ACCT101 Principles of Accounting – Merchandising, Inventory Systems, and Gross Profit Exam Questions with Answers

Description: This document contains ACCT101 exam questions with 100% correct answers, focusing on merchandising companies, gross profit calculations, perpetual vs. periodic inventory systems, and multiple-step income statements. It explains key concepts such as credit terms, merchandise inventory, adjusting entries, and inventory shrinkage. The material is highly detailed and provides practical examples with journal entries, making it useful for exam preparation. Each of the following are examples of a merchandising company except: - answerMichael's lawn mowing Gross profit is: - answerequal to net sales less cost of goods sold A company reports net sales of $600,000, cost of goods sold of $200,000, and net income of $100,000. Its gross profit equals: - answer$400,000 Merchandise inventory includes: - answer- costs to purchase - shipping costs - costs to prepare for sale Place the operating cycle for a merchandiser in the correct order. - answer1. credit sales - item"c" 2. receipt of cash from credit sales - item "e" 3. cash purchase of merchandise - item"a" 4. Page1 account receivable - item"d" 5. inventory for sale - item"b" The company's cost of goods sold equals: - answer$21,000 The company's cost of goods available for sale equals: - answer$34,000 a perpetual inventory system updates the accounting records____ - answerfor each purchase and each sale a periodic inventory system updates the accounting records____ - answerat the end of the period Credit terms of "2/10, n/60" means: - answerthe company will receive a 2 percent discount if paid within 10 days The company's total cost of merchandise purchases equals: - answer$91,000 Which of the following statements is correct regarding the adjusting entries for a merchandiser versus a service company. - answer- a service company will have an adjusting entry for accrued expenses - a merchandising company will have an adjusting entry for accrued expenses - a service company will have an adjusting entry for unearned revenues. - a merchandising company will have an adjusting entry for unearned revenues Which of the following statements is correct regarding inventory shrinkage? - answer- shrinkage refers to the loss of inventory - shrinkage can be caused by theft or deterioration - shrinkage is computed by comparing a physical count of inventory with the recorded amount - shrinkage is recorded by debiting cost of goods sold Which statement is correct regarding the closing process of a merchandiser? - answerboth the sales discounts and the sales returns and allowances accounts are credited during the closing process Which of the following totals and subtotals are not found on a multiple-step income statement? - Page2 answertotal current assets A single-step income statement: - answerreports the same amount of net income as that reported on a multiple- step income statement When a classified balance sheet is prepared, merchandise inventory is: - answerreported as a current asset To compute net income for a merchandiser, you will start with net sales, subtract cost of goods sold and subtract other ______ - answerexpenses Select all that apply Cost of goods sold is characterized by which of the following statements? (Check all that apply.) - answer- cost of goods sold is an expense reported on the income statement. - cost of goods sold is also called cost of sales. - cost of goods sold is used to figure gross profit - cost of goods sold includes the expenses of buying and preparing an item for sale. Select all that apply Merchandise inventory can be described as: (Check all that apply.) - answer- products that a company owns and intends to sell - an account increased with a debit. - an account appearing on a balance sheet of a merchandiser - an asset account Complete the following statement. Merchandise inventory that is still available for sale is considered a(n) ______ (asset/expense/revenue) and is reported on the _____ (balance sheet/income statement) and merchandise that is sold during the period is considered a(n) _____ (asset/expense/liability) and reported on the _____ (balance sheet/income statement). - answer1. asset 2. balance sheet 3. expense 4. income statement X-Mart purchased $300 of merchandise and paid immediately. Demonstrate the journal entry to record this transaction, assuming the perpetual inventory system is Page3 used. Multiple choice question. - answerDebit Merchandise Inventory $300; credit Cash $300. How do you compute net income for a merchandiser. - answerNet sales - cost of goods sold - other expenses. Which of the statements below are correct regarding cost of goods sold? - answerCost of goods sold is the expense of buying and preparing merchandise. Select all that apply Explain what the credit terms of 2/10,n/30 mean. (Check all that apply.) - answer- the full payment is due within a 30 day credit period - the buyer can deduct2% of the invoice amount if payment is made within 10 days of the invoice date. Which statement below correctly explains what merchandise inventory is? - answerMerchandise inventory is an asset reported on the balance sheet and