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Exam 4: Accounting for Merchandising Businesses

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Question 61

True/False

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

A) True
B) False

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Question 62

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The following entry is taken from the journal of a merchandising company: What is the effect of this entry on the company's financial statements?

A) Assets and stockholders' equity increase.
B) Assets and liabilities increase.
C) Assets and stockholders' equity decrease.
D) Assets decrease and stockholders' equity increases.

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

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Question 63

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The following information for Year 2 is taken from the accounts of Tuttle Company.The company uses the periodic inventory system. Based on this information,what is the inventory at December 31,Year 2?

A multistep income statement shows sales revenue,cost of goods sold,and gross margin.

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 the entry to recognize the missing inventory affect the company's financial statements?

[The following information applies to the questions displayed below.] Darlington Company entered into the following business events during its first month of operations. The company uses the perpetual inventory system. 1) The company purchased $12,500 of merchandise on account under terms 2/10, n/30. 2) The company returned $1,200 of merchandise to the supplier before payment was made. 3) The liability was paid within the discount period. 4) All of the merchandise purchased was sold for $18,800 cash. -What is the net cash flow from operating activities as a result of the four transactions?

What is (are) the term(s) used to describe a discount given to encourage prompt payment?

With a perpetual inventory system,the cost of merchandise inventory is recognized at the time of purchase.

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?

A company's chart of accounts includes,in part,the following account numbers and corresponding account titles: -Which accounts would affect operating income?

[The following information applies to the questions displayed below.] Darlington Company entered into the following business events during its first month of operations. The company uses the perpetual inventory system. 1) The company purchased $12,500 of merchandise on account under terms 2/10, n/30. 2) The company returned $1,200 of merchandise to the supplier before payment was made. 3) The liability was paid within the discount period. 4) All of the merchandise purchased was sold for $18,800 cash. -What effect will the return of merchandise to the supplier in event (2) have on Darlington's financial statements?

-Based on common-sized income statements,which of the companies spent the least on operating expenses in relationship to its sales?

Selling costs are recognized as expenses in the period when goods are sold.

Which of the following statements about period costs is true?