(1) Which one of the following is not a difference between a retail business and a service business?

a. in what is sold
b. the inclusion of gross profit in the income statement
c. accounting equation
d. merchandise inventory included in the balance sheet
(2) C. Accounting Equation
(3) Net Income plus operating expenses is equal to

a. cost of merchandise sold

b. cost of merchandise available for sale
c. net sales
d. gross profit
(4) D. Gross Profit
(5)
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(10)Generally, the revenue account for merchandising business is entitled

a. Sales
b. Fees Earned
c. Gross Sales
d. Gross Profit
(11)A. Sales
(12)
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(14)
(15)What is the term applied to the excess of net revenue from sales over the cost of merchandise
sold?
(16)A. Gross Profit
(17)The term "inventory" can indicate

a. merchandise held for sale in the normal course of business

b. equipment used to manufacture products
c. supplies
d. any asset
(18)A. merchandise held for sale in the normal course of business
(19)A company using the periodic inventory system has the following account balances:
Merchandise Inventory at the beginning of the year, $3600; Freight-In, $650; Purchases,
$10,700; Purchases Returns and Allowances, $1950; Purchases Discounts, $330. The cost of
merchandise purchased is equal to
 a. $12, 670
b. $9,070
c. $8,420
d. $17,230
(20)B. $9,070
(21)A company, using the periodic inventory system, has merchandise inventory costing $175 on
hand at the beginning of hte period. During the period, merchandise costing $635 is purchased.
At year-end, merchandise inventory costing $160 is on hand. The cost of merchandise sold for
the year is

a. $970
b. $650
c. $300
d. $620
(22)B. $650
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(25)
(26)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
(27)A. selling expenses
(28)
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(30)
(31)Office salaries, depreciation of office equipment, and office supplies are examples of what type
of expense?

a. selling expense
b. miscellaneous expense
c. administrative expense
d. other expense
(32)C. administrative expense
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(35)
(36)The form of income statement that derives its name from the fact that the total of all expenses is
deducted from the total of all revenues is called a

a. multiple-step statement
 b. revenue statement
c. report-form statement
d. single-step statement
(37)D. single-step statement
(38)
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(40)
(41)Multiple-step income statements show

a. gross profit but not income from operations

b. neither gross profit nor income from operations
c. both gross profit and income from operations
d. income from operations but not gross profit
(42)C. both gross profit and income from operations
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(45)
(46)When the three sections of a balance sheet are presented on a page in a downward sequence, it
is called the

a. account form
b. comparative form
c. horizontal form
d. report form
(47)D. report form
(48)The statement of owner's equity shows

a. only net income, beginning and ending capital

b. only total assets, beginning and ending capital
c. only net income, beginning capital, and withdrawals
d. all the changes in the owner's capital as a result of net income, net loss additional
investments, and withdrawals
(49)D. all the changes in the owner's capital as a result of net income, net loss additional
investments, and withdrawals
(50)Merchandise inventory is classified on the balance sheet as a

a. Current Liability
b. Current Asset
c. Long-Term Asset
d. Long-Term Liability
(51)B. Current Asset
(52)
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(54)
(55)Which account is not classified as a selling expense?

a. Sales Salaries
b. Freight-Out
c. Freight-In
d. Advertising Expense
(56)C. Freight-In
(57)
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(59)
(60)The primary difference between a periodic and perpetual inventory system is that a

a. periodic system determines the inventory on hand at the end of the accounting period
b. periodic system keeps a record showing the inventory on hand at all times
c. periodic system provides an easy means to determine inventory shrinkage
d. period system records the cost of the sale on the date the sale is made
(61)A. periodic system determines the inventory on hand at the end of the accounting period
(62)
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(64)
(65)The inventory system employing accounting records that continuously disclose the amount of
inventory is called

a. retail
b. periodic
c. physical
d. perpetual
(66)D. perpetual
(67)
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(69)
(70)When the perpetual inventory system is used, the inventory sold is shown on the income
statement as

a. cost of merchandise sold

b. purchases
c. purchases returns and allowances
d. net purchases
(71)A. cost of merchandise sold
(72)When comparing a retail business to a service business, the financial statement that changes the
most is the

a. Balance Sheet
b. Income Statement
 c. Statement of Owner's Equity
d. Statement of Cash Flow
(73)B. Income Statement
(74)When comparing a retail business to a service business, the financial statement that changes the
least is the
(75)C. Statement of Owner's Equity
(76)Gross Profit is equal to:

a. sales plus (sales discounts, returns, and allowances plus cost of merchandise sold
b. sales plus (sales returns, allowances; less sales discounts, less cost of merchandise sold
c. sales plus sales discounts less sales returns and allowances less cost of merchandise sold
d. sales less (sales discounts and sales returns and allowances) less cost of merchandise sold
(77)D. sales less (sales discounts and sales returns and allowances) less cost of merchandise sold
(78)Where are selling and administrative expenses found on the multiple-step income statement?

a. before gross profit

b. after sales and before gross profit
c. after net income before expenses
d. after gross profit
(79)D. after gross profit
(80)
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(82)
(83)Dorman Co. sold merchandise to Smith Co. on account, $23,500, terms 2/15, net 45. The cost of
the merchandise sold is $16,000. Dorman Co. issued a credit memo for $1,750 for merchandise
returned that originally cost $1,400. The Smith Co. paid paid invoice within the discount period.
What is amount of net sales from the above transactions?

a. $23,030
b. $21,750
c. $21,315
d. $13,808
(84)C. $21,315
(85)Using a perpetual inventory system, the entry to record the sale of merchandise on account
includes a

a. debit to Sales
b. debit to Merchandise Inventory
c. credit to Merchandise Inventory
d. credit Account Receivable
(86)C. credit to Merchandise Inventory
(87)
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(90)Which of the following accounts has a normal debit balance?

a. Accounts Payable
b. Sales Returns and Allowances
c. Sales
d. Interest Revenue
(91)B. Sales Returns and Allowances
(92)
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(94)
(95)Merchandise is ordered on December 1; the merchandise is shipped by the seller and the invoice
is prepared, dated, and mailed by the seller on December 3; the merchandise is received by the
buyer on December 8; the entry is made in the buyer's accounts on December 10. The credit
period begins with what date?

a. December 1
b. December 3
c. December 8
d. December 10
(96)B. December 3
(97)