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Exam 3: Accounting for Merchandising Businesses

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Question 51

True/False

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When Tiffany & Co.discontinued Iridesse,a chain of stores dedicated to pearl-only jewelry,due to losses sustained since its founding,Tiffany & Co.recorded an expense equal to the amount of the cumulative operating losses.

A) True
B) False

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Question 52

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The gross margin for the year 2012 is:

A) $7,250.
B) $4,250.
C) $8,150.
D) $9,350.

E) All of the above
F) None of the above

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Question 53

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The Gross Margin line appears on a single-step income statement but not on a multistep income statement.

The balance in the Merchandise Inventory account at December 31,2013 is:

Which of the following would be primarily a merchandising business?

Give an example of a product cost for a retailing business.

Rice Company sold merchandise costing $1,600 for $2,500 cash.All of the merchandise was later returned by the customer.If the perpetual inventory method is used,what effect will the sales return have on the accounting equation?

An entry to record the amount of inventory shrinkage decreases both assets and equity.

A company using the perpetual inventory method paid cash for transportation-in.Which of the following choices reflects the effects of this event on the financial statements?

What type of financial statement matches sales revenue items with related expense items and distinguishes between recurring operating activities and nonoperating items such as gains and losses?

If goods are shipped FOB destination,who is responsible for the shipping costs - the buyer or the seller?

Kotsay Co.sold goods with the terms 1/10,n/30.What do the terms mean?

The following information for the year 2012 is taken from the accounts of Thornwood Company.The company uses the periodic inventory method. Based on this information,the inventory at December 31,2012 is

The Operating Income line appears on a multistep income statement but not on a single-step income statement.

Youkilis Company paid $2,000 of selling expenses with cash.Show how the transaction would affect Youkilis's financial statements.

Income statements that display a single comparison of all revenues minus all expenses are called single-step income statements.

Merchandising businesses

Indicate how accounting for lost and stolen merchandise differs between firms using a perpetual inventory system and those using a periodic inventory system.Which system provides the best way to identify and account for such losses,and why?

What is the relationship between gross margin and net income?

Operating income is the amount of income that is generated from the normal recurring operations of a business.