Chapter 05 – Accounting for Retail Businesses
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Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.05–04 – LO: 05–04
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:19 PM
DATE MODIFIED:
10/16/2017 4:50 PM
56. The single-step income statement is easier to prepare, but a criticism of this format is that gross profit and income
from operations are not readily available.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Bloom’s: Remembering
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.05–04 – LO: 05–04
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:19 PM
DATE MODIFIED:
10/16/2017 4:50 PM
57. Gross profit minus selling expenses equals net income.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Bloom’s: Remembering
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.05–04 – LO: 05–04
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:19 PM
DATE MODIFIED:
10/16/2017 4:50 PM
58. In the merchandising income statement, sales will be reduced by administrative expenses to arrive at operating
income.
a.
True
Chapter 05 – Accounting for Retail Businesses
Copyright Cengage Learning. Powered by Cognero.
Page 22
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Bloom’s: Remembering
Easy
QUESTION TYPE:
True / False
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.05–04 – LO: 05–04
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:19 PM
DATE MODIFIED:
10/16/2017 4:50 PM
59. As we compare a merchandising business to a service business, the financial statement that changes the most is the
balance sheet.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Bloom’s: Remembering
Moderate
QUESTION TYPE:
True / False
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.05–04 – LO: 05–04
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.09 – Financial Statements
ACCT.ACBSP.APC.17 – Inventories Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:19 PM
DATE MODIFIED:
10/16/2017 4:50 PM
60. Cost of goods sold is often the largest expense on a merchandising company income statement.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Bloom’s: Remembering
Easy
QUESTION TYPE:
True / False
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.05–04 – LO: 05–04
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.09 – Financial Statements
ACCT.ACBSP.APC.17 – Inventories Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
Copyright Cengage Learning. Powered by Cognero.
Page 26
69. Under a periodic inventory system, the accounts Purchases, Purchases Returns and Allowances, Purchases Discounts,
and Freight In are found on the balance sheet.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Bloom’s: Remembering
Easy
QUESTION TYPE:
True / False
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.05–05 – LO: 05–05
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.09 – Financial Statements
ACCT.ACBSP.APC.17 – Inventories Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:19 PM
DATE MODIFIED:
10/16/2017 4:50 PM
70. Inventory is classified on the balance sheet as a
a.
current liability
b.
current asset
c.
long-term asset
d.
long-term liability
ANSWER:
b
POINTS:
1
DIFFICULTY:
Easy
Bloom’s: Remembering
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.05–01 – LO: 05–01
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.09 – Financial Statements
ACCT.ACBSP.APC.17 – Inventories Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:19 PM
DATE MODIFIED:
10/16/2017 4:50 PM
71. Which of the following is not a difference between a retail business and a service business?
a.
in what is sold
b.
the inclusion of gross profit on the income statement
c.
accounting equation
d.
inventory included on the balance sheet
ANSWER:
c
POINTS:
1
DIFFICULTY:
Moderate
Chapter 05 – Accounting for Retail Businesses
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Page 29
Operating expenses
52,500
Cost of goods sold
538,000
a.
$485,500
b.
$711,500
c.
$173,500
d.
$226,000
ANSWER:
c
RATIONALE:
Operating income = Sales – Cost of goods sold – Operating expenses = $764,000 –
$538,000 – $52,500 = $173,500
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.05–01 – LO: 05–01
FNMN.WAJO.19.05–04 – LO: 05–04
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:19 PM
DATE MODIFIED:
10/16/2017 4:50 PM
77. Gross profit is equal to
a.
sales plus cost of goods sold
b.
sales plus selling expenses
c.
sales less selling expenses
d.
sales less cost of goods sold
ANSWER:
d
POINTS:
1
DIFFICULTY:
Bloom’s: Understanding
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.05–01 – LO: 05–01
FNMN.WAJO.19.05–04 – LO: 05–04
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:19 PM
DATE MODIFIED:
10/16/2017 4:50 PM
78. When comparing a retail business to a service business, the financial statement that changes the most is the
a.
balance sheet
b.
income statement
c.
statement of stockholders’ equity
d.
statement of cash flows
Chapter 05 – Accounting for Retail Businesses
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Page 30
ANSWER:
b
POINTS:
1
DIFFICULTY:
Bloom’s: Remembering
Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.05–01 – LO: 05–01
FNMN.WAJO.19.05–04 – LO: 05–04
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.09 – Financial Statements
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:19 PM
DATE MODIFIED:
10/16/2017 4:50 PM
79. Dollar Co. sold merchandise to Pound Co. on account, $25,500, terms 2/15, net 45. Pound Co. paid the invoice within
the discount period. What is the sales amount to be recorded in the above transactions?
a.
$25,500
b.
$26,010
c.
$24,990
d.
$16,000
ANSWER:
c
RATIONALE:
Amount of sales = Invoice amount – Sales discount = $25,500 – (2% × $25,500) =
$25,500 – $510 = $24,990
POINTS:
1
DIFFICULTY:
Challenging
Bloom’s: Applying
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.05–02 – LO: 05–02
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.09 – Financial Statements
ACCT.ACBSP.APC.17 – Inventories Reporting
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:19 PM
DATE MODIFIED:
10/16/2017 4:50 PM
80. The primary difference between the periodic and perpetual inventory systems is that a
a.
periodic system determines the inventory on hand only at the end of the accounting period
b.
periodic system keeps a record showing the inventory on hand at all times
c.
periodic system provides an easy means to determine inventory shrinkage
d.
periodic system records the cost of the sale on the date the sale is made
ANSWER:
a
POINTS:
1
DIFFICULTY:
Moderate
Bloom’s: Understanding
QUESTION TYPE:
Multiple Choice