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Exam 4: Accounting for Merchandising Businesses

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Question 41

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Expenses that are incurred directly or entirely in connection with the sale of merchandise are classified as:

A) selling expenses.
B) general expenses.
C) other expenses.
D) administrative expenses.

E) B) and C)
F) A) and B)

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Question 42

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A company has a net income of $70,000 and depreciation expenses of $20,000.During the year,its accounts payable balance decreased by $15,000.What is the net cash flow from operating activities using the indirect method for preparing the statement of cash flows?

A) $90,000
B) $105,000
C) $50,000
D) $75,000

E) All of the above
F) C) and D)

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Question 43

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Where are selling and administrative expenses found on the multi-step income statement?

Merchandise subject to terms 1/10,n/30,FOB shipping point,is sold on account to a customer for $17,500.The seller issued a credit memorandum for $4,000 prior to payment.What is the amount of the cash discount allowable?

Under the indirect method for preparing the statement of cash flows,increases in current liabilities are the net income in the cash flows from operating activities section.

Sometimes a(n) is offered to buyers as a means of encouraging them to pay before the end of the credit period.

Using a perpetual inventory system,the return of merchandise purchased on account includes a(n) :

Which term indicates that merchandise is free of transportation charges to the buyer?

Silver Co.sold merchandise to Copper Co.on account,$75,000,terms 2/10,net 30.The cost of the merchandise sold is $55,000.Silver Co.issued a credit memorandum for $10,000 for merchandise returned that originally cost $9,000.Copper Co.paid the invoice within the discount period.What is amount of net sales from the transactions?

The indirect method of preparing the statement of cash flows reconciles net income with net cash flows from operating activities.

There are two alternatives to reporting cash flows from operating activities in the statement of cash flows: (1)the direct method and (2)the indirect method.

Which of the following is not an example of selling expenses?

Merchandise not sold at the end of the period is reported as:

Which of the following accounts is a contra account to Sales?

The following data for the current year ended December 31,2016,were extracted from the accounting records of Gilbert Co.:

If the ownership of merchandise passes to the buyer when the seller delivers the merchandise for shipment,the terms are stated as FOB destination.

Purchase discounts reduce sales.

When merchandise is purchased to resell to customers,it is recorded in the account entitled:

When the seller offers a sales discount,even if borrowing has to be done,it is generally advantageous for the buyer to pay within the discount period.

Gold Co.sold merchandise to Bronze Co.on account,$23,000,terms 2/15,net 45.The cost of the merchandise sold is $18,500.Gold Co.issued a credit memorandum for $2,500 for merchandise returned that originally cost $1,900.Bronze Co.paid the invoice within the discount period.What is the amount of net income earned by Gold Co.on the transactions?