Which of the following would be considered as primarily a merchandising business?
Baker's Jewelry Store
Sandridge and Associates Law Offices
KPM Accounting and Tax Service
A business firm that primarily sells merchandise to other businesses is known as a:
The Cost of Goods Sold account is classified as:
a contra asset.
Which of the following statements is true about period costs?
Operating expenses are not period costs.
Period costs are expensed when the products associated with these costs are sold.
Period costs are usually recorded as assets.
Period costs are expensed in the period the costs are incurred.
Assume the perpetual inventory method is used.
1) The company purchased $12,000 of merchandise on account under terms 2/10, n/30.
2) The company returned $1,500 of merchandise to the supplier before payment was made.
3) The liability was paid within the discount period.
4) All of the merchandise purchased was sold for $18,000 cash.
What effect will the return of merchandise to the supplier have on the accounting equation?
Assets and equity are reduced by $1,500.
Assets and liabilities are reduced by $1,470.
Assets and liabilities are reduced by $1,500.
None. It is an asset exchange transaction.
What is the effect of an entry to record the purchase of inventory on account under the perpetual inventory method?
Total assets increase.
Total liabilities decrease.
Total assets decrease.
Both A and B.
Morton Company uses the perpetual inventory method. The company purchased an item of inventory for $65 and sold the item to a customer for $100. What effect will the sale have on the company's inventory account?
The account will decrease by $100.
The account will decrease by $65.
The account will decrease by $35.
A discount given to encourage prompt payment is called:
a cash discount.
a sales discount by the seller.
a purchase discount by the buyer.
all of these are correct.
The credit terms, 2/10, n/30, indicate that a:
ten percent discount can be deducted if the invoice is paid within two days following the date of sale.
two percent discount can be deducted for a period up to thirty days following the date of sale.
two percent discount can be deducted if the invoice is paid before the tenth day following the date of the sale.
two percent discount can be deducted if the invoice is paid after the tenth day following the sale, but before the thirtieth day.
The purpose of common size financial statements is to:
compare the amount of common stock to other types of stock.
make comparisons between firms of different sizes.
make comparisons between different time periods.
Both "b" and "c" are correct.
Which of the following retailers would be expected to have the highest gross margin percentage?
A supermarket chain such as Safeway
Which of the following account titles is normally used in a periodic inventory system?
Purchase Returns and Allowances.
All of these are normally used.
Under a periodic system, the account debited for shipping costs on goods received from the vendor is called:
Cost of Goods Sold.
Under a periodic inventory system, the buyer does not use which of the following accounts in recording purchases and related transactions?
Purchase Returns and Allowances