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Exam 4: Accounting for Merchandising Businesses

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Question 71

True/False

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On the income statement in the single-step form, the total of all expenses is deducted from the total of all revenues.

A) True
B) False

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Question 72

Multiple Choice

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Silver Co.sold merchandise to Copper Co.on account, $75,000, terms 2/10, net 30.The cost of the merchandise sold is $55,000.Silver Co.issued a credit memorandum for $10,000 for merchandise returned that originally cost $9,000.Copper Co.paid the invoice within the discount period.What is amount of net sales from the transactions?

A) $65,000
B) $63,500
C) $64,680
D) $63,700

E) B) and C)
F) A) and D)

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Question 73

Multiple Choice

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Where are selling and administrative expenses found on the multi-step income statement?

In a perpetual inventory system, merchandise returned to vendors reduces the merchandise inventory account.

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

It is usual for the credit period to begin with the date the merchandise is received by the buyer.

On the income statement, customer refunds and allowances and customer discounts are added to gross sales to yield net sales.

ONI, Inc.purchased $60,000 of equipment for cash.How does this transaction impact the statement of cash flows?

Merchandise subject to terms 2/10, n/30, FOB shipping point, is sold on account to a customer for $35,000.The seller issued a credit memorandum for $8,000 prior to payment.What is the amount of the cash discount allowable?

Which of the following should be shown on a statement of cash flows under the financing activity section?

Which of the following is the effect of purchasing merchandise on account with credit terms 2/10, n/30?​

Customer refunds and allowances is a contra-asset account.

Which of the following occurs when a seller pays a customer a refund?​

Scada Co's beginning inventory for the year was $52,500, purchases during the year were $135,750, and ending inventory for the year was $175,000.What is Scada's cost of goods sold for the year?

State the section(s) of the statement of cash flows prepared by the indirect method (operating activities, investing activities, financing activities, or not reported) and the amount that would be reported for each of the following transactions: (a)Received $145,000 from the sale of land costing $70,000. (b)Purchased investments for $50,000. (c)Declared $35,000 cash dividends on stock.$5,000 dividends were payable at the beginning of the year, and $6,000 were payable at the end of the year. (d)Acquired equipment for $32,000 cash. (e)Declared and issued 100 shares of $20 par common stock as a stock dividend, when the market price of the stock was $32 a share. (f)Recognized by an adjusting entry depreciation for the year, $48,000. (g)Issued 85,000 shares of $10 par common stock for $25 a share, receiving cash. (h)Issued $500,000 of 20-year, 10% bonds payable at 99. (i)Borrowed $43,000 from Busey National Bank, issuing a 5-year, 8% note for that amount.

In a multiple-step income statement, sales will be reduced by sales discounts and customer refunds and allowances to arrive at net sales.

Sometimes a(n) _____ is offered to buyers as a means of encouraging them to pay before the end of the credit period.

Operating income is calculated by subtracting _____ from gross profit.

Merchandise purchased on account by a company has no effect on its working capital because:​

The following data for the current year ended December 31, 2016, was extracted from the accounting records of Xender Co.: $\begin{array}{l}\begin{array} { l r } \text { Cost of merchandise sold } & \$ 937,200 \\\text { Operating expenses } & 307,500 \\\text { Sales } & 1,230,250\end{array}\\\text { Prepare a multiple-step income statement for the year ended December 31, } 2016 .\end{array}$