Q: Which of the following best describes the calculation for gross profit percentage?

$$\text{Gross Profit Percentage} = \frac{\text{Gross Profit}}{\text{Net Sales Revenue}} \times 100$$

Question 1

Which of the following best describes the main difference between a perpetual and a periodic inventory system?

Accepted Answer

A perpetual system continuously updates inventory records for each purchase and sale.

Question 2

A retailer purchases $$10,000 of merchandise inventory on account with terms 2/10, n/30. If the retailer returns 2$$,000 of inventory and pays the remaining balance within the discount period, what is the amount of cash paid?

Accepted Answer

$7,840

Question 3

Which of the following journal entries correctly records the payment of a $$5,000 invoice (with 400 $$freight-in) under terms 3/10, n/30, paid within the discount period?

Accepted Answer

Debit Accounts Payable $$5,400; Credit Cash 5$$,238; Credit Merchandise Inventory $162

Question 4

A company’s income statement shows: Sales Revenue $$200,000, Sales Returns and Allowances 5$$,000, Sales Discounts $$3,000, and Cost of Goods Sold 120$$,000. What is the company’s gross profit?

Accepted Answer

$72,000

Question 5

Which of the following is NOT a feature of a multi-step income statement for a merchandiser?

Accepted Answer

Investing activities section

Question 6

Under FOB shipping point, which party is responsible for paying the freight charges and when does ownership of the goods transfer?

Accepted Answer

The buyer pays the freight and ownership transfers when goods leave the seller.

Question 7

A company’s beginning inventory is $$15,000, purchases are 60$$,000, and ending inventory is $10,000. What is the cost of goods sold?

Accepted Answer

$65,000

Question 8

Which account is credited when a purchaser returns merchandise inventory in a perpetual inventory system?

Accepted Answer

Inventory

Question 9

A company’s Merchandise Inventory account shows an unadjusted balance of $$50,000. A physical count reveals only 48$$,000 on hand. What is the journal entry to adjust for inventory shrinkage?

Accepted Answer

Debit Cost of Goods Sold $$2,000; Credit Merchandise Inventory 2$$,000

Question 10

Which of the following best describes the calculation for gross profit percentage?

Accepted Answer

$$	ext{Gross Profit Percentage} = \frac{	ext{Gross Profit}}{	ext{Net Sales Revenue}} 	imes 100$$

Question 11

Which of the following is a correct closing entry for a merchandiser’s revenue accounts?

Accepted Answer

Debit Sales Revenue; Credit Income Summary

Question 12

A company purchases $$697,710 of inventory, returns 150$$,000, takes $$9,510 in discounts, and pays 36$$,400 in freight-in. What is the net cost of inventory purchased?

Accepted Answer

$574,600

Question 13

Which of the following is true regarding sales returns and allowances?

Accepted Answer

They are recorded as a contra-revenue account.

Question 14

A company sells goods for $$5,000 on account with terms 2/10, n/30. The customer returns 1$$,000 of goods and pays the balance within the discount period. How much cash does the company receive?

Accepted Answer

$3,920

Question 15

Which of the following is NOT included in the calculation of net sales revenue?

Accepted Answer

Cost of Goods Sold

Question 16

Which of the following best describes the journal entry to record a sale of merchandise for cash in a perpetual inventory system?

Accepted Answer

Debit Cash; Credit Sales Revenue. Debit Cost of Goods Sold; Credit Merchandise Inventory.

Question 17

Which of the following is an example of an operating expense on a multi-step income statement?

Accepted Answer

Salaries and Wages Expense

Question 18

A company’s adjusted trial balance shows: Inventory $$25,000, Sales Revenue 162$$,400, Sales Returns and Allowances $$4,800, Sales Discounts 3$$,600, Cost of Goods Sold $$110,000, Rent Revenue 6$$,000, Freight-Out $$1,800, Rent Expense 8$$,800, and Salaries and Wages Expense $22,000. What is the amount closed to Income Summary for total expenses?

Accepted Answer

$142,600

Question 19

Which of the following best describes the effect of a purchase discount taken by the buyer in a perpetual inventory system?

Accepted Answer

It decreases the Merchandise Inventory account.

Merchandising Operations in Financial Accounting: Chapter 5 Study Guide

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