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Questions and Answers
Income from operations is gross profit less:
Income from operations is gross profit less:
- Operating expenses (correct)
- Administrative expenses
- Selling expenses
- Other expenses and losses
An enterprise that sells goods to customers is known as a:
An enterprise that sells goods to customers is known as a:
- Proprietorship
- Corporation
- Service firm
- Retailer (correct)
Which of the following would NOT be considered a merchandising company?
Which of the following would NOT be considered a merchandising company?
- Service firm
- Wholesaler
- Retailer (correct)
- Dot Com firm
What are the two main categories of expenses for merchandising companies?
What are the two main categories of expenses for merchandising companies?
What is the primary source of revenue for a wholesaler?
What is the primary source of revenue for a wholesaler?
Sales revenue less cost of goods sold is called:
Sales revenue less cost of goods sold is called:
After gross profit is calculated, operating expenses are deducted to determine:
After gross profit is calculated, operating expenses are deducted to determine:
In which inventory system is the cost of goods sold determined only at the end of the accounting period?
In which inventory system is the cost of goods sold determined only at the end of the accounting period?
Which of the following expressions is incorrect?
Which of the following expressions is incorrect?
The Merchandise Inventory account is used in each of the following except to record
The Merchandise Inventory account is used in each of the following except to record
Cost of goods available for sale is computed by adding:
Cost of goods available for sale is computed by adding:
Under a periodic inventory system, acquisition of merchandise is debited to the:
Under a periodic inventory system, acquisition of merchandise is debited to the:
Net sales is sales less:
Net sales is sales less:
If a customer agrees to retain defective merchandise because the seller is willing to reduce the selling price, what is this transaction known as?
If a customer agrees to retain defective merchandise because the seller is willing to reduce the selling price, what is this transaction known as?
In a perpetual inventory system, when is the cost of goods sold recorded?
In a perpetual inventory system, when is the cost of goods sold recorded?
Under a perpetual inventory system, when a business acquires merchandise for resale, which account is debited?
Under a perpetual inventory system, when a business acquires merchandise for resale, which account is debited?
The journal entry to record a return of merchandise purchased on account under a perpetual inventory system would credit which account?
The journal entry to record a return of merchandise purchased on account under a perpetual inventory system would credit which account?
Where is ending merchandise inventory reported on the balance sheet?
Where is ending merchandise inventory reported on the balance sheet?
Which of the following accounts is not closed to Income Summary?
Which of the following accounts is not closed to Income Summary?
In a perpetual inventory system, a return of defective merchandise by a purchaser is recorded by crediting:
In a perpetual inventory system, a return of defective merchandise by a purchaser is recorded by crediting:
Flashcards
Income from operations is
Income from operations is
Gross profit less operating expenses.
What is a retailer?
What is a retailer?
An enterprise that sells goods to customers.
Service firm
Service firm
A business that provides services rather than tangible goods.
Key expense categories for merchandising companies
Key expense categories for merchandising companies
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Primary revenue for a wholesaler
Primary revenue for a wholesaler
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Sales revenue less cost of goods sold
Sales revenue less cost of goods sold
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Calculate Net Income
Calculate Net Income
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When is cost of goods sold determined?
When is cost of goods sold determined?
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Incorrect accounting expression
Incorrect accounting expression
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Merchandise Inventory account is used in each of the following except to record
Merchandise Inventory account is used in each of the following except to record
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Cost of goods available adds
Cost of goods available adds
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Debiting merchandise debit with purchases
Debiting merchandise debit with purchases
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What is net sales?
What is net sales?
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Agreement to reduce the selling price
Agreement to reduce the selling price
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When is cost of goods sold recorded?
When is cost of goods sold recorded?
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Perpetual inventory system: acquisition of merchandise
Perpetual inventory system: acquisition of merchandise
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Journal entry to record a return of merchandise
Journal entry to record a return of merchandise
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Entries that don't record merchandise inventory
Entries that don't record merchandise inventory
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Report balance sheet
Report balance sheet
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Which account does not close in income summary?
Which account does not close in income summary?
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Study Notes
- Income from operations is gross profit minus operating expenses.
- An enterprise selling goods to customers is a retailer.
- A service firm is not considered a merchandising company.
- The two categories of expenses for merchandising companies are the cost of goods sold and operating expenses.
- The primary source of revenue for a wholesaler is the sale of merchandise.
- Sales revenue less cost of goods sold is called gross profit.
- To determine net income, operating expenses are deducted after calculating gross profit.
- In a periodic inventory system, the cost of goods sold is determined only at the end of the accounting period.
- The incorrect expression given is: Operating expenses – cost of goods sold = gross profit
- The Merchandise Inventory account is used in each of the following except the entry to record: payment of freight on goods sold.
- Cost of goods available for sale is computed by adding beginning inventory to cost of goods purchased.
- Under a periodic inventory system, acquisition of merchandise is debited to the Purchases account.
- Given operating expenses of $50,000, sales returns and allowances of $15,000, sales discounts of $9,000, sales of $150,000, and cost of goods sold of $60,000, the net sales on the income statement are $126,000.
- Given operating expenses of $50,000, sales returns and allowances of $15,000, sales discounts of $9,000, sales of $150,000, and cost of goods sold of $60,000, the gross profit is $66,000.
- If a customer agrees to retain defective merchandise because the seller will reduce the selling price, this deal is known as a sales allowance.
- In a perpetual inventory system, cost of goods sold is recorded with each sale.
- Under a perpetual inventory system, acquisition of merchandise for resale is debited to the Merchandise Inventory account.
- The journal entry to record a return of merchandise purchased on account under a perpetual inventory system credits Merchandise Inventory.
- The Merchandise Inventory account is used in each of the following except the entry to record payment of freight on goods sold.
- Cost of goods available for sale is computed by adding beginning inventory to cost of goods purchased.
- Net sales is sales less sales discounts and sales returns and allowances.
- In the balance sheet, ending merchandise inventory is reported in current assets immediately following accounts receivable.
- The account that is not closed to Income Summary is Merchandise Inventory.
- In a perpetual inventory system, a return of defective merchandise by a purchaser is recorded by crediting Merchandise Inventory.
- In a periodic inventory system, a return of defective merchandise by a customer is recorded by crediting Purchase Returns and Allowances.
- Cash received on account with a discount is recorded with the same entry in a perpetual and a periodic inventory system.
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