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Exam 5: Accounting for Merchandising Businesses

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Question 91

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On the income statement in the single-step form, the total of all expenses is deducted from the total of all revenues.

A) True
B) False

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Question 92

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When the seller offers a sales discount, even if borrowing has to be done, it is generally advantageous for the buyer to pay within the discount period.

A) True
B) False

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Question 93

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The abbreviation FOB stands for Free On Board.

Retailers record all credit card sales as credit sales.

Which of the following accounts will not be found on the Cost of Merchandise Sold section on the Income Statement?

Under the perpetual inventory system, a company purchases merchandise on terms 2/10, n/30. If payment is made within 10 days of the purchase, the entry to record the payment will include a credit to Cash and a credit to Purchase Discounts.

Using a perpetual inventory system, the entry to record the purchase of $30,000 of merchandise on account would include a

When goods are shipped FOB destination and the seller pays the freight charges, the buyer

A retailer purchases merchandise with a catalog list price of $15,000. The retailer receives a 15% trade discount and credit terms of 2/10, n/30. How much cash will be needed to pay this invoice within the discount period?

Title to merchandise shipped FOB shipping point passes to the buyer upon delivery of the merchandise to the buyer's place of business.

Cost of Merchandise Sold is often the largest expense on a merchandising company income statement.

If merchandise costing $3,500, terms FOB destination, 2/10, n/30, with prepaid freight costs of $125, is paid within 10 days, the amount of the purchases discount is $70.

Inventory shortage is recorded when

Using the letter preceding each account, arrange the following selected accounts in the order they would normally appear in a chart of accounts of a company that uses a multiple-step income statement.

What is the normal balance of the following accounts? a. Sales Tax Payable b. Merchandise Inventory c. Delivery Expense d. Cost of Merchandise Sold e. Sales Returns and Allowance f. Sales Discounts g. Sales

Merchandise inventory is classified on the balance sheet as a

If the perpetual inventory system is used, an account entitled Cost of Merchandise Sold is included in the general ledger.

Complete the following data taken from the condensed income statements for merchandising Companies X, Y, & Z.

If title to merchandise purchases passes to the buyer when the goods are delivered to the buyer, the terms are

Which of the following accounts has a normal credit balance?