Assignment

1. The operating cycle of a merchandising company is ordinarily shorter than that of a service company.

True
False

2. The operating cycle of a merchandising company is ordinarily ___________________ that of a service firm.

longer than
shorter than
has fewer steps than
the same as

3. Which statement is true when recording the sale of goods for cash in a perpetual inventory system?

Only one journal entry is necessary. It will record the receipt of cash and sales revenue.
Two journal entries are necessary: one to record the receipt of cash and sales revenue, and one to record the cost of goods sold and to reduce inventory.
Two journal entries are necessary: one to record the receipt of cash and reduction of inventory, and one to record the the cost of goods sold and sales revenue.
Only one journal entry is necessary. It will record cost of goods sold and reduce of inventory.

4. Net income is $15,000, operating expenses are $20,000, and net sales total $75,000. How much is cost of goods sold?

$35,000
$15,000
$60,000
$40,000

5. Which one of the following will result in gross profit?

Operating expenses less net income
Operating expenses less cost of goods sold
Sales revenue less cost of goods sold
Sales revenue less operating expenses

6. Under what system is cost of goods sold determined at the end of an accounting period?

Double entry inventory system
Perpetual inventory system
Single entry inventory system
Periodic inventory system

7. Net income is $15,000, operating expenses are $20,000, net sales total $75,000, and sales revenues total $95,000. How much is the profit margin?

16%
79%
75%
20%

8. In a periodic inventory system, when is the cost of the merchandise sold determined?

At the end of the period
Periodically during the period
Either at time of sale, end of period or periodically during the period
At the time of the sale

9. Waymon Co. has net sales of $100,000, cost of goods sold of $70,000, and operating expenses of $18,000. What is its gross profit?
Gross profit $
Masie Ascot believes revenues from credit sales may be recorded before they are collected in cash. Do you agree? Explain.
Gross profit equals the difference between

sales revenue and cost of goods sold.
sales revenue and cost of goods sold plus operating expenses.
sales revenue and operating expenses.
net income and operating expenses

10. Net income will result if gross profit exceeds

purchases.
cost of goods sold.
cost of goods sold plus operating expenses.
operating expenses.

11. Two categories of expenses in merchandising companies are

cost of goods sold and financing expenses.
other expenses and cost of goods sold.
cost of goods sold and operating expenses.
operating expenses and financing expenses

12. Under a perpetual inventory system

increases in inventory resulting from purchases are debited to purchases.
there is no need for a year-end physical count.
the account purchase returns and allowances is credited when goods are returned to vendors.
accounting records continuously disclose the amount of inventory.

13. In a perpetual inventory system, cost of goods sold is recorded

on a monthly basis.
on an annual basis.
each time a sale occurs.
on a daily basis.

14. If a purchaser using a perpetual inventory system pays the transportation costs, then the

Inventory account is not affected.
Freight-out account is increased.
Inventory account is increased.
Delivery Expense account is increased

15. In the credit terms of 1/10, n/30, the "1" represents the

number of days in the discount period.
full amount of the invoice.
percent of the cash discount.
number of days when the entire amount is due.

16. Assets purchased for resale are recorded in which of the following accounts?

Inventory.
Supplies.
Equipment.
Patents.

17. Which of the following accounts is classified as a contra revenue account?

Purchase Discounts
Cost of Goods Sold
Sales Revenue
Sales Returns and Allowances

18. Sales revenues are usually considered earned when

adjusting entries are made.
cash is received from credit sales.
an order is received.
goods have been transferred from the seller to the buyer.