Fundamental Accounting Principles Canadian Canadian 14th Edition Larson Test Bank 1

Solution Manual for Fundamental Accounting Principles Canadian
Canadian 14th Edition by Larson ISBN 1259066509

9781259066504
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05
Student: ___________________________________________________________________________
1. A merchandiser earns net income by buying and selling merchandise.

True False
2. A service company earns net income by buying and selling merchandise.

True False
3. A wholesaler is a company that buys products from manufacturers and sells them to consumers.
True False
4. A retailer is a middleman that buys products from manufacturers and sells them to wholesalers.
True False
5. Gross profit is also called gross margin.

True False
6. Cost of goods sold represents the cost of buying and preparing merchandise for sale.
True False
7. Y-Mart had sales of $350,000. Its cost of goods sold was $200,000. Its gross profit was $550,000.
True False
8. Y-Mart had net sales of $645,000. Its cost of goods was $445,000. Its gross margin was $200,000.
True False
9. Z-Mart had a gross profit of $340,000 based on sales of $700,000. Its cost of goods sold was $350,000.
True False
10. Cost of goods sold is reported on both the income statement and the balance sheet.
True False
11. Merchandise inventory refers to products a company owns for purposes of selling to customers.
True False
12. A merchandising company's operating cycle begins with the sale of merchandise and ends with the
collection of cash from the sale.
True False
13. Companies try to lengthen their operating cycles to increase net income.
True False
14. Merchandise inventory is included in the Plant and Equipment section of the balance sheet.
True False
15. Merchandise inventory includes merchandise and office supplies.

True False
16. Assets tied up in inventory are not productive assets.

True False
17. A company's cost of merchandise available for sale consists of beginning inventory plus the net cost of
purchases minus ending inventory.
True False
18. A periodic inventory system requires updating the inventory account at the beginning of an accounting
period.
True False
19. A perpetual inventory system gives a continuous record of the amount of inventory on hand.
True False
20. In a perpetual inventory system, the cost of inventory purchased is recorded in the Purchases account.
True False
21. In a perpetual inventory system, the net cost of purchases is accumulated in the Inventory account.
True False
22. Periodic inventory systems were historically used by companies that sold large quantities of low-value
items.
True False
23. In a periodic inventory system, Purchases is a temporary account.

True False
24. In a periodic inventory system, cost of goods sold is not recorded as each sale occurs.
True False
25. The purchaser usually records a purchase return by a credit memorandum.

True False
26. Trade discounts are entered into the accounting system.
True False
27. Credit terms are the listing of the amounts and timing of payments between a buyer and a seller.
True False
28. The terms 2/10, n/30 means that the seller offers the purchaser a 2% cash discount if the amount is paid in
full within 10 days. Otherwise, the full amount is due in 30 days.
True False
29. Sellers offer a purchase discount to buyers for prompt payment for purchases on account.
True False
30. Z-Mart did not take advantage of a supplier's offer of 2/10, n/30, and paid the invoice at the end of the
month. By not taking the discount Z-Mart lost the equivalent of 18% annual interest on the amount of the
purchase.
True False
31. FOB shipping or FOB factory means ownership of goods transfers to the buyer at the buyer's place of
business.
True False
32. Each sales transaction for sellers using a perpetual inventory system involves recognizing revenue and cost
of goods sold.
True False
33. A credit memorandum informs a customer of a credit to its Accounts Payable account from a sales return or
allowance.
True False
34. A debit to Sales Returns and Allowances and a credit to Accounts Receivable mean that a customer may
have returned merchandise.
True False
35. A journal entry with a debit to cash of $980, a debit to Sales Discounts of $20, and a credit to Accounts
Receivable of $1,000 means that a customer has taken a 10% cash discount for early payment.
True False
36. Sales of $350,000 and net sales of $323,000 may reflect sales discounts of $27,000.
True False
37. The Merchandise Inventory account balance at the end of one period is the amount of beginning inventory
in the next period.
True False
38. A perpetual inventory system is able to directly measure shrinkage.

True False
39. The adjustment to reflect shrinkage is a debit to Income Summary and a credit to Shrinkage Expense.
True False
40. The amount of gross profit for a merchandising business will be the same under both the accrual basis and
the cash basis of accounting.
True False
41. Merchandising sales and costs reported on the income statement usually differ from cash receipts and
payments for the period.
True False
42. A classified multiple-step income statement is a format that shows intermediate totals between sales and net
income and detailed calculations of net sales and cost of goods sold.
True False
43. Operating expenses are classified into two categories: selling expenses and cost of goods sold.
True False
44. Generally accepted accounting principles require companies to use a specific format for financial
statements.
True False
45. The cost of goods sold section of a multiple-step income statement includes beginning and ending
inventories, goods available for sale and operating expenses.
True False
46. Sales Discounts are closed to Income Summary.

True False
47. Accounts unique to merchandising companies include Merchandise Inventory, Sales, Sales Discounts, Sales
Returns and Allowances, and Cost of Goods Sold.
True False
48. Sales Discounts, Sales Returns and Allowances, and Cost of Goods Sold are closed to Income Summary
with debits.
True False
49. A credit to Income Summary of $231,000 and a debit to Income Summary of $216,250 results in profit of
$14,750 transferred to Owner's Capital.
True False
50. The periodic inventory system is superior to the perpetual inventory system in preventing shrinkage.
True False
51. Businesses normally get a full credit for the goods and services tax (GST) and/or Harmonized Sales Tax
(HST) that they have paid.
True False
52. Businesses normally get a full credit for the provincial sales tax (PST) they have paid.
True False
53. Businesses normally get a full credit for both the goods and services tax (GST) and/or Harmonized Sales
Tax (HST), and the provincial sales tax (PST) that they have paid.
True False
54. For a business, goods and services tax (GST) and/or Harmonized Sales Tax (HST) paid is included in the
amount recorded as an asset or an expense when a purchase is made.
True False
55. For a business, provincial sales tax (PST) paid is included in the amount recorded as an asset or an expense
when a purchase is made.
True False
56. Some businesses use only one account to keep track of the amount of goods and services tax (GST) and/or
Harmonized Sales Tax (HST) owed or owing.
True False
57. When a single goods and services tax (GST) or Harmonized Sales Tax (HST) account is used, a credit
balance in the account means that the government owes money to the business.
True False
58. When a single goods and services tax (GST) or Harmonized Sales Tax (HST) account is used, a debit
balance in the account means the government owes money to the business.
True False
59. Provincial sales tax (PST) is normally calculated on the original purchase price plus the goods and services
tax (GST) or Harmonized Sales Tax (HST).
True False
60. Goods and services tax (GST) or Harmonized Sales Tax (HST) is calculated on the original purchase price
plus the provincial sales tax (PST).
True False
61. A merchandising company:
A. Earns net income from buying and selling merchandise.
B. Buys products from manufacturers and sells to retailers.
C. Buys products from manufacturers and sells them to consumers.
D. Reports cost of goods sold on the income statement.
E. All of these answers are correct.
62. Merchandisers:
A. Earn net income from buying and selling merchandise.
B. Receive fees in exchange for services.
C. Earn net income from commissions.
D. Earn net income from fares.
E. Do not report gross profit.
63. Wholesalers:
A. Buy products from manufacturers and sell to retailers.
B. Buy products from other wholesalers and sell to consumers.
C. Buy products from manufacturers and sell to consumers.
D. Buy products from retailers and sell to consumers.
64. Retailers:
A. Buy products from manufacturers and sell to wholesalers.
B. Buy products from wholesalers and sell to other wholesalers.
C. Buy products from manufacturers and wholesalers and sell to consumers.
D. Buy only from wholesalers.
65. Gross profit is:

A. The same as net income.
B. Subtracted from operating income to get net income.
C. Net sales less cost of goods sold.
D. A special general ledger account.
E. Only calculated when using the perpetual inventory system.
66. Cost of goods sold is:
A. Another term for net sales.
B. The term used for the cost of buying and preparing merchandise.
C. An operating expense.
D. Also called gross margin.
E. The cost of goods sold to customers.
67. Z-Mart had sales of $498,100. Cost of goods sold was $143,400. What is the gross profit?
A. $214,600.
B. $215,100.
C. $354,700.
D. $501,900.
E. 40%.
68. Z-Mart had sales of $569,300. Gross profit was $239,106. What is the cost of goods sold?
A. $276,194.
B. $330,194.
C. $357,194.
D. $808,406.
E. 42%.
69. Merchandise inventory is:

A. Reported on the balance sheet under plant and equipment.
B. Products a company owns for resale to customers.
C. Reported on the income statement as an expense.
D. Includes supplies.
E. Included on a service company's balance sheet.
70. The operating cycle of a merchandising company:

A. Begins with the purchase of merchandise.
B. Ends with the collection of cash from the sale of merchandise.
C. Varies among types of businesses.
D. Applies to both cash and credit sales.
71. Merchandise inventory:
A. Is a capital asset.
B. Is a current asset.
C. Can include supplies.
D. Is a type of long term investment.
E. Is an expense.
72. The cash sales operating cycle moves from:

A. Purchases to inventory for sale to cash sales.
B. Purchases to inventory for sale to accounts receivable to cash sales.
C. Inventory for sale to cash sales to purchases.
D. Accounts receivable to purchases to inventory for sale to cash sales.
E. Accounts receivable to inventory for sale to cash sales.
73. A periodic inventory system:

A. Requires updating the inventory account every month.
B. Records the cost of new merchandise purchased in a permanent account.
C. Does not require a physical count of inventory.
D. Records the cost of new merchandise purchased in a temporary account.
74. A perpetual inventory system:

A. Gives a continuous record of the amount of inventory on hand.
B. Uses a Purchases account for the cost of new merchandise purchased.
C. Was historically used by companies that sold large quantities of low-value items.
D. Is not widely used in practice.

A. Gives more timely information.
B. Is widely used in practice.
D. Provides point of sale data.
E. Does not use a Purchases account.
76. In a periodic inventory system:
A. The company records the cost of new merchandise in the permanent Purchases account.
B. The cost of merchandise on hand is determined by relating the quantities on hand to records showing each
item's original cost.
C. The inventory value is not based on a physical count.
D. A continuous record of the amount of inventory on hand is maintained.
E. None of these answers apply.
77. 2/10, n/30 is interpreted as:

A. 2% cash discount if the whole amount is paid within 10 days, the balance is due in 30 days.
B. 10% cash discount if the whole amount is paid within 2 days, the balance is due in 30 days.
C. 30% discount if paid within 2 days.
D. 30% discount if paid within 10 days.
E. 2% discount if paid within 30 days.
78. A trade discount is:

A. A term used by a purchaser to describe a cash discount given to customers for prompt payment.
B. A reduction below a list price.
C. A term used by a seller to describe a cash discount granted to customers for prompt payment.
D. A reduction in price for prompt payment.
E. Also called a rebate.
79. To calculate the total cost of a merchandise purchase, the invoice account must be adjusted for which of the
following?
A. Any discounts given to a purchaser by a supplier.
B. Any returns and allowances received from a supplier.
C. Any freight costs paid by a purchaser.
D. Any taxes or other costs necessary to make the goods ready for sale.
80. Z-Mart uses the perpetual inventory system and recorded the following journal entry:
The transaction was:

A. A purchase.
B. A return.
C. A return and payment of the account payable.
D. A payment of the account payable and recognition of a cash discount taken.
E. A purchase and recognition of a cash discount taken.
81. On December 5, Z-Mart purchased $1,800 worth of merchandise. On December 7, Z-Mart returned $400
worth of merchandise. On December 8, the company paid the balance in full, taking a 2% discount. The amount
of the payment was:
A. $200.
B. $1,372.
C. $1,568.
D. $1,600.
E. $1,800.
82. Z-Mart purchased $5,000 worth of merchandise on credit. Transportation costs were an additional $100,
paid cash to the cartage company on delivery. Z-Mart returned $275 worth of merchandise and paid the invoice
on time, and took a 2% purchase discount. The amount of this payment was:
A. $3,600.50
B. $3,725.00
C. $3,993.50
D. $4,630.50
E. $4,728.50
83. Merchandising companies must account for:

A. Sales.
B. Sales discounts.
C. Sales returns and allowances.
D. Cost of goods sold.
84. Sales returns:

A. Refer to merchandise that customers return to the seller after the sale.
B. Refer to reductions in the selling price of merchandise sold to customers.
C. Represent cash discounts.
D. Represent trade discounts.
E. Are related to purchase discounts.
85. For a merchandiser, each sales transaction involves:

A. Revenue received in the form of a liability from a customer.
B. Recognizing the cost of merchandise sold to a customer.
C. Recognizing cash discounts.
D. Recognizing purchase discounts.
E. Recording accounts payable.
86. Sales returns and allowances:
A. Provide information about dissatisfied customers and the possibility of lost future sales.
B. Are usually recorded in separate contra-revenue accounts.
C. Are omitted from published statements.
D. Represent a reduction of the customer's account receivable.
87. A debit to Sales Returns and Allowances and a credit to Accounts Receivable:
A. Is not possible; it should be a credit to Sales Returns and Allowances and a debit to Accounts Receivable.
B. Recognizes that a customer returned merchandise.
C. Requires a debit memorandum to recognize the customer's return.
D. Recognizes a cash discount taken by a customer.
88. Shrinkage:
A. Refers to the loss of inventory for merchandising companies.
B. Is not able to be directly measured by a perpetual inventory system.
C. Is recognized by debiting Cost of Goods Sold.
D. Can arise because of theft and deterioration of merchandise.
89. An income statement on which the cost of goods sold and operating expenses are added together and
subtracted from net sales in one step to get net income is a(n):
A. Balanced income statement.
B. Single-step income statement.
C. Multiple-step income statement.
D. Merchandise income statement.
E. Unclassified income statement.
90. Expenses that support the overall operations of a business and include the expenses of such activities as
providing accounting services, human resource management, and financial management are called:
A. Operating expenses.
B. Selling expenses.
C. Purchasing expenses.
D. General and administrative expenses.
E. Miscellaneous expenses.
91. Classified multiple-step income statements:
A. Are required by Canada Revenue Agency.
B. Are generally used for internal reporting.
C. Are required for the perpetual system.
D. List cost of goods sold as an operating expense.
92. Gross profit is derived from:

A. Sales.
B. Beginning inventory.
C. Ending inventory.
93. For a merchandising company using the perpetual inventory system, the second closing entry closes debit
balances in:
A. Sales Discounts.
B. Sales Returns and Allowances.
C. Cost of Goods Sold.
D. Operating Expenses.
94. If a merchandising company ends a period with a larger inventory than it owned at the beginning of the
period, then:
A. The cost of goods sold was larger than net purchases.
B. Net income was larger than gross profit.
C. The cost of goods sold was smaller than net purchases.
D. The cost of goods available for sale was smaller than the cost of goods sold.
E. Gross profit was larger than the cost of goods sold.
95. The agreed cost of an item to be purchased by a business on credit is $4,000. The applicable cost will be
debited to advertising expense. The item is subject to 5% goods and services tax (GST) and 7% provincial sales
tax (PST). When this transaction is recorded, what amount will be debited to advertising expense?
A. $4,000
B. $4,200
C. $4,280
D. $4,480
E. None of these answers is correct.
tax (PST). When this transaction is recorded, what amount will be credited to accounts payable?
A. $4,000
B. $4,200
C. $4,240
D. $4,480
tax (PST). When this transaction is recorded, what amount will be recorded as GST Receivable?
A. $200 debit
B. $200 credit
C. $240 debit
D. $240 credit
98. A business sold some inventory that had cost $5,000 before taxes. The sale is subject to 5% goods and
services tax (GST) and 7% provincial sales tax (PST). The business uses a perpetual inventory system. How
much will be credited to the Merchandise Inventory account as a result of this sale?
A. $5,000
B. $5,300
C. $5,350
D. $5,600
99. A business sold some inventory on credit for $5,000 before taxes. The sale is subject to 5% goods and
services tax (GST) and 7% provincial sales tax (PST). The business uses a perpetual inventory system. What is
the amount of the accounts receivable that was recorded as a result of this sale?
A. $5,000
B. $5,300
C. $5,350
D. $5,600
the amount that will be recorded in the GST payable account as a result of this sale?
A. $250 debit
B. $250 credit
C. $350 debit
D. $350 credit
101. Describe the difference between wholesalers and retailers.
102. Identify and explain the components of income for a merchandising company.
103. Describe the attributes of inventory as an asset of a merchandising company.
104. Describe the periodic and perpetual inventory systems.

105. Discuss the difference between the periodic and perpetual inventory systems.
106. Describe the recording process for purchases of merchandise inventory using a perpetual inventory
system.
107. Evenflow had the following transactions for October:
Prepare journal entries to record each of the preceding transactions. Assume a perpetual inventory system.
108. Evenflow had the following sales transactions in January.
Prepare journal entries to record these transactions.

109. Describe the recording process for sales of merchandise inventory using a perpetual inventory system.
110. Explain inventory shrinkage.
111. Explain the difference between single-step and multiple-step income statements.
112. Calculate net sales, gross profit, and gross profit ratio for each of the following situations. Round the gross
profit ratio figure to the nearest whole percent.
a. Which situation has the highest net sales?

b. Which situation has the highest gross profit ratio?
113. Complete the work sheet for the year ended October 31, 2015.
114. Given the following partial income statement information for Ellen's Office Supplies, determine the
missing amounts and fill in the blanks.
115. The following information is available for Oz Systems for the year ended March 31, 2015:
Prepare a multiple-step income statement in good form for Oz Systems.
116. The partially completed income statements for Marshal Advertising Co follow:
Calculate the value for each missing item.

117. Neutron uses a periodic inventory system. Prepare general journal entries to record the following
transactions on the books of Neutron:
118. Fiona's Store had the following transactions during December, the last month of the accounting period:
(1) Prepare general journal entries to record these transactions, using a perpetual inventory system.
(2) Prepare general journal entries to record these transactions, using a periodic inventory system.
119. The following is the trial balance for Roller Skate Store at their year end, December 31, 2015:
Prepare the necessary closing entries at December 31, 2015.

120. Screen Shots Photography Store has the following trial balance at their year end, December 31, 2015.
Prepare a classified multiple-step income statement in good form for Screen Shots Photography Store for their
2015 fiscal year.
121. A(n) _______________ is a middleman who buys products from manufacturers and sells to retailers.
________________________________________
122. Z-Mart purchased $8,750 worth of merchandise, on terms of 2/10, n/30. The invoice was paid within the
discount period. Z-Mart received a discount of _______________.
________________________________________
123. Sales discounts can benefit a seller by _______________ the receipt of cash.
________________________________________
124. A merchandising company's _______________ begins with the purchase of merchandise and ends with the
collection of cash from sales.
________________________________________
125. A(n) _______________ inventory system requires updating the inventory account at the end of a period.
________________________________________
126. Under the _______________ system, each purchase, purchase return and allowance, purchase discount,
and transportation-in transaction is recorded in the _______________ account.
________________________________________
127. Shrinkage can be calculated by comparing _______________ of the inventory with recorded quantities.
________________________________________
128. _______________ expenses support the overall operations of a company.
________________________________________
129. Z-Mart had net sales of $741,800. Its cost of goods sold was _____________ and its resulting gross profit
was $282,884.
________________________________________
130. Match the following terms with the appropriate definition.
1. The description of the amounts and timing of Perpetual

payments that a buyer agrees to make in the future. inventory system ____
2. A notification that the sender has entered a debit in the ::Periodic
recipient's account maintained by the sender. inventory system ____
Discount
3. The time period in which a cash discount is available. period ____
4. The difference between net sales and cost of goods Debit
sold. memorandum ____
5. A notification that the sender has entered a credit in Selling
the recipient's account maintained by the sender. expenses ____
6. A method of accounting that maintains continuous
records of the amount of inventory on hand and cost of Credit
goods sold. memorandum ____
7. The expenses of promoting sales by displaying and
advertising the merchandise, making sales, and
delivering goods to customers. Sales discount ____
8. A method of accounting that records the cost of
inventory purchased but does not track the quantity on
hand or sold to customers; the records are updated
periodically to reflect the results of physical counts of the
items on hand. Gross profit ____
9. A cash discount granted to customers for paying
within the discount period. Credit terms ____
10. The time period that can pass before a customer's
payment is due. Credit period ____
1. Goods a company owns and holds for the purpose

of selling them to its customers. Purchase discount ____
2. The catalogue price of an item before any trade Single-step income
discount is deducted. statement ____
3. The abbreviation for end-of-month; used to
describe credit terms for some transactions. FOB ____
4. Expenses that support the overall operations of a
business and include the expenses of such activities
as providing accounting services, human resource Merchandise
management, and financial management. inventory ____
General and
5. Inventory losses that occur as a result of administrative
shoplifting or deterioration. expense ____
6. A term used by a purchaser to describe a cash
discount granted to the purchaser for paying within
the discount period. EOM ____
7. An income statement format that does not present
intermediate totals other than total expenses. Shrinkage ____
Classified
8. An income statement format that shows several multiple-step income
intermediate totals between sales and net income. statement ____
9. The expenses of promoting sales by displaying
and advertising the merchandise, making sales, and
delivering goods to customers. List price ____
10. The abbreviation for free on board; the
designated point at which ownership of goods passes
to the buyer. Selling expenses ____
05 Key
1. A merchandiser earns net income by buying and selling merchandise.

TRUE
Difficulty: Easy
Larson - Chapter 05 #1
Learning Objective: 05-01 Describe merchandising and identify and explain the important income statement and balance sheet components for a merchandising
company.
Type: Knowledge
2. A service company earns net income by buying and selling merchandise.

FALSE
Difficulty: Easy
company.
Type: Knowledge
3. A wholesaler is a company that buys products from manufacturers and sells them to consumers.
FALSE
Difficulty: Moderate
company.
Type: Knowledge
4. A retailer is a middleman that buys products from manufacturers and sells them to wholesalers.
FALSE
company.
Type: Knowledge
5. Gross profit is also called gross margin.
TRUE
Difficulty: Easy
company.
Type: Knowledge
6. Cost of goods sold represents the cost of buying and preparing merchandise for sale.
FALSE
company.
Type: Knowledge
7. Y-Mart had sales of $350,000. Its cost of goods sold was $200,000. Its gross profit was $550,000.
FALSE
Difficulty: Easy
company.
Type: Application
8. Y-Mart had net sales of $645,000. Its cost of goods was $445,000. Its gross margin was $200,000.
TRUE
Difficulty: Easy
company.
Type: Application
9. Z-Mart had a gross profit of $340,000 based on sales of $700,000. Its cost of goods sold was $350,000.
FALSE
company.
Type: Application
10. Cost of goods sold is reported on both the income statement and the balance sheet.
FALSE
Difficulty: Easy
company.
Type: Knowledge
11. Merchandise inventory refers to products a company owns for purposes of selling to customers.
TRUE
Difficulty: Easy
company.
Type: Knowledge
12. A merchandising company's operating cycle begins with the sale of merchandise and ends with the
collection of cash from the sale.
FALSE
Difficulty: Easy
company.
Type: Knowledge
13. Companies try to lengthen their operating cycles to increase net income.
FALSE
company.
Type: Knowledge
14. Merchandise inventory is included in the Plant and Equipment section of the balance sheet.
FALSE
Difficulty: Easy
company.
Type: Knowledge
15. Merchandise inventory includes merchandise and office supplies.
FALSE
company.
Type: Knowledge
16. Assets tied up in inventory are not productive assets.

TRUE
Difficulty: Hard
company.
Type: Knowledge
17. A company's cost of merchandise available for sale consists of beginning inventory plus the net cost of
purchases minus ending inventory.
FALSE
company.
Type: Knowledge
18. A periodic inventory system requires updating the inventory account at the beginning of an accounting
period.
FALSE
Difficulty: Easy
Learning Objective: 05-02 Describe both perpetual and periodic inventory systems.
Type: Knowledge
19. A perpetual inventory system gives a continuous record of the amount of inventory on hand.
TRUE
Difficulty: Easy
Type: Knowledge
20. In a perpetual inventory system, the cost of inventory purchased is recorded in the Purchases account.
FALSE
Type: Knowledge
21. In a perpetual inventory system, the net cost of purchases is accumulated in the Inventory account.
TRUE
Type: Knowledge
22. Periodic inventory systems were historically used by companies that sold large quantities of low-value
items.
TRUE
Type: Knowledge
23. In a periodic inventory system, Purchases is a temporary account.

TRUE
Difficulty: Easy
Type: Knowledge
24. In a periodic inventory system, cost of goods sold is not recorded as each sale occurs.
TRUE
Type: Knowledge
25. The purchaser usually records a purchase return by a credit memorandum.
FALSE
Learning Objective: 05-03 Analyze and record transactions for merchandise purchases and sales using a perpetual system.
Type: Knowledge
26. Trade discounts are entered into the accounting system.

FALSE
Difficulty: Easy
Type: Knowledge
27. Credit terms are the listing of the amounts and timing of payments between a buyer and a seller.
TRUE
Difficulty: Easy
Type: Knowledge
28. The terms 2/10, n/30 means that the seller offers the purchaser a 2% cash discount if the amount is paid in
full within 10 days. Otherwise, the full amount is due in 30 days.
TRUE
Type: Knowledge
29. Sellers offer a purchase discount to buyers for prompt payment for purchases on account.
FALSE
Type: Knowledge
30. Z-Mart did not take advantage of a supplier's offer of 2/10, n/30, and paid the invoice at the end of the
month. By not taking the discount Z-Mart lost the equivalent of 18% annual interest on the amount of the
purchase.
FALSE
Difficulty: Hard
Type: Application
31. FOB shipping or FOB factory means ownership of goods transfers to the buyer at the buyer's place of
business.
FALSE
Difficulty: Hard
Type: Knowledge
32. Each sales transaction for sellers using a perpetual inventory system involves recognizing revenue and cost
of goods sold.
TRUE
Difficulty: Easy
Type: Knowledge
33. A credit memorandum informs a customer of a credit to its Accounts Payable account from a sales return or
allowance.
FALSE
Type: Knowledge
34. A debit to Sales Returns and Allowances and a credit to Accounts Receivable mean that a customer may
have returned merchandise.
TRUE
Type: Knowledge
35. A journal entry with a debit to cash of $980, a debit to Sales Discounts of $20, and a credit to Accounts
Receivable of $1,000 means that a customer has taken a 10% cash discount for early payment.
FALSE
Type: Application
36. Sales of $350,000 and net sales of $323,000 may reflect sales discounts of $27,000.
TRUE
Type: Application
37. The Merchandise Inventory account balance at the end of one period is the amount of beginning inventory
in the next period.
TRUE
Difficulty: Easy
Learning Objective: 05-04 Prepare adjustments for a merchandising company.
Type: Knowledge
38. A perpetual inventory system is able to directly measure shrinkage.

FALSE
Difficulty: Easy
Type: Knowledge
39. The adjustment to reflect shrinkage is a debit to Income Summary and a credit to Shrinkage Expense.
FALSE
Difficulty: Hard
Type: Knowledge
40. The amount of gross profit for a merchandising business will be the same under both the accrual basis and
the cash basis of accounting.
FALSE
Difficulty: Easy
Learning Objective: 05-05 Define; prepare; and use merchandising income statements.
Type: Knowledge
41. Merchandising sales and costs reported on the income statement usually differ from cash receipts and
payments for the period.
TRUE
Difficulty: Easy
Type: Knowledge
42. A classified multiple-step income statement is a format that shows intermediate totals between sales and net
income and detailed calculations of net sales and cost of goods sold.
TRUE
Difficulty: Easy
Type: Knowledge
43. Operating expenses are classified into two categories: selling expenses and cost of goods sold.
FALSE
Difficulty: Easy
Type: Knowledge
44. Generally accepted accounting principles require companies to use a specific format for financial
statements.
FALSE
Type: Knowledge
45. The cost of goods sold section of a multiple-step income statement includes beginning and ending
inventories, goods available for sale and operating expenses.
FALSE
Type: Knowledge
46. Sales Discounts are closed to Income Summary.

TRUE
Difficulty: Easy
Learning Objective: 05-06 Prepare closing entries for a merchandising company.
Type: Knowledge
47. Accounts unique to merchandising companies include Merchandise Inventory, Sales, Sales Discounts, Sales
Returns and Allowances, and Cost of Goods Sold.
TRUE
Type: Knowledge
48. Sales Discounts, Sales Returns and Allowances, and Cost of Goods Sold are closed to Income Summary
with debits.
FALSE
Type: Knowledge
49. A credit to Income Summary of $231,000 and a debit to Income Summary of $216,250 results in profit of
$14,750 transferred to Owner's Capital.
TRUE
Type: Application
50. The periodic inventory system is superior to the perpetual inventory system in preventing shrinkage.
FALSE
Difficulty: Easy
Learning Objective: 05-07 Record and compare merchandising transactions using both periodic and perpetual inventory systems.
Type: Knowledge
51. Businesses normally get a full credit for the goods and services tax (GST) and/or Harmonized Sales Tax
(HST) that they have paid.
TRUE
Difficulty: Easy
Learning Objective: 05-08 Explain and record Provincial Sales Tax (PST) and Goods and Services Tax (GST).
Type: Knowledge
52. Businesses normally get a full credit for the provincial sales tax (PST) they have paid.
FALSE
Difficulty: Easy
Type: Knowledge
53. Businesses normally get a full credit for both the goods and services tax (GST) and/or Harmonized Sales
Tax (HST), and the provincial sales tax (PST) that they have paid.
FALSE
Type: Knowledge
54. For a business, goods and services tax (GST) and/or Harmonized Sales Tax (HST) paid is included in the
amount recorded as an asset or an expense when a purchase is made.
FALSE
Difficulty: Easy
Type: Knowledge
55. For a business, provincial sales tax (PST) paid is included in the amount recorded as an asset or an expense
when a purchase is made.
TRUE
Difficulty: Easy
Type: Knowledge
56. Some businesses use only one account to keep track of the amount of goods and services tax (GST) and/or
Harmonized Sales Tax (HST) owed or owing.
TRUE
Type: Knowledge
57. When a single goods and services tax (GST) or Harmonized Sales Tax (HST) account is used, a credit
balance in the account means that the government owes money to the business.
FALSE
Type: Knowledge
58. When a single goods and services tax (GST) or Harmonized Sales Tax (HST) account is used, a debit
balance in the account means the government owes money to the business.
TRUE
Type: Knowledge
59. Provincial sales tax (PST) is normally calculated on the original purchase price plus the goods and services
tax (GST) or Harmonized Sales Tax (HST).
FALSE
Type: Knowledge
60. Goods and services tax (GST) or Harmonized Sales Tax (HST) is calculated on the original purchase price
plus the provincial sales tax (PST).
FALSE
Type: Knowledge
61. A merchandising company:

A. Earns net income from buying and selling merchandise.
B. Buys products from manufacturers and sells to retailers.
C. Buys products from manufacturers and sells them to consumers.
D. Reports cost of goods sold on the income statement.
Difficulty: Easy
company.
Type: Knowledge
62. Merchandisers:
A. Earn net income from buying and selling merchandise.
B. Receive fees in exchange for services.
C. Earn net income from commissions.
D. Earn net income from fares.
Difficulty: Easy
company.
Type: Knowledge
63. Wholesalers:
A. Buy products from manufacturers and sell to retailers.
B. Buy products from other wholesalers and sell to consumers.
C. Buy products from manufacturers and sell to consumers.
D. Buy products from retailers and sell to consumers.
company.
Type: Knowledge
64. Retailers:
A. Buy products from manufacturers and sell to wholesalers.
B. Buy products from wholesalers and sell to other wholesalers.
C. Buy products from manufacturers and wholesalers and sell to consumers.
D. Buy only from wholesalers.
company.
Type: Knowledge
65. Gross profit is:

A. The same as net income.
B. Subtracted from operating income to get net income.
C. Net sales less cost of goods sold.
D. A special general ledger account.
E. Only calculated when using the perpetual inventory system.
Difficulty: Easy
company.
Type: Knowledge
66. Cost of goods sold is:

A. Another term for net sales.
B. The term used for the cost of buying and preparing merchandise.
C. An operating expense.
D. Also called gross margin.
E. The cost of goods sold to customers.
Difficulty: Easy
company.
Type: Knowledge
67. Z-Mart had sales of $498,100. Cost of goods sold was $143,400. What is the gross profit?
A. $214,600.
B. $215,100.
C. $354,700.
D. $501,900.
E. 40%.
company.
Type: Application
68. Z-Mart had sales of $569,300. Gross profit was $239,106. What is the cost of goods sold?
A. $276,194.
B. $330,194.
C. $357,194.
D. $808,406.
E. 42%.
company.
Type: Application
69. Merchandise inventory is:

A. Reported on the balance sheet under plant and equipment.
B. Products a company owns for resale to customers.
C. Reported on the income statement as an expense.
D. Includes supplies.
E. Included on a service company's balance sheet.
Difficulty: Easy
company.
Type: Knowledge
70. The operating cycle of a merchandising company:
A. Begins with the purchase of merchandise.
B. Ends with the collection of cash from the sale of merchandise.
C. Varies among types of businesses.
D. Applies to both cash and credit sales.
Difficulty: Easy
company.
Type: Knowledge
71. Merchandise inventory:

A. Is a capital asset.
B. Is a current asset.
C. Can include supplies.
D. Is a type of long term investment.
E. Is an expense.
company.
Type: Knowledge
72. The cash sales operating cycle moves from:

A. Purchases to inventory for sale to cash sales.
B. Purchases to inventory for sale to accounts receivable to cash sales.
C. Inventory for sale to cash sales to purchases.
D. Accounts receivable to purchases to inventory for sale to cash sales.
E. Accounts receivable to inventory for sale to cash sales.
Difficulty: Hard
company.
Type: Knowledge
A. Requires updating the inventory account every month.
B. Records the cost of new merchandise purchased in a permanent account.
C. Does not require a physical count of inventory.
D. Records the cost of new merchandise purchased in a temporary account.
Type: Knowledge
74. A perpetual inventory system:

A. Gives a continuous record of the amount of inventory on hand.
B. Uses a Purchases account for the cost of new merchandise purchased.
D. Is not widely used in practice.
Type: Knowledge

A. Gives more timely information.
B. Is widely used in practice.
D. Provides point of sale data.
E. Does not use a Purchases account.
Type: Knowledge
76. In a periodic inventory system:
A. The company records the cost of new merchandise in the permanent Purchases account.
B. The cost of merchandise on hand is determined by relating the quantities on hand to records showing each
item's original cost.
C. The inventory value is not based on a physical count.
D. A continuous record of the amount of inventory on hand is maintained.
E. None of these answers apply.
Difficulty: Hard
Type: Knowledge
77. 2/10, n/30 is interpreted as:

A. 2% cash discount if the whole amount is paid within 10 days, the balance is due in 30 days.
B. 10% cash discount if the whole amount is paid within 2 days, the balance is due in 30 days.
C. 30% discount if paid within 2 days.
D. 30% discount if paid within 10 days.
E. 2% discount if paid within 30 days.
Difficulty: Easy
Type: Knowledge
78. A trade discount is:

A. A term used by a purchaser to describe a cash discount given to customers for prompt payment.
B. A reduction below a list price.
C. A term used by a seller to describe a cash discount granted to customers for prompt payment.
D. A reduction in price for prompt payment.
E. Also called a rebate.
Difficulty: Easy
Type: Knowledge
79. To calculate the total cost of a merchandise purchase, the invoice account must be adjusted for which of the
following?
A. Any discounts given to a purchaser by a supplier.
B. Any returns and allowances received from a supplier.
C. Any freight costs paid by a purchaser.
D. Any taxes or other costs necessary to make the goods ready for sale.
Type: Knowledge
80. Z-Mart uses the perpetual inventory system and recorded the following journal entry:
The transaction was:

A. A purchase.
B. A return.
C. A return and payment of the account payable.
D. A payment of the account payable and recognition of a cash discount taken.
E. A purchase and recognition of a cash discount taken.
Type: Application
81. On December 5, Z-Mart purchased $1,800 worth of merchandise. On December 7, Z-Mart returned $400
worth of merchandise. On December 8, the company paid the balance in full, taking a 2% discount. The amount
of the payment was:
A. $200.
B. $1,372.
C. $1,568.
D. $1,600.
E. $1,800.
Type: Application
82. Z-Mart purchased $5,000 worth of merchandise on credit. Transportation costs were an additional $100,
paid cash to the cartage company on delivery. Z-Mart returned $275 worth of merchandise and paid the invoice
on time, and took a 2% purchase discount. The amount of this payment was:
A. $3,600.50
B. $3,725.00
C. $3,993.50
D. $4,630.50
E. $4,728.50
Type: Application
83. Merchandising companies must account for:

A. Sales.
B. Sales discounts.
C. Sales returns and allowances.
Difficulty: Easy
Type: Knowledge
84. Sales returns:

A. Refer to merchandise that customers return to the seller after the sale.
B. Refer to reductions in the selling price of merchandise sold to customers.
C. Represent cash discounts.
D. Represent trade discounts.
E. Are related to purchase discounts.
Difficulty: Easy
Type: Knowledge
85. For a merchandiser, each sales transaction involves:
A. Revenue received in the form of a liability from a customer.
B. Recognizing the cost of merchandise sold to a customer.
C. Recognizing cash discounts.
D. Recognizing purchase discounts.
E. Recording accounts payable.
Type: Knowledge
86. Sales returns and allowances:

A. Provide information about dissatisfied customers and the possibility of lost future sales.
B. Are usually recorded in separate contra-revenue accounts.
C. Are omitted from published statements.
D. Represent a reduction of the customer's account receivable.
Type: Knowledge
87. A debit to Sales Returns and Allowances and a credit to Accounts Receivable:
A. Is not possible; it should be a credit to Sales Returns and Allowances and a debit to Accounts Receivable.
B. Recognizes that a customer returned merchandise.
C. Requires a debit memorandum to recognize the customer's return.
D. Recognizes a cash discount taken by a customer.
Type: Knowledge
88. Shrinkage:
A. Refers to the loss of inventory for merchandising companies.
B. Is not able to be directly measured by a perpetual inventory system.
C. Is recognized by debiting Cost of Goods Sold.
D. Can arise because of theft and deterioration of merchandise.
Type: Knowledge
89. An income statement on which the cost of goods sold and operating expenses are added together and
subtracted from net sales in one step to get net income is a(n):
A. Balanced income statement.
B. Single-step income statement.
C. Multiple-step income statement.
D. Merchandise income statement.
E. Unclassified income statement.
Difficulty: Easy
Type: Knowledge
90. Expenses that support the overall operations of a business and include the expenses of such activities as
providing accounting services, human resource management, and financial management are called:
A. Operating expenses.
B. Selling expenses.
C. Purchasing expenses.
D. General and administrative expenses.
E. Miscellaneous expenses.
Difficulty: Easy
Type: Knowledge
91. Classified multiple-step income statements:

A. Are required by Canada Revenue Agency.
B. Are generally used for internal reporting.
C. Are required for the perpetual system.
D. List cost of goods sold as an operating expense.
Type: Knowledge
92. Gross profit is derived from:
A. Sales.
B. Beginning inventory.
C. Ending inventory.
Difficulty: Hard
Type: Knowledge
93. For a merchandising company using the perpetual inventory system, the second closing entry closes debit
balances in:
A. Sales Discounts.
B. Sales Returns and Allowances.
C. Cost of Goods Sold.
D. Operating Expenses.
Type: Knowledge
94. If a merchandising company ends a period with a larger inventory than it owned at the beginning of the
period, then:
A. The cost of goods sold was larger than net purchases.
B. Net income was larger than gross profit.
C. The cost of goods sold was smaller than net purchases.
D. The cost of goods available for sale was smaller than the cost of goods sold.
E. Gross profit was larger than the cost of goods sold.
Difficulty: Hard
Type: Knowledge
tax (PST). When this transaction is recorded, what amount will be debited to advertising expense?
A. $4,000
B. $4,200
C. $4,280
D. $4,480
Type: Application
tax (PST). When this transaction is recorded, what amount will be credited to accounts payable?
A. $4,000
B. $4,200
C. $4,240
D. $4,480
Type: Application
tax (PST). When this transaction is recorded, what amount will be recorded as GST Receivable?
A. $200 debit
B. $200 credit
C. $240 debit
D. $240 credit
Type: Application
98. A business sold some inventory that had cost $5,000 before taxes. The sale is subject to 5% goods and
services tax (GST) and 7% provincial sales tax (PST). The business uses a perpetual inventory system. How
much will be credited to the Merchandise Inventory account as a result of this sale?
A. $5,000
B. $5,300
C. $5,350
D. $5,600
Type: Application
the amount of the accounts receivable that was recorded as a result of this sale?
A. $5,000
B. $5,300
C. $5,350
D. $5,600
Type: Application
the amount that will be recorded in the GST payable account as a result of this sale?
A. $250 debit
B. $250 credit
C. $350 debit
D. $350 credit
Type: Application
101. Describe the difference between wholesalers and retailers.
A wholesaler is a middleman who buys products from manufacturers and sells to retailers or other wholesalers.
A retailer is a middleman who buys products from manufacturers or wholesalers and sells them to consumers.
company.
Type: Knowledge
102. Identify and explain the components of income for a merchandising company.
The basic components of income start with net sales. From net sales is subtracted the cost of goods sold. The
resulting amount is called gross profit or gross margin.
Difficulty: Easy
company.
Type: Knowledge
103. Describe the attributes of inventory as an asset of a merchandising company.
Merchandise inventory is a current asset. It represents merchandise held for sale to customers.
company.
Type: Knowledge
104. Describe the periodic and perpetual inventory systems.
A periodic inventory system provides for updating the inventory account at the end of the period. The
information is used to adjust the quantity and cost of both goods on hand and goods sold. A perpetual inventory
system provides a continuous record of the amount of inventory on hand.
Type: Knowledge
105. Discuss the difference between the periodic and perpetual inventory systems.
Under the periodic system the cost of inventory is recorded when purchased. However, the quantity on hand or
sold to customers is not tracked. The accounting records are updated at the end of each period to reflect the
results of physical counts of the items on hand.
Under the perpetual system a continuous record of the cost of inventory on hand and the cost of goods sold is
kept.
Difficulty: Hard
Type: Knowledge
106. Describe the recording process for purchases of merchandise inventory using a perpetual inventory
system.
Purchases net of trade discounts are added (debited) to the Merchandise Inventory account. Purchases discounts
and purchases returns and allowances are subtracted (credited) from Merchandise Inventory. Transportation-in
costs are added (debited) to Merchandise Inventory.
Difficulty: Hard
Type: Knowledge
107. Evenflow had the following transactions for October:
Prepare journal entries to record each of the preceding transactions. Assume a perpetual inventory system.
Type: Application
108. Evenflow had the following sales transactions in January.
Prepare journal entries to record these transactions.
Difficulty: Easy
Type: Application
109. Describe the recording process for sales of merchandise inventory using a perpetual inventory system.
Sales are recorded at list price less any trade discounts. The cost of items sold is transferred from Merchandise
Inventory to Cost of Goods Sold. Refunds or credits for returned merchandise are recorded (debited) in Sales
Returns and Allowances. When cash discounts from the sales price are taken, the seller records (debits) the
amount of the discounts in Sales Discounts.
Difficulty: Hard
Type: Knowledge
110. Explain inventory shrinkage.
Shrinkage is the loss of merchandise inventory due to theft or deterioration.
Difficulty: Easy
Type: Knowledge
111. Explain the difference between single-step and multiple-step income statements.
A single-step income statement format includes cost of goods sold as an operating expense, and shows only one
subtotal for total expenses.
A multiple-step income statement shows intermediate totals between sales and net income. It also includes
detailed computations of net sales and cost of goods sold.
Type: Knowledge
112. Calculate net sales, gross profit, and gross profit ratio for each of the following situations. Round the gross
profit ratio figure to the nearest whole percent.
a. Which situation has the highest net sales?

b. Which situation has the highest gross profit ratio?
a. Situation (b) has the highest net sales.

b. Situation (b) has the highest gross profit ratio.
Type: Application
113. Complete the work sheet for the year ended October 31, 2015.
Difficulty: Hard
Type: Application
114. Given the following partial income statement information for Ellen's Office Supplies, determine the
missing amounts and fill in the blanks.
Type: Application
115. The following information is available for Oz Systems for the year ended March 31, 2015:
Prepare a multiple-step income statement in good form for Oz Systems.
Difficulty: Hard
Type: Application
116. The partially completed income statements for Marshal Advertising Co follow:
Calculate the value for each missing item.
Difficulty: Hard
Type: Application
117. Neutron uses a periodic inventory system. Prepare general journal entries to record the following
transactions on the books of Neutron:
Type: Application
118. Fiona's Store had the following transactions during December, the last month of the accounting period:
(1) Prepare general journal entries to record these transactions, using a perpetual inventory system.
(2) Prepare general journal entries to record these transactions, using a periodic inventory system.
Type: Application
119. The following is the trial balance for Roller Skate Store at their year end, December 31, 2015:
Prepare the necessary closing entries at December 31, 2015.
Type: Application
120. Screen Shots Photography Store has the following trial balance at their year end, December 31, 2015.
Prepare a classified multiple-step income statement in good form for Screen Shots Photography Store for their
2015 fiscal year.
Difficulty: Hard
Type: Application
121. A(n) _______________ is a middleman who buys products from manufacturers and sells to retailers.
Wholesaler
company.
Type: Knowledge
122. Z-Mart purchased $8,750 worth of merchandise, on terms of 2/10, n/30. The invoice was paid within the
discount period. Z-Mart received a discount of _______________.
$175
Type: Application
123. Sales discounts can benefit a seller by _______________ the receipt of cash.
Speeding up
Type: Knowledge
124. A merchandising company's _______________ begins with the purchase of merchandise and ends with the
collection of cash from sales.
Operating cycle
Difficulty: Easy
company.
Type: Knowledge
125. A(n) _______________ inventory system requires updating the inventory account at the end of a period.
Periodic
Difficulty: Easy
Type: Knowledge
126. Under the _______________ system, each purchase, purchase return and allowance, purchase discount,
and transportation-in transaction is recorded in the _______________ account.
Perpetual; Merchandise Inventory
Type: Knowledge
127. Shrinkage can be calculated by comparing _______________ of the inventory with recorded quantities.
A physical count
Difficulty: Easy
Type: Knowledge
128. _______________ expenses support the overall operations of a company.

General and administrative
Difficulty: Easy
Type: Knowledge
129. Z-Mart had net sales of $741,800. Its cost of goods sold was _____________ and its resulting gross profit
was $282,884.
$458,916
Difficulty: Easy
Type: Application
1. The description of the amounts and timing of payments Perpetual

that a buyer agrees to make in the future. inventory system 6
2. A notification that the sender has entered a debit in the ::Periodic
recipient's account maintained by the sender. inventory system 8
Discount
3. The time period in which a cash discount is available. period 3
Debit
4. The difference between net sales and cost of goods sold. memorandum 2
5. A notification that the sender has entered a credit in the Selling
recipient's account maintained by the sender. expenses 7
6. A method of accounting that maintains continuous
records of the amount of inventory on hand and cost of Credit
goods sold. memorandum 5
advertising the merchandise, making sales, and delivering
goods to customers. Sales discount 9
8. A method of accounting that records the cost of
inventory purchased but does not track the quantity on hand
or sold to customers; the records are updated periodically to
reflect the results of physical counts of the items on hand. Gross profit 4
9. A cash discount granted to customers for paying within
the discount period. Credit terms 1
10. The time period that can pass before a customer's
payment is due. Credit period 10
company.
Type: Knowledge
1. Goods a company owns and holds for the purpose of

selling them to its customers. Purchase discount 6
2. The catalogue price of an item before any trade Single-step income
discount is deducted. statement 7
3. The abbreviation for end-of-month; used to describe
credit terms for some transactions. FOB 10
4. Expenses that support the overall operations of a
business and include the expenses of such activities as
providing accounting services, human resource Merchandise
management, and financial management. inventory 1
General and
5. Inventory losses that occur as a result of shoplifting administrative
or deterioration. expense 4
6. A term used by a purchaser to describe a cash
discount granted to the purchaser for paying within the
discount period. EOM 3
7. An income statement format that does not present
intermediate totals other than total expenses. Shrinkage 5
8. An income statement format that shows several Classified multiple-
intermediate totals between sales and net income. step income statement 8
advertising the merchandise, making sales, and
delivering goods to customers. List price 2
10. The abbreviation for free on board; the designated
point at which ownership of goods passes to the buyer. Selling expenses 9
company.
Type: Knowledge
05 Summary
Category # of Questi
ons
Difficulty: Easy 47
Difficulty: Hard 15
Difficulty: Moderate 69
Larson - Chapter 05 131
Learning Objective: 05- 36
01 Describe merchandising and identify and explain the important income statement and balance sheet components for a merchandisi
ng company.
Learning Objective: 05-02 Describe both perpetual and periodic inventory systems. 16
Learning Objective: 05-03 Analyze and record transactions for merchandise purchases and sales using a perpetual system. 33
Learning Objective: 05-04 Prepare adjustments for a merchandising company. 8
Learning Objective: 05-05 Define; prepare; and use merchandising income statements. 21
Learning Objective: 05-06 Prepare closing entries for a merchandising company. 6
Learning Objective: 05-07 Record and compare merchandising transactions using both periodic and perpetual inventory systems. 4
Learning Objective: 05-08 Explain and record Provincial Sales Tax (PST) and Goods and Services Tax (GST). 16
Type: Application 31
Type: Knowledge 100

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Fundamental Accounting Principles Canadian Canadian 14th Edition Larson Test Bank 1

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Solution Manual for Fundamental Accounting Principles Canadian

Canadian 14th Edition by Larson ISBN 1259066509

Solution manual: https://testbankpack.com/p/solution-manual-for-fundamental-accounting-principles-

Test bank: https://testbankpack.com/p/test-bank-for-fundamental-accounting-principles-canadian-

1. A merchandiser earns net income by buying and selling merchandise.

2. A service company earns net income by buying and selling merchandise.

5. Gross profit is also called gross margin.

15. Merchandise inventory includes merchandise and office supplies.

16. Assets tied up in inventory are not productive assets.

23. In a periodic inventory system, Purchases is a temporary account.

25. The purchaser usually records a purchase return by a credit memorandum.

38. A perpetual inventory system is able to directly measure shrinkage.

46. Sales Discounts are closed to Income Summary.

65. Gross profit is:

69. Merchandise inventory is:

70. The operating cycle of a merchandising company:

72. The cash sales operating cycle moves from:

73. A periodic inventory system:

74. A perpetual inventory system:

75. A periodic inventory system:

77. 2/10, n/30 is interpreted as:

78. A trade discount is:

The transaction was:

83. Merchandising companies must account for:

84. Sales returns:

85. For a merchandiser, each sales transaction involves:

92. Gross profit is derived from:

101. Describe the difference between wholesalers and retailers.

103. Describe the attributes of inventory as an asset of a merchandising company.

104. Describe the periodic and perpetual inventory systems.

107. Evenflow had the following transactions for October:

108. Evenflow had the following sales transactions in January.

Prepare journal entries to record these transactions.

110. Explain inventory shrinkage.

a. Which situation has the highest net sales?

Prepare a multiple-step income statement in good form for Oz Systems.

Calculate the value for each missing item.

Prepare the necessary closing entries at December 31, 2015.

130. Match the following terms with the appropriate definition.

1. The description of the amounts and timing of Perpetual

1. Goods a company owns and holds for the purpose

1. A merchandiser earns net income by buying and selling merchandise.

2. A service company earns net income by buying and selling merchandise.

16. Assets tied up in inventory are not productive assets.

23. In a periodic inventory system, Purchases is a temporary account.

26. Trade discounts are entered into the accounting system.

38. A perpetual inventory system is able to directly measure shrinkage.

46. Sales Discounts are closed to Income Summary.

61. A merchandising company:

65. Gross profit is:

66. Cost of goods sold is:

69. Merchandise inventory is:

71. Merchandise inventory:

72. The cash sales operating cycle moves from:

74. A perpetual inventory system:

75. A periodic inventory system:

77. 2/10, n/30 is interpreted as:

78. A trade discount is:

The transaction was:

83. Merchandising companies must account for:

84. Sales returns:

86. Sales returns and allowances:

91. Classified multiple-step income statements:

103. Describe the attributes of inventory as an asset of a merchandising company.