Question 1

A company buys footwear and clothing from manufacturers,which it resells to discount stores in a large urban area.This company is an example of a:
A)wholesale merchandising company.
B)service company.
C)retail merchandising company.
D)secondary service company.

Accepted Answer

This is a wholesaler because the company does not sell products to the final consumer.

Question 2

Sleepy Head Coffee Shop buys coffee,mugs,and pastries from Morning Show Co.for sale to consumers.What type of company is Sleepy Head Coffee Shop?
A)Retail merchandiser
B)Wholesale merchandiser
C)Manufacturer
D)Service business

Accepted Answer

Merchandising companies differ in that their cycle begins with buying products,which are sold to customers,which leads to collecting cash that can be used to pay operating expenses and buy more inventory.Merchandising companies are called retailers when they sell directly to individual consumers and wholesalers when they sell their inventory to retail businesses for resale to consumers.Manufacturers make rather than buy the products they sell.Service companies sell services to customers.

Question 3

Which of the following is an activity common to the operations of merchandising,manufacturing,and service companies?
A)Producing the product
B)Incurring operating expenses
C)Buying goods or raw materials
D)Selling a physical product

Accepted Answer

Regardless of the type of business,all businesses incur operating expenses.

Question 4

Seasons has sales of $42,000,beginning inventory of $4,900,purchases of $24,500,and ending inventory of $3,500.The cost of goods sold is:
A)$29,400.
B)$25,900.
C)$16,100.
D)$23,100.

Accepted Answer

Cost of goods sold = Beginning inventory + Purchases − Ending inventory
= $4,900 + $24,500 − $3,500 = $25,900

Question 5

Cost of goods sold reports the:
A)cost of merchandise available to sell.
B)cost of merchandise purchased.
C)cost times the quantity of goods sold.
D)selling price times the quantity of goods sold.

Accepted Answer

Sales Revenue and Cost of Goods Sold indicate the total selling price and cost of all goods that the merchandiser did sell to customers during the period.

Question 6

Which line item would be found on a merchandiser's income statement and not on a service firm's?
A)Inventory
B)Service Revenue
C)Depreciation Expense
D)Cost of Goods Sold

Accepted Answer

Merchandisers report an expense called Cost of Goods Sold,which represents the total cost of all goods sold to customers during the period.Service companies do not incur this expense because they do not sell goods.

Question 7

The receipt of cash is one of the operating activities of:
A)companies that sell goods but not companies that sell services.
B)companies that sell to consumers but do not sell to other companies.
C)merchandising,manufacturing,and service companies.
D)companies that sell goods they bought from others but not of companies that make the goods they sell.

Accepted Answer

All types of businesses have operating activities that involve cash receipts.

Question 8

Sales Revenue reports the:
A)cost of merchandise available to sell.
B)cost of merchandise purchased.
C)cost times the quantity of goods sold.
D)selling price times the quantity of goods sold.

Accepted Answer

Sales Revenue and Cost of Goods Sold indicate the total selling price and cost of all goods that the merchandiser did sell to customers during the period.

Question 9

Broad,Inc.had a beginning inventory of $50,000 and an ending inventory of $80,000.Its Cost of Goods Sold for the year was $970,000.What was the amount of purchases that it made for the year?
A)$940,000
B)$1,000,000
C)$1,050,000
D)$1,060,000

Accepted Answer

Ending inventory = Beginning inventory + Purchases − Cost of goods sold
Purchases = Ending inventory − Beginning inventory + Cost of goods sold
= $80,000 − $50,000 + $970,000 = $1,000,000

Question 10

Which of the following is inventory?
A)Tangible property held for sale in the normal course of business.
B)Office supplies that a company plans to use in the next few months.
C)Equipment used to manufacture products which will be sold later.
D)Raw materials and work in process.

Accepted Answer

Inventory consists of goods acquired for resale to customers.

Question 11

Madison Manufacturing's ending inventory count was $65,000,cost of goods sold was $35,100,and purchases were $72,800,its beginning inventory must have been:
A)$42,900.
B)$172,900.
C)$102,700.
D)$27,300.

Accepted Answer

Cost of goods sold = Beginning inventory + Purchases − Ending inventory
Beginning inventory = Cost of goods sold − Purchases + Ending inventory
= $35,100 − $72,800 + $65,000 = $27,300

Question 12

________ sell their inventory to ________ for resale to consumers.
A)Wholesalers;retailers
B)Retailers;wholesalers
C)Manufacturers;wholesalers
D)Manufacturers;service companies

Accepted Answer

Wholesalers sell their inventory to retail businesses who then sell it to consumers.

Question 13

Inventory is reported as a(n)________ on the ________.
A)current asset;balance sheet
B)current asset;balance sheet and income statement
C)expense;income statement
D)expense;balance sheet

Accepted Answer

A merchandiser reports inventory as a current asset on its balance sheet because it expects to sell the inventory within the next twelve months or their operating cycle,whichever is shorter.

Question 14

Orbit,Inc.has sales of $28,000,beginning inventory of $3,500,purchases of $17,500,and ending inventory of $4,900.The cost of goods sold is:
A)$16,100.
B)$21,000.
C)$28,000.
D)$11,900.

Accepted Answer

Cost of goods sold = Beginning inventory + Purchases − Ending inventory
= $3,500 + $17,500 − $4,900 = $16,100

Question 15

Elm Corporation is a merchandising company.The year began with inventory of $35,100,Purchases for the year were $67,600,and the Ending Inventory was $18,200.What is the Cost of Goods Sold that would be reported on the income statement?
A)$120,900
B)$50,700
C)$14,300
D)$84,500

Accepted Answer

Ending inventory = Beginning inventory + Purchases − Cost of goods sold
Cost of goods sold = Beginning inventory + Purchases − Ending inventory
= $35,100 + $67,600 − $18,200 = $84,500

Question 16

Which line item would be found on a merchandiser's balance sheet and not on a service firm's?
A)Supplies
B)Cost of Goods Sold
C)Inventory
D)Sales Revenue

Accepted Answer

Service companies sell services to customers.Merchandising companies differ in that their cycle begins with buying products,which are sold to customers,which leads to collecting cash that can be used to pay operating expenses and buy more inventory.Merchandisers report Inventory on their balance sheets.

Question 17

A series of activities that generates revenues and collects cash from customers is called:
A)the operating cycle.
B)the financing cycle.
C)the accounting cycle.
D)the perpetual cycle.

Accepted Answer

The operating cycle is a series of activities that a company undertakes to generate revenues and,ultimately,cash.

Question 18

Which of the following is an activity in the operations of a manufacturer,but not in the operations of a merchandising or service company?
A)Selling goods to consumers
B)Receiving cash
C)Selling goods to other firms
D)Buying raw materials

Accepted Answer

Manufacturers process raw materials into a finished product.

Question 19

Inventory reports the:
A)cost of goods available for sale.
B)cost of merchandise purchased and sold.
C)cost of goods that have been delivered to customers.
D)selling price times the quantity of goods sold.

Accepted Answer

Inventory reports the merchandiser's total cost of acquiring goods that it has not yet sold.Or,in other words,Inventory reports the cost of the goods that are available for sale to customers.

Question 20

Which of the following is a merchandising company?
A)General Motors
B)H&R Block
C)The Gap
D)Proctor & Gamble

Accepted Answer

Merchandising companies,such as The Gap,are called retailers when they sell directly to individual consumers and wholesalers when they sell their inventory to retail businesses for resale to consumers.General Motors and Proctor and Gamble are manufacturers and H&R Block is a service provider.

Quiz 6: Merchandising Operations and the Multistep Income Statement

A company buys footwear and clothing from manufacturers,which it resells to discount stores in a large urban area.This company is an example of a:

Sleepy Head Coffee Shop buys coffee,mugs,and pastries from Morning Show Co.for sale to consumers.What type of company is Sleepy Head Coffee Shop?

Which of the following is an activity common to the operations of merchandising,manufacturing,and service companies?

Seasons has sales of $42,000,beginning inventory of $4,900,purchases of $24,500,and ending inventory of $3,500.The cost of goods sold is:

Cost of goods sold reports the:

Which line item would be found on a merchandiser's income statement and not on a service firm's?

The receipt of cash is one of the operating activities of:

Sales Revenue reports the:

Broad,Inc.had a beginning inventory of $50,000 and an ending inventory of $80,000.Its Cost of Goods Sold for the year was $970,000.What was the amount of purchases that it made for the year?

Which of the following is inventory?

Madison Manufacturing's ending inventory count was $65,000,cost of goods sold was $35,100,and purchases were $72,800,its beginning inventory must have been:

sell their inventory to for resale to consumers.

Inventory is reported as a(n) on the .

Orbit,Inc.has sales of $28,000,beginning inventory of $3,500,purchases of $17,500,and ending inventory of $4,900.The cost of goods sold is:

Elm Corporation is a merchandising company.The year began with inventory of $35,100,Purchases for the year were $67,600,and the Ending Inventory was $18,200.What is the Cost of Goods Sold that would be reported on the income statement?

Which line item would be found on a merchandiser's balance sheet and not on a service firm's?

A series of activities that generates revenues and collects cash from customers is called:

Which of the following is an activity in the operations of a manufacturer,but not in the operations of a merchandising or service company?

Inventory reports the:

Which of the following is a merchandising company?