profit percentages are so variable across industries,they are more useful in analyzing one company over time.
D)  Because gross profit percentages are so consistent across industries,they are most useful in comparing companies from different industries.E) None of the above
F) B) and C)

Question 8

Alvarado Company began the current month with inventory costing $18,000,then purchased inventory at a cost of $63,000.The perpetual inventory system indicates that inventory costing $54,000 was sold during the month for $72,000.If an inventory count shows that inventory costing $26,100 is actually on hand at month-end,what amount of shrinkage occurred during the month?

Accepted Answer

A)  $900
B)  $9,000
C)  $26,091
D)  $27,000E) B) and C)
F) A) and B)

Question 9

Glenrosa Company bought inventory FOB shipping point from Monterosa Company for $8,200 cash,including shipping charges.On December 31,the last day of the accounting year,the goods were on a truck owned by Common Carrier,Inc. ,and not expected to arrive until January 3.Which company should include these goods in its December 31 inventory?

Accepted Answer

A)  Glenrosa should include the $8,200 in its inventory.
B)  Glenrosa owns the inventory,but Common Carrier has possession of it.Each of them should include half of the inventory,$4,100 each.
C)  Common Carrier should include the $8,200 in its inventory,since the inventory is on its truck.
D)  Glenrosa owns the inventory,but Common Carrier has possession of it.Neither of them can include the $8,200 in its December 31 inventory.E) A) and B)
F) A) and C)

Question 10

Which of the following would generally be considered an operating revenue or expense?

Accepted Answer

A)  Income from renting out extra warehouse space
B)  Interest on a note payable
C)  Dividends earned on an investment is another company's stock
D)  DepreciationE) B) and D)
F) B) and C)

Question 11

Match the term to the appropriate definition.There are more definitions than terms.
-FOB Shipping Point

Accepted Answer

A)  The sum of beginning inventory and purchases for the period.
B)  Presents important subtotals,such as gross profit,to help distinguish core operating results from other,less significant items that affect net income.
C)  A term of sale indicating that goods are owned by the seller until they are delivered to the buyer.
D)  Sells goods that have been obtained from a supplier.
E)  Inventory records are updated every time inventory is bought,sold,or returned.F) A sales price reduction given to customers for prompt payment of their account balance.G) Inventory records are updated at the end of the accounting period.To determine how much merchandise has been sold,inventory must be physically counted at the end of the period.H) A term of sale indicating that goods are owned by the buyer the moment they leave the seller's premises.I) Sells services rather than physical goods.J) Assets acquired for resale to customers.K) A) and H)
L) E) and G)

Question 12

Inventory reports the:

Accepted Answer

A)  cost of goods available for sale.
B)  cost of merchandise purchased and sold.
C)  cost of goods that have been delivered to customers.
D)  selling price times the quantity of goods sold.E) A) and B)
F) None of the above

Question 13

Sheridan Co.uses a perpetual inventory system.On May 1,beginning inventory was $350,000.During May,Sheridan purchased $122,500 of inventory and sold $248,500 of inventory.After the store closed on May 31,employees counted the inventory in the store and found that $210,000 of inventory remained unsold.What was Sheridan's inventory shrinkage?

Accepted Answer

A)  $14,000
B)  $224,000
C)  $262,500
D)  $161,000E) C) and D)
F) B) and C)

Question 14

The accounting records of the Meadowbrook Company show the following:   Cost of Goods Sold 140,000 Income Tax 10,000 Interest and Other Expenses 14,000 Sales Discounts 2,000 Sales Revenue 200,000 Selling and Administrative Expense 20,000\begin{array}{lr}	ext { Cost of Goods Sold } & 140,000 \	ext { Income Tax } & 10,000 \	ext { Interest and Other Expenses } & 14,000 \	ext { Sales Discounts } & 2,000 \	ext { Sales Revenue } & 200,000 \	ext { Selling and Administrative Expense } & 20,000\end{array} Cost of Goods Sold  Income Tax  Interest and Other Expenses  Sales Discounts  Sales Revenue  Selling and Administrative Expense ​140,00010,00014,0002,000200,00020,000​  What is the gross profit?

Accepted Answer

A)  $36,000.
B)  $38,000.
C)  $58,000.
D)  $60,000. E) A) and C)
F) C) and D)

Question 15

Match the term to the appropriate definition.There are more definitions than terms.
-Goods Available for Sale

Accepted Answer

A)  A ratio indicating the percentage of profit earned on each dollar of sales,after considering the cost of products sold.
B)  A sales price reduction given to customers for prompt payment of their account balance.
C)  Presents important subtotals,such as gross profit,to help distinguish core operating results from other,less significant items that affect net income.
D)  Expresses the relationship between inventory on hand,purchased,and sold;shown as either BI + P - EI = CGS or BI + P - CGS = EI.
E)  Refunds and price reductions given to customers after goods have been sold and found unsatisfactory.F) A cash discount received for prompt payment of a purchase on account.G) The cost of inventory lost to theft,fraud,and error.H) Net sales minus cost of goods sold.It is a subtotal,not an account.I) A reduction in the cost of inventory purchases associated with unsatisfactory goods.J) The sum of beginning inventory and purchases for the period.K) A) and E)
L) F) and G)

Question 16

Assuming that all else is equal,which of the following companies is most profitable?

Accepted Answer

A)  A company with low gross profit percentage and low sales volume
B)  A company with high gross profit percentage and high sales volume
C)  A company with low gross profit percentage and high cost of goods sold
D)  A company with low sales volume and high cost of goods soldE) B) and C)
F) All of the above

Question 17

Gross profit is a ledger account name included with other income statement accounts.

Accepted Answer

A) True 
 B)False

Question 18

Companies make a month-end adjustment for expected returns by decreasing Sales Revenue and decreasing Cost of Goods Sold.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is an activity in the operations of a manufacturer,but not in the operations of a merchandising or service company?

Accepted Answer

A)  Selling goods to consumers
B)  Receiving cash
C)  Selling goods to other firms
D)  Buying raw materialsE) B) and C)
F) None of the above

Question 20

A series of activities that generates revenues and collects cash from customers is called:

Accepted Answer

A)  the operating cycle.
B)  the financing cycle.
C)  the accounting cycle.
D)  the perpetual cycle.E) None of the above
F) All of the above

Exam 6: Merchandising Operations and the Multistep Income Statement

Which of the following would generally be considered an operating revenue or expense?

Correct Answer
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A company using a perpetual inventory system made the following entry: Debit Accounts Payable for $3,000,credit Inventory for $60,and credit Cash for $2,940.What does this entry reflect?

Correct Answer
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Sales Revenue reports the:

Correct Answer
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Which of the following statements about gross profit percentages is correct?

Correct Answer
verified

Gross profit is a ledger account name included with other income statement accounts.

Correct Answer
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Which of the following is the most common wording for a measure of the company's income from regular operating activities,before considering the effects of interest,income taxes,and any nonrecurring items?

Correct Answer
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Correct Answer
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Which of the following statements regarding gross profit percentage is not correct?

Correct Answer
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Correct Answer
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Match the term to the appropriate definition.There are more definitions than terms. -FOB Shipping Point

Correct Answer
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Assuming that all else is equal,which of the following companies is most profitable?

Correct Answer
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Correct Answer
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Match the term to the appropriate definition.There are more definitions than terms. -Goods Available for Sale

Correct Answer
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When a customer returns for credit a defective product it had purchased,the seller would record the transaction by:

Correct Answer
verified

A series of activities that generates revenues and collects cash from customers is called:

Correct Answer
verified

Which of the following is an activity in the operations of a manufacturer,but not in the operations of a merchandising or service company?

Correct Answer
verified

Inventory reports the:

Correct Answer
verified

Companies make a month-end adjustment for expected returns by decreasing Sales Revenue and decreasing Cost of Goods Sold.

Correct Answer
verified

Correct Answer
verified
a.
Sales revenue = 6,000 bags × $10 per ...
View Answer

Correct Answer
verified

Exam 6: Merchandising Operations and the Multistep Income Statement

Which of the following would generally be considered an operating revenue or expense?

Correct AnswerverifiedShow Answer

A company using a perpetual inventory system made the following entry: Debit Accounts Payable for $3,000,credit Inventory for $60,and credit Cash for $2,940.What does this entry reflect?

Correct AnswerverifiedShow Answer

Sales Revenue reports the:

Correct AnswerverifiedShow Answer

Which of the following statements about gross profit percentages is correct?

Correct AnswerverifiedShow Answer

Gross profit is a ledger account name included with other income statement accounts.

Correct AnswerverifiedShow Answer

Which of the following is the most common wording for a measure of the company's income from regular operating activities,before considering the effects of interest,income taxes,and any nonrecurring items?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following statements regarding gross profit percentage is not correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Match the term to the appropriate definition.There are more definitions than terms. -FOB Shipping Point

Correct AnswerverifiedShow Answer

Assuming that all else is equal,which of the following companies is most profitable?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Match the term to the appropriate definition.There are more definitions than terms. -Goods Available for Sale

Correct AnswerverifiedShow Answer

When a customer returns for credit a defective product it had purchased,the seller would record the transaction by:

Correct AnswerverifiedShow Answer

A series of activities that generates revenues and collects cash from customers is called:

Correct AnswerverifiedShow Answer

Which of the following is an activity in the operations of a manufacturer,but not in the operations of a merchandising or service company?

Correct AnswerverifiedShow Answer

Inventory reports the:

Correct AnswerverifiedShow Answer

Companies make a month-end adjustment for expected returns by decreasing Sales Revenue and decreasing Cost of Goods Sold.

Correct AnswerverifiedShow Answer

Correct Answerverifieda.Sales revenue = 6,000 bags × $10 per ...View AnswerShow Answer

Correct AnswerverifiedShow Answer

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a.
Sales revenue = 6,000 bags × $10 per ...
View Answer

Correct Answer
verified