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| 1 | |
A perpetual inventory system updates the Merchandise Inventory account after each purchase or sale of inventory. |
| | A) | True |
| | B) | False |
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| 2 | |
When a merchandiser buys inventory on credit and takes advantage of any credit terms it is called a sales discount; when a customer buys our merchandise on credit and takes advantage of the credit terms we offer, it is called a purchase discount. |
| | A) | True |
| | B) | False |
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| 3 | |
A customer buys an inventory item from us on credit but it is the wrong color. Instead of returning the item to us, we agree to reduce the customer's account payable balance by $20. This transaction is called a purchase allowance. |
| | A) | True |
| | B) | False |
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| 4 | |
FOB shipping point means that the buyer must pay any necessary shipping costs and must assume any responsibility for lost or damaged goods. |
| | A) | True |
| | B) | False |
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| 5 | |
When a company is taking its physical inventory at the end of the year, goods still in transit shipped FOB shipping point will be included in the buyer's inventory and goods still in transit shipped FOB destination will not be included in the buyer's inventory. |
| | A) | True |
| | B) | False |
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| 6 | |
Although the perpetual inventory method and the periodic inventory method require different journal entries and procedures, the procedures for recording sales returns, sales discounts, and sales allowance are the same under both systems. |
| | A) | True |
| | B) | False |
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| 7 | |
The cost of goods available for sale is equal to the beginning merchandise inventory plus the amount of merchandise purchased during the accounting period minus purchase returns minus purchase discounts plus freight-in charges. |
| | A) | True |
| | B) | False |
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| 8 | |
The three main sections found on the multiple-step income statement are the: (1) gross profit, (2) income from operations, and (3) net income. |
| | A) | True |
| | B) | False |
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| 9 | |
Selling expenses would include advertising expense, sales commissions paid to the sales force, depreciation on the cars used by the sales force, and the salary of the company president. |
| | A) | True |
| | B) | False |
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| 10 | |
On a multiple-step income statement, interest revenue and interest expense are considered operating revenues and operating expenses, respectively. |
| | A) | True |
| | B) | False |
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| 11 | |
A wholesaler is a middleman that buys products and sells them to other wholesalers or to retailers who, in turn, sell them to consumers. |
| | A) | True |
| | B) | False |
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| 12 | |
Net sales revenue plus cost of goods sold is called gross profit. |
| | A) | True |
| | B) | False |
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| 13 | |
A method of inventory accounting that maintains continuous records of the cost of inventory on hand and the cost of goods sold is called a perpetual inventory system. |
| | A) | True |
| | B) | False |
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| 14 | |
If the net sales for the business total $500,000, gross profit is $230,000, and net income is $80,000, the cost of goods sold must be $270,000. |
| | A) | True |
| | B) | False |
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| 15 | |
In a periodic inventory system, Cost of Goods Sold is determined every time a sale is occurs. |
| | A) | True |
| | B) | False |
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| 16 | |
A deduction allowed from the invoice price of goods if payment is made within a specified period of time is called a cash discount. |
| | A) | True |
| | B) | False |
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| 17 | |
A trade discount is a method of specifying the amount of discount percentage allowed to a specific customer while simultaneously printing only lists prices in the catalog. |
| | A) | True |
| | B) | False |
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| 18 | |
When merchandise is purchased under transportation terms of FOB shipping point, the buyer has agreed to pay the freight charges. |
| | A) | True |
| | B) | False |
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| 19 | |
A multiple step income statement does not distinguish between operating and non-operating activities. |
| | A) | True |
| | B) | False |
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| 20 | |
Shrinkage is the term used for inventory losses that occur as a result of shoplifting or deterioration. |
| | A) | True |
| | B) | False |
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| 21 | |
Merchandise inventory is a product or products that a company owns and intends to sell to customers. |
| | A) | True |
| | B) | False |
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| 22 | |
Another term for the cost of goods sold is the cost of merchandise available for sale. |
| | A) | True |
| | B) | False |
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| 23 | |
The Income Statement of a retailer (or merchandiser) uses exactly the same expense categories as a service business. |
| | A) | True |
| | B) | False |
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| 24 | |
When merchandise inventory is sold on account and a perpetual inventory system is used, two journal entries are required to record the sale. |
| | A) | True |
| | B) | False |
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| 25 | |
In a perpetual inventory system, transportation charges are recorded by a debit to the Merchandise Inventory account. |
| | A) | True |
| | B) | False |
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| 26 | |
The documentation for supporting a sales return and allowance authorized by the seller is a credit memo. |
| | A) | True |
| | B) | False |
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| 27 | |
When closing entries are prepared, net income will be closed into the Capital account of the single-proprietorship business through a debit to the Income Summary account and a credit to the Capital account. |
| | A) | True |
| | B) | False |
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| 28 | |
Operating expenses include general expenses, administrative expenses, and selling expenses. |
| | A) | True |
| | B) | False |
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| 29 | |
An income statement format that shows intermediate totals between sales and net income and detailed computations of net sales and costs of goods sold is called a classified, multiple-step income statement. |
| | A) | True |
| | B) | False |
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| 30 | |
The account Sales Discounts has a normal debit balance. |
| | A) | True |
| | B) | False |
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