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Exam 4: Accounting for Merchandising Businesses

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Question 21

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Which of the following would not be considered as primarily a merchandising business?

A) Abercrombie and Fitch
B) Sam's Clubs
C) Amazon
D) Regal Cinemas

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Question 22

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Which factor has removed most of the practical limitations associated with use of the perpetual inventory system?

A) A more honest work force
B) Recent changes in GAAP
C) Recent changes in federal and state laws
D) Advancements in technology

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Question 23

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On April 1,Snell Company made a $50,000 sale giving the customer terms of 3/10,n/30.The receivable was collected from the customer on April 8.How does the collection of cash from the customer affect the company's financial statements?

When a company recognizes cost of goods sold,how does that event impact the elements of the financial statements? (Ignore the effects of recognizing sales revenue.)

Ashton Company uses the perpetual inventory system.The company's inventory account had a $6,600 balance as of December 31,Year 1.A physical count of inventory shows only $5,900 of merchandise in stock at December 31,Year 1.How will recognizing the missing inventory affect the company's financial statements?

Kenyon Company experienced a transaction that had the following effect on the financial statements: Which of the following business events would result in this effect on the financial statements?

A company that purchases merchandise treats a cash discount as a reduction to the cost of merchandise inventory.

A common size income statement is prepared by dividing all amounts on the statement by net income.

What type of account is the Cost of Goods Sold account?

Butte Company recognized $24,000 of revenue on the cash sale of merchandise that cost $11,000.How will the sale be reported on the statement of cash flows?

[The following information applies to the questions displayed below.] A company's chart of accounts includes, in part, the following account numbers and corresponding account titles: -Which accounts would appear on the balance sheet?

A company using the perpetual inventory system paid cash for a transportation-in cost.Which of the following choices reflects the effects of this event on the financial statements?

Aaron Company uses the periodic inventory system.If Aaron's ending inventory is understated due to an accounting error,what is the effect on net income and the ending balance of retained earnings?

The return on sales ratio indicates the amount of each sales dollar that is left over after covering the cost of goods sold.

Llewelyn Company paid the amount due on a purchase of merchandise on account.Llewelyn uses the perpetual inventory system.Which of the following reflects the effect of the payment on the financial statements?

Indicate whether each of the following statements is true or false.

Which of the following is considered a period cost?

What is the gross margin that results from these four transactions?

Which of the following statements regarding a multistep income statement is true?

The term FOB shipping point indicates that the seller is responsible for freight costs.