Purchases $50,000 Purchase returns $ 4,000 Purchase discounts $ 1,000 Transporta

Question

Purchases

$50,000

Purchase returns

$ 4,000

Purchase discounts

$ 1,000

Transportation in

$ 2,000

1.Expenses that are incurred directly or entirely in connection with the sale of merchandise are classified as (Points : 2)        selling expenses.
       general expenses.
       other expenses.
       administrative expenses.

2.Sometimes a(n) __________ is offered to buyers as a means of encouraging them to pay before the end of the credit period. (Points : 2)        accounts receivable
       credit card
       sales discount
       cash sale

3.Generally, the revenue account for a merchandising business is entitled (Points : 2)        Sales.
       Net Sales.
       Gross Sales.
       Gross Profit.

4.The difference between sales and cost of merchandise sold for a merchandising business is (Points : 2)        sales.
       net sales.
       gross sales.
       gross profit.

5.The credit terms of a sale are normally indicated on a(n) (Points : 2)        purchase order.
       invoice.
       bill of lading.
       account receivable.

6.Gross profit is determined by subtracting the cost of merchandise sold from what? (Points : 2)        The cost of merchandise purchased
       Fees earned
       Accounts receivable
       Net sales

7.Multiple-step income statements show: (Points : 2)        gross profit but not income from operations.
       neither gross profit nor income from operations.
       both gross profit and income from operations.
       income from operations but not gross profit.

8.Inventory shortage is recorded when (Points : 2)        merchandise is returned by a buyer.
       merchandise purchased from a seller is incomplete or short.
       merchandise is returned to a seller.
       there is a difference between a physical count of inventory and inventory records.

           

9.Dig, Inc. had the following merchandise transactions in October:

Purchases

$50,000

Purchase returns

$ 4,000

Purchase discounts

$ 1,000

Transportation in

$ 2,000

What is the total cost of merchandise purchased for Dig, Inc.? (Points : 2)        $50,000
       $47,000
       $52,000
       $48,000

10.Which of the following would be subtracted from gross profit to reach operating income? (Points : 2)        Operating expenses
       Other expenses
       Income taxes
       All of these

Explanation / Answer

1. Selling expenses

2. Sales discount

3. Sales

4. Gross profit.

5. Bill of lading.

6. Net sales

7.Both gross profit and income from operations.

8.Merchandise is returned to a seller.

9. $48,000

10.Operating expenses

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