Question 1

Sales revenues are earned during the period cash is collected from the buyer.

Accepted Answer

Sales revenues are recognized at the time of sale or delivery of goods or services, regardless of when cash is collected from the buyer. Cash collection may occur before or after the sale, but it does not affect the recognition of revenue.

Question 2

The primary source of revenue for a wholesaler is

Accepted Answer

The primary source of revenue for a wholesaler is the sale of merchandise. Wholesalers purchase large quantities of goods from manufacturers and then sell them to retailers, who ultimately sell them to consumers. The difference between the price the wholesaler paid for the goods and the price for which they sell them to retailers is their profit.

Question 3

The steps in the accounting cycle are different for a merchandiser than for a service enterprise.

Accepted Answer

The accounting cycle for a merchandiser includes additional steps such as recording purchases of inventory, recording sales of inventory, and adjusting inventory accounts.

Question 4

A perpetual inventory system would likely be used by a(n)

Accepted Answer

A perpetual inventory system is best suited for businesses with high-value items and a low volume of inventory turnover. An automobile dealership typically meets these criteria as they sell high-value vehicles and typically have a limited inventory turnover.

Question 5

For a merchandiser, all accounts that affect the determination of income are closed to the Income Summary account.

Accepted Answer

The answer of For a merchandiser, all accounts that affect...

Question 6

A periodic inventory system requires a detailed inventory record of inventory items.

Accepted Answer

A periodic inventory system does not maintain a day-to-day record of inventory items; it calculates inventory levels at specific intervals, typically at the end of an accounting period.

Question 7

Under a perpetual inventory system, acquisition of merchandise for resale is debited to the

Accepted Answer

The answer of Under a perpetual inventory system, acquisition of...

Question 8

An enterprise that sells goods to customers is known as a

Accepted Answer

A retailer is an enterprise that sells goods to customers. A proprietorship refers to a business owned and run by a single individual. A corporation is a legal entity that is separate from its owners and is authorized to act as a single entity. A service firm offers services rather than physical goods.

Question 9

Which of the following expressions is incorrect?

Accepted Answer

Operating expenses minus cost of goods sold is not the correct formula for finding gross profit. The correct formula for gross profit is sales minus cost of goods sold.

Question 10

Which of the following would be considered a service firm?

Accepted Answer

The answer of Which of the following would be considered...

Question 11

A merchandiser that sells directly to consumers is a

Accepted Answer

The answer of A merchandiser that sells directly to consumers...

Question 12

In a perpetual inventory system, cost of goods sold is recorded

Accepted Answer

In a perpetual inventory system, cost of goods sold is recorded with each sale as the system updates the inventory and cost of goods sold accounts in real-time.

Question 13

Retailers and wholesalers are both considered merchandisers.

Accepted Answer

Both retailers and wholesalers are involved in the sale of merchandise, making them both merchandisers.

Question 14

A merchandiser has different types of adjusting entries than a service company.

Accepted Answer

The answer of A merchandiser has different types of adjusting...

Question 15

The journal entry to record a return of merchandise purchased on account under a perpetual inventory system would credit

Accepted Answer

The return of merchandise purchased on account would result in a reduction of the amount owed to the supplier, Accounts Payable, which would be credited. The account Purchase Returns and Allowances would also be credited to reflect the decrease in inventory caused by the return. Sales and Merchandise Inventory would not be affected by the return since it does not involve a sale to a customer.

Question 16

The revenue recognition principle applies to merchandisers by recognizing sales revenues when they are earned.

Accepted Answer

The revenue recognition principle applies to all types of businesses, including merchandisers, and requires that sales revenues should be recognized when they are earned, regardless of when payment is received.

Question 17

Which of the following is a true statement about inventory systems?

Accepted Answer

Perpetual inventory systems require more detailed inventory records because they track inventory levels in real-time and update inventory records with each purchase or sale. Periodic inventory systems do not require as detailed of inventory records because they only determine the cost of goods sold at the end of a period through a physical inventory count.

Question 18

If a company determines cost of goods sold each time a sale occurs, it

Accepted Answer

In a perpetual inventory system, cost of goods sold is determined each time a sale occurs as the system continuously updates inventory levels and costs.

Question 19

To grant a customer a sales return, the seller credits Sales Returns and Allowances.

Accepted Answer

The answer of To grant a customer a sales return,...

Question 20

Under a perpetual inventory system, the cost of goods sold is determined each time a sale occurs.

Accepted Answer

In a perpetual inventory system, the cost of goods sold is updated continuously as soon as a sale occurs through the use of computer software or other inventory tracking methods. This allows for real-time tracking of inventory levels and costs, as well as accurate determination of the cost of goods sold with each sale.

Quiz 8: Accounting for Merchandisingoperations in Hospitality