978-0134125053 Chapter 4 Part 3

Unlock access to all the studying documents.

View Full Document

9) Which of the following indicates that the shipment is free on board and the buyer pays all of

the shipping and freight costs?

A) Cash on delivery

B) FOB shipping point

C) FOB destination

D) 2/10, n/30

Question Type: Concept

10) Which of the following indicates that the shipment is free on board and the seller pays all of

the shipping and freight costs?

A) Cash on delivery

B) FOB shipping point

C) FOB destination

D) 2/10, n/30

Question Type: Concept

11) When a company repays the seller for shipping costs on an FOB shipping point transaction,

which of the following is TRUE?

A) A purchase discount can still be taken net of the prepaid shipping charges.

B) A purchase discount can still be taken on the gross amount of the invoice.

C) A purchase discount cannot be taken when shipping charges are prepaid.

D) The shipping costs do not affect the invoice value.

Question Type: Concept

12) Merchandise is sold FOB shipping point. If the seller prepays the delivery costs and adds

them to the customer‘s invoice, the entry the seller must prepare, will:

A) debit Cash and credit Inventory.

B) debit Inventory and credit Cash.

C) debit Delivery Expense and credit Cash.

D) debit Accounts Receivable and credit Cash.

Question Type: Application

13) Which of the following is NOT a selling expense?

A) Advertising

B) Salary of salesperson

C) Utility bill

D) Commissions

Question Type: Concept

14) The accounting principle that relates to the expensing of freight charges is:

A) the cost principle.

B) the reliability principle.

C) the matching principle.

D) none of the above.

Question Type: Concept

15) Greene Company purchases $8,000 of inventory with shipping terms, FOB Columbus.

Greene is based in Dayton and the supplier is based in Columbus. The shipping costs are $450.

What is the cost of Greene’s inventory?

A) $8,000

B) $8,450

C) Either $8,000 or $8,450 is an acceptable amount to assign to inventory cost under GAAP.

D) There is not enough information to calculate inventory cost.

Question Type: Application

16) S&C, Inc. purchases $2,100 of inventory with shipping terms FOB Olympia. The supplier is

based in Seattle and S&C is based in Olympia. The shipping costs are $300. What is the cost of

S&C’s inventory?

A) $2,100

B) $2,400

C) Either $2,100 or $2,400 is an acceptable amount to assign to inventory cost under GAAP.

D) There is not enough information to calculate inventory cost.

Question Type: Application

17) Prism Co. purchased $2,300 of merchandise on account. The terms of the purchase are 2/15,

n/45, FOB shipping point with prepaid shipping costs of $60. If Prism pays within the discount

period, what is the amount of the purchase discount?

A) $44.80

B) $46.00

C) $47.20

D) No discount is allowed when shipping is prepaid.

Question Type: Application

4.6 Prepare a multi-step income statement and a classified balance sheet

1) Most merchandising businesses prepare a single-step Income Statement.

Question Type: Concept

2) Cost of Goods Sold is part of general and administrative expenses.

Question Type: Concept

3) Net Sales minus Cost of Goods Sold equals Gross Profit.

Question Type: Concept

4) Net income is commonly referred to as the company’s “bottom line.“

Question Type: Concept

5) The Statement of Retained Earnings for a merchandiser is prepared differently than that of a

service business.

Question Type: Concept

6) Long-term assets on the Balance Sheet represent assets that will last longer than one operating

cycle of the business.

Question Type: Concept

7) On the Balance Sheet, assets are listed in alphabetical order.

Question Type: Concept

8) A 5-year note payable to be repaid in equal payments throughout the 5-year period, would be

listed on the Balance Sheet as a long-term liability only.

Question Type: Concept

9) Salieri & Company has net sales of $43,000, cost of goods sold $22,000, interest expense

$1,000, and operating expenses $5,000. Salieri’s operating income is $15,000.

Question Type: Application

10) Sassycat Corporation has $7,000 cash, $6,000 equipment, and $3,000 inventory. The current

assets section of the balance sheet would total $10,000

Question Type: Application

11) A company has net sales of $132,000, cost of goods sold of $77,000, operating expenses of

$32,000, and other expenses of $1,000. The company’s gross profit is:

A) $22,000.

B) $55,000.

C) $54,000.

D) $23,000.

Question Type: Application

12) A company has net sales of $137,000, cost of goods sold of $73,000, operating expenses of

$42,000, and other expenses of $1,000. The company’s operating income is:

A) $21,000.

B) $64,000.

C) $63,000.

D) $22,000.

Question Type: Application

13) A company has net sales of $137,000, cost of goods sold of $82,000, operating expenses of

$39,000, and other expenses of $3,000. The company’s net income is:

A) $13,000.

B) $55,000.

C) $52,000.

D) $16,000.

Question Type: Application

14) A company has net sales of $213,000, cost of goods sold $83,000, operating expenses of

$46,000, and other expenses of $5,000. The company’s operating income is:

A) $37,000.

B) $79,000.

C) $84,000.

D) $125,000.

Question Type: Application

15) A company has net sales of $222,000, cost of goods sold $95,000, operating expenses of

$44,000, and other expenses of $9,000. The company’s net income is:

A) $51,000.

B) $74,000.

C) $83,000.

D) $118,000.

Question Type: Application

16) Current assets are listed on the Balance Sheet in:

A) alphabetical order.

B) order of liquidity.

C) ascending order of value.

D) descending order of value.

Question Type: Concept

17) Wages Payable, Income Taxes Payable and Accounts Payable are:

A) long-term liabilities.

B) long-term assets.

C) short-term liabilities.

D) short-term assets.

Question Type: Concept

18) The Balance Sheet format that lists assets above liabilities is the:

A) account form.

B) report form.

C) alphabetical form.

D) liquidity form.

Question Type: Concept

19) The Balance Sheet format that reflects the accounting equation in its layout is the:

A) account form.

B) report form.

C) equation form.

D) liquidity form.

Question Type: Concept

20) Cash is listed as the first current asset because it is the account:

A) with the most value.

B) that is most liquid.

C) that is most used.

D) that is first alphabetically.

Question Type: Concept

21) Equipment is an example of a:

A) current asset.

B) long-term asset.

C) current liability.

D) long-term liability.

Question Type: Concept

22) In a Balance Sheet prepared in report form, liabilities must be listed after:

A) assets in alphabetical order.

B) assets with long-term liabilities listed first.

C) assets with current liabilities listed first.

D) Stockholders‘ Equity.

Question Type: Concept