Strayer ACC557 (Strayer) Week 5 Chapter 5, 6 Quiz

ACC 557 (Strayer) WK 5 Chapter 5, 6 QuizTRUE-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 they are earned. 11. Sales 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. Non-operating 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’s income performance. 20. The multiple-step form of income statement is easier to read than the single-step form. 21. Inventory is classified as a current asset in a classified balance sheet. 22. Gain on sale of equipment and interest expense are reported under other revenues and gains in a multiple-step income statement. 23. The gross profit section for a merchandising company appears on both the multiple-step and single-step forms of an income statement. 24. In a multiple-step income statement, income from operations excludes other revenues and gains and other expenses and losses. 25. A single-step income statement reports all revenues, both operating and other revenues and gains, at the top of the statement. 26. If net sales are $800,000 and cost of goods sold is $600,000, the gross profit rate is 25%. 27. Gross profit represents the merchandising profit of a company. 28. Gross profit is a measure of the overall profitability of a company. 29. Gross profit rate is computed by dividing cost of goods sold by net sales.30. Purchase Returns and Allowances and Purchase Discounts are subtracted from Purchases to determine net purchases.31. Freight-in is an account that is subtracted from the Purchases account to arrive at cost of goods purchased.32. Under a periodic inventory system, the acquisition of inventory is charged to the Purchases account.33. Under a periodic inventory system, freight-in on merchandise purchases should be charged to the Inventory account.34. In a worksheet, cost of goods sold will be shown in the trial balance (Dr.), adjusted trial balance (Dr.) and income statement (Dr.) columns.a35. The steps in preparing a worksheet for a merchandising company are different than for a service company.a36. A merchandising company generally has the same types of adjustments as a service company.a37. The major difference between the balance sheet of a service company and a merchandiser is inventory. 38. Inventory is reported as a long-term asset on the balance sheet. 39. Under a perpetual inventory system, inventory shrinkage and lost or stolen goods are more readily determined. 40. The terms 2/10, n/30 state that a 2% discount is available if the invoice is paid within the first 10 days of the next month. 41. Sales revenue should be recorded in accordance with the matching principle. 42. Sales returns and allowances and sales discounts are subtracted from sales in reporting net sales in the income statement. 43. A merchandising company using a perpetual inventory system will usually need to make an adjusting entry to ensure that the recorded inventory agrees with physical inventory count. 44. If a merchandising company sells land at more than its cost, the gain should be reported in the sales revenue section of the income statement. 45. The single-step income statement is so named because only one step, subtracting total expenses from total revenues, is required in determining net income or net loss.MULTIPLE CHOICE QUESTIONS 46. Income from operations is gross profit lessa. financing expenses.b. operating expenses.c. other expenses and losses.d. other expenses. 47. An enterprise which sells goods to customers is known as aa. proprietorship.b. corporation.c. retailer.d. service firm. 48. Which of the following would not be considered a merchandising company?a. Retailerb. Wholesalerc. Service firmd. Dot Com firm 49. A merchandising company that sells directly to consumers is aa. retailer.b. wholesaler.c. broker.d. service company.More Questions are Included…