Question 1

Cost of Goods Sold is part of general and administrative expenses.

Accepted Answer

Cost of Goods Sold (COGS) is not part of general and administrative expenses (G&A). COGS are the direct costs associated with producing or acquiring goods sold by a company, while G&A expenses are indirect costs related to the overall operation and management of a business.

Question 2

The Balance Sheet format that lists assets above liabilities is the:

Accepted Answer

The report form of a balance sheet lists assets at the top, followed by liabilities and shareholders' equity, resembling a standard financial report.

Question 3

A company has net sales of $126,000,cost of goods sold of $72,000,operating expenses of $38,000,and other expenses of $3,000.The company's operating income is:

Accepted Answer

Operating income is calculated as net sales minus cost of goods sold and operating expenses. So, $126,000 - $72,000 - $38,000 = $16,000.

Question 4

A 10-year note payable to be repaid in equal payments throughout the 10-year period,would be listed on the Balance Sheet as:

Accepted Answer

The portion of the note payable due within the next year is classified as a current liability, while the remaining balance is classified as a long-term liability.

Question 5

The Statement of Retained Earnings for a merchandiser is prepared differently than that of a service business.

Accepted Answer

The Statement of Retained Earnings is prepared in the same manner for both merchandising and service businesses, as it primarily reflects the changes in retained earnings over a period, regardless of the business type.

Question 6

On the Balance Sheet,assets are listed in alphabetical order.

Accepted Answer

Assets are usually listed in order of liquidity or how easily they can be converted into cash, not alphabetical order.

Question 7

Long-term assets on the Balance Sheet represent assets that will last longer than one operating cycle of the business.

Accepted Answer

The answer of Long-term assets on the Balance Sheet represent...

Question 8

Net income is generally referred to as the company's "bottom line."

Accepted Answer

Net income is also known as the profit after deducting all expenses and taxes. It is called the "bottom line" because it is the final amount that the company earns or loses.

Question 9

Greene Company purchases $5,000 inventory with shipping terms,FOB Columbus.Greene is based in Dayton and the supplier is based in Columbus.The shipping costs are $460.What is the cost of Greene's inventory?

Accepted Answer

According to the shipping terms FOB Columbus, the supplier is responsible for the shipping costs until the inventory reaches the Columbus location. Therefore, the shipping costs of $460 should be added to the cost of inventory, resulting in a total cost of $5,460 for Greene Company's inventory.

Question 10

A company has net sales of $126,000,cost of goods sold of $72,000,operating expenses of $38,000,and other expenses of $3,000.The company's gross profit is:

Accepted Answer

Gross profit is calculated as net sales minus the cost of goods sold. Therefore, $126,000 - $72,000 = $54,000.

Question 11

Merchandise is sold FOB shipping point.If the seller prepays the delivery costs and adds them to the customer's invoice,the entry the seller must prepare,will:

Accepted Answer

The answer of Merchandise is sold FOB shipping point.If the...

Question 12

Most merchandising businesses prepare a single-step Income Statement.

Accepted Answer

Most merchandising businesses prepare a multiple-step Income Statement, which includes details such as gross profit, operating expenses, and net income.

Question 13

Current assets are listed on the Balance Sheet in:

Accepted Answer

Current assets are listed in order of liquidity, which means that they are listed in the order of how easily they can be converted into cash. This is important for assessing a company's ability to meet short-term financial obligations. Examples of current assets include cash, accounts receivable, inventory, and prepaid expenses.

Question 14

A company has net sales of $223,000,cost of goods sold $85,000,operating expenses of $54,000,and other expenses of $6,000.The company's operating income is:

Accepted Answer

Operating income is calculated as Net Sales - Cost of goods sold - Operating expenses. So, the operating income of the company would be:

Operating income = 223,000 - 85,000 - 54,000 = $84,000.

Hence the best choice for the company's operating income is C) $84,000.

Question 15

A company has net sales of $126,000,cost of goods sold of $72,000,operating expenses of $38,000,and other expenses of $3,000.The company's net income is:

Accepted Answer

Net income is calculated as net sales minus cost of goods sold, operating expenses, and other expenses: $126,000 - $72,000 - $38,000 - $3,000 = $13,000.

Question 16

A company has net sales of $223,000,cost of goods sold $85,000,operating expenses of $54,000,and other expenses of $6,000.The company's net income is:

Accepted Answer

The answer of A company has net sales of $223,000,cost...

Question 17

Wages Payable,Income Taxes Payable and Accounts Payable are:

Accepted Answer

Wages Payable, Income Taxes Payable and Accounts Payable are all examples of short-term liabilities, which are debts that must be paid within one year or less. They represent amounts owed by the company to employees, tax authorities and suppliers, respectively.

Question 18

Which of the following is NOT a selling expense?

Accepted Answer

Utility bill is not a direct selling expense as it is not directly related to the sales process. Advertising, salary of salesperson, and commissions are all examples of direct selling expenses as they are incurred specifically for the purpose of generating sales.

Question 19

The accounting principle that relates to the expensing of freight charges is:

Accepted Answer

The matching principle requires that expenses be matched to the revenues they help to generate. Freight charges are often incurred as a result of shipping products to customers, and therefore are considered a necessary cost to generate revenues. As a result, the matching principle dictates that these expenses should be recognized in the same period as the associated revenues they help to generate. Therefore, the cost of freight should be expensed in the same period that the corresponding revenue is earned.

Question 20

Net Sales minus Cost of Goods Sold equals Gross Profit.

Accepted Answer

This is a basic accounting equation where the net sales are reduced by the cost of goods sold to calculate the gross profit.

Quiz 4: Accounting for a Merchandising Business