ACC 291T PRINCIPLES OF
ACCOUNTING II WEEK 4 QUIZZES AND
EXERCISES | QUESTIONS AND
ANSWERS | 2026 UPDATE | WITH
COMPLETE SOLUTIONS.
merchandising business - answer- Companies that buy and resell merchandise
inventory.
merchandise inventory - answer- Finished goods held for resale to customers.
retail companies - answer- Businesses that sell merchandise directly to consumers.
wholesale companies - answer- Companies that sell goods to other businesses.
product costs - answer- All costs directly traceable to acquiring inventory and getting it
ready for sale, including transportation-in. Contrast with selling and administrative costs.
selling and administrative costs - answer- Costs such as advertising expense and rent
expense that cannot be directly traced to inventory; recognized as expenses in the
period in which they are incurred. Contrast with product costs.
period costs - answer- Expenses recognized in the period in which they are incurred
regardless of when cash payments for them are made; costs that cannot be directly
traced to products.
cost of goods available for sale - answer- Total costs paid to obtain goods and ready
them for sale, including the cost of beginning inventory plus purchases and
transportation-in costs, less purchase returns and allowances and purchase discounts.
Cost of goods sold - answer- Total cost incurred for the goods sold during a specific
accounting period.
gross margin - answer- Difference between sales revenue and cost of goods sold; the
amount a company makes from selling goods before subtracting operating expenses.
perpetual inventory system - answer- Method of accounting for inventory in which the
amount of cost of goods sold is recorded for each sale of inventory; the Inventory
account is increased and decreased with each purchase and sale of merchandise.
, purchase returns and allowances - answer- A reduction in the cost of purchases
resulting from dissatisfaction with merchandise purchased.
cash discounts - answer- Price reduction on merchandise sold offered by sellers to
encourage prompt payment; when taken, represents a sales discount to the seller and a
purchase discount to the buyer of the merchandise.
purchase discount - answer- Reduction in the gross price of merchandise offered to a
buyer if the buyer pays cash for the merchandise within a stated time (usually within 10
days of the date of the sale).
Annual Rate Formula - answer- discount rate x (365 days / Term of loan)
FOB Shipping Point - answer- Shipping term that means the buyer bears the freight
(transportation-in) costs.
FOB Destination - answer- Shipping term that means the seller bears the freight
(transportation-in) costs.
Transportation-in - answer- Cost of freight on goods purchased under FOB shipping
point terms; a product cost usually added to the cost of inventory.
Transportation-out - answer- Freight cost for goods delivered to customers under FOB
destination terms; a period cost expensed when incurred.
Shrinkage - answer- Decreases in inventory for reasons other than sales to customers.
Decreases in inventory for reasons other than sales to customers.
Gain - answer- Increases in assets or decreases in liabilities that result from peripheral
or incidental transactions.
Loss - answer- Decreases in assets or increases in liabilities that result from peripheral
or incidental transactions.
Operating Income - answer- Income after subtracting operating expenses from
operating revenues. Gains and losses and other peripheral activities are added to or
subtracted from operating income to determine net income or loss.
Multistep Income Statement - answer- Income statement format that matches various
revenues with related expenses in order to present subtotals (steps) such as gross
margin and operating income; distinguishes between routine operating items and
nonoperating items such as gains, losses, and interest.
Single-step income statements - answer- Income statement format which presents net
income in one step, the difference between total revenues and total expenses.
ACCOUNTING II WEEK 4 QUIZZES AND
EXERCISES | QUESTIONS AND
ANSWERS | 2026 UPDATE | WITH
COMPLETE SOLUTIONS.
merchandising business - answer- Companies that buy and resell merchandise
inventory.
merchandise inventory - answer- Finished goods held for resale to customers.
retail companies - answer- Businesses that sell merchandise directly to consumers.
wholesale companies - answer- Companies that sell goods to other businesses.
product costs - answer- All costs directly traceable to acquiring inventory and getting it
ready for sale, including transportation-in. Contrast with selling and administrative costs.
selling and administrative costs - answer- Costs such as advertising expense and rent
expense that cannot be directly traced to inventory; recognized as expenses in the
period in which they are incurred. Contrast with product costs.
period costs - answer- Expenses recognized in the period in which they are incurred
regardless of when cash payments for them are made; costs that cannot be directly
traced to products.
cost of goods available for sale - answer- Total costs paid to obtain goods and ready
them for sale, including the cost of beginning inventory plus purchases and
transportation-in costs, less purchase returns and allowances and purchase discounts.
Cost of goods sold - answer- Total cost incurred for the goods sold during a specific
accounting period.
gross margin - answer- Difference between sales revenue and cost of goods sold; the
amount a company makes from selling goods before subtracting operating expenses.
perpetual inventory system - answer- Method of accounting for inventory in which the
amount of cost of goods sold is recorded for each sale of inventory; the Inventory
account is increased and decreased with each purchase and sale of merchandise.
, purchase returns and allowances - answer- A reduction in the cost of purchases
resulting from dissatisfaction with merchandise purchased.
cash discounts - answer- Price reduction on merchandise sold offered by sellers to
encourage prompt payment; when taken, represents a sales discount to the seller and a
purchase discount to the buyer of the merchandise.
purchase discount - answer- Reduction in the gross price of merchandise offered to a
buyer if the buyer pays cash for the merchandise within a stated time (usually within 10
days of the date of the sale).
Annual Rate Formula - answer- discount rate x (365 days / Term of loan)
FOB Shipping Point - answer- Shipping term that means the buyer bears the freight
(transportation-in) costs.
FOB Destination - answer- Shipping term that means the seller bears the freight
(transportation-in) costs.
Transportation-in - answer- Cost of freight on goods purchased under FOB shipping
point terms; a product cost usually added to the cost of inventory.
Transportation-out - answer- Freight cost for goods delivered to customers under FOB
destination terms; a period cost expensed when incurred.
Shrinkage - answer- Decreases in inventory for reasons other than sales to customers.
Decreases in inventory for reasons other than sales to customers.
Gain - answer- Increases in assets or decreases in liabilities that result from peripheral
or incidental transactions.
Loss - answer- Decreases in assets or increases in liabilities that result from peripheral
or incidental transactions.
Operating Income - answer- Income after subtracting operating expenses from
operating revenues. Gains and losses and other peripheral activities are added to or
subtracted from operating income to determine net income or loss.
Multistep Income Statement - answer- Income statement format that matches various
revenues with related expenses in order to present subtotals (steps) such as gross
margin and operating income; distinguishes between routine operating items and
nonoperating items such as gains, losses, and interest.
Single-step income statements - answer- Income statement format which presents net
income in one step, the difference between total revenues and total expenses.
