Acc 556 week 3 chapter 5 exercise


Question 1
With the periodic inventory system, goods available for sale must be calculated before cost of goods sold.
Question 2
Match the items below by entering the appropriate code letter in the space provided.

Net sales

Sales discount

Credit terms

Periodic inventory system

Gross profit rate

Contra revenue


Gross profit

Sales invoice

Purchase discount
    A.    An account that is offset against a revenue account on the income statement.
B.    Provides support for a credit sale.
C.    Freight cost to deliver goods to customers reported as an operating expense.
D.    Requires a physical count of goods on hand to compute cost of goods sold.
E.    A reduction given by the seller for prompt payment of a credit sale.
F.    A cash discount claimed by a buyer for prompt payment of a balance due.
G.    Gross profit divided by net sales.
H.    Specifies the amount of cash discount and time period during which it is offered.
I.    Sales less sales returns and allowances and sales discounts.
J.    Net sales less cost of goods sold.

Question 3
Financial information is presented below:
Operating expenses                         $  28,000
Sales returns and allowances                7,000
Sales discounts                                      3,000
Sales revenue                                    150,000
Cost of goods sold                               91,000
The gross profit rate would be: (Hint: Calculate net sales first)
Question 4
The terms 2/10, net/30 mean that a 2 percent discount is allowed on payments made within the 10 days discount period.
Question 5
Merchandising companies that sell to retailers are known as
    service firms.
Question 6
Freight-out appears as an operating expense in the income statement.
Question 7
A sales invoice is prepared when goods
    are sold for cash.
    are sold on credit.
    sold on credit are returned.
    are sold on credit or for cash
Question 8
What is an advantage of using the multiple-step income statement?
    It highlights the components of net income.
    Gross profit is not a separate item.
    It is easier to prepare than the single-step income statement.
    Net income will be higher than net income computed using the single-step income statement.
Question 9
The primary source of revenue for a wholesaler is
    investment income.
    service revenue.
    the sale of merchandise.
    the sale of plant assets the company owns.
Question 10
The collection of a $700 account beyond the 2 percent discount period will result in a
    debit to Cash for $686.
    credit to Accounts Receivable for $700.
    credit to Cash for $700.
    debit to Sales Discounts for $14.
Question 11
Which of the following items does not result in an adjustment in the merchandise inventory account under a perpetual system?
    A purchase of merchandise.
    A return of merchandise inventory to the supplier
    Payment of freight costs for goods shipped to a customer
    Payment of freight costs for goods received from a supplier
Question 12
As the president of Harter Company, you notice that no discounts have been taken when settling accounts payables. What would be an acceptable explanation?
    All invoices have credit terms of n/30.
    There is not sufficient cash to pay within the discount period.
    Discounts are missed because no one knows how to enter them in the new accounting software.
    The full amount of the invoice is being paid within the discount period and the treasurer is pocketing the discount amount.
Question 13
Which statement is incorrect?
    The sales revenue account is used to record the sales of goods held for resale to customers.
    Sales discounts are recorded as debits to the sales revenue account.
    The sales revenue account is a revenue account.
    The sales revenue account has a normal credit balance and is closed at the end of the accounting period.
Question 14
Which of the following provides the best rationale regarding analysts’ views about the information value of the gross profit rate versus the gross profit amount?
    The gross profit amount is more informative than the gross profit rate because it is a dollar amount rather than a ratio.
    The gross profit amount is less informative than the gross profit rate because the latter presents a meaningful relationship between gross profit and net sales.
    The gross profit amount is more informative than the gross profit rate because the gross profit rate is only used to describe a few industries while the gross profit amount is universally used.
    The gross profit amount is more informative than the gross profit rate because high volume operations are able to calculate the gross profit rate but not the gross profit amount.
Question 15
Farwell Company purchased merchandise with an invoice price of $2,000 and credit terms of 1/10, n/30. Assuming a 365 day year, what is the implied annual interest rate inherent in the credit terms?
Question 16
Which of the following is a true statement about inventory systems?
    Periodic inventory systems require more detailed inventory records.
    Perpetual inventory systems require more detailed inventory records.
    A periodic system requires cost of goods sold be determined after each sale.
    A perpetual system determines cost of goods sold only at the end of the accounting period.
Question 17
The Sales Returns and Allowances account does not provide information to management about
    possible inferior merchandise.
    the percentage of credit sales versus cash sales.
    inefficiencies in filling orders.
    errors in filling customers.
Question 18
Multiple-step income statements show
    gross profit but not income from operations.
    neither gross profit nor income from operations.
    both income from operations and gross profit.
    income from operations but not gross profit.

Place your order
(550 words)

Approximate price: $22

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
The price is based on these factors:
Academic level
Number of pages
Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Read more

Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Read more

Privacy policy

Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

Read more

Fair-cooperation guarantee

By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.

Read more

Enjoy 10% OFF today with the coupon code: save10