Question 1

Gross margin is equal to the amount of change (increase or decrease)in Merchandise Inventory during a period.

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Question 2

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

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Question 3

A company that purchases merchandise treats a cash discount as a reduction to the cost of merchandise inventory.

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Question 4

JJ Co.purchased on account merchandise with a list price of $10,000.Payment terms were 1/15,n/45.If collection occurs before the discount expires,what is the effect of the sales discount on the balance sheet?

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Question 5

The beginning inventory plus cost of goods sold equals the cost of goods available for sale during the period.

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Question 6

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

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Question 7

Costs charged to the Merchandise Inventory account are product costs.

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Question 8

Sam Company reported the following amounts on its income statement:

Based on the information provided,what was the amount of sales reported on the income statement?

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Question 9

Wholesale companies sell goods primarily to other businesses.

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Question 10

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

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Question 11

A perpetual inventory system updates the Merchandise Inventory account for all purchases of inventory,as well as returns of inventory to suppliers.

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Question 12

Net income is not affected by a purchase of merchandise.

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Question 13

In a perpetual inventory system,a purchase allowance is treated as a decrease in expenses by the company that purchased the goods.

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Question 14

Jake Co.purchased on account merchandise with a list price of $90,000.Payment terms were 1/15,n/45.If collection occurs within 18 days,what discount will Jake Co.recognize on the merchandise?

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Question 15

Merchandising businesses include retail companies and manufacturing companies.

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Question 16

Glen Company uses the perpetual inventory system. The company entered into the following events:
1) Purchased merchandise inventory that cost $10,000 under terms of 2/10, n/30.
2) Made payment to the supplier within the discount period.
3) Sold all of the goods to customers on account for $22,000.

What is Glen's cost of goods sold as a result of these three transactions?

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Question 17

Costs of selling inventory are product costs.

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Question 18

With a perpetual inventory system,assets and stockholders' equity increase by the amount of the gross margin when inventory is sold.(Consider the effects of both parts of this event. )

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Question 19

Melbourne Company sold merchandise that it had purchased with a list price of $3,300.The credit terms were of 2/10,n/30.Assuming that Melbourne paid for the merchandise during the discount period,the cost of goods sold for this transaction would be $2,970.

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Question 20

A company using a perpetual inventory system treats transportation-out as an operating expense.

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Quiz 4: Accounting for Merchandising Businesses