Question 1

A company must solely be a service company,a merchandising company,or a manufacturer.
BT: Knowledge

Accepted Answer

A company can operate in multiple sectors, offering services, selling merchandise, and manufacturing products simultaneously.

Question 2

Operating activities involve both inflows and outflows of cash.
BT: Knowledge

Accepted Answer

Operating activities refer to the day-to-day activities involved in running a business, and therefore involve both inflows (such as from sales revenue) and outflows (such as from operating expenses) of cash.

Question 3

Coca-Cola reported net sales revenues of $19.8 billion and cost of goods sold of $6.0 billion.Its gross profit percentage was:

Accepted Answer

Gross profit percentage is calculated as (Net Sales - Cost of Goods Sold) / Net Sales. For Coca-Cola, it is ($19.8 billion - $6.0 billion) / $19.8 billion = 69.7%.

Question 4

Sales revenue is $367,810 while sales returns and allowances and sales discounts total $24,180.The cost of goods sold is $216,490,operating and other expenses are $28,500,and the company pays $31,640 in income tax.Which of the following is true?

Accepted Answer

Net sales can be calculated as: 
Sales revenue - (Sales returns and allowances + Sales discounts) 
= $367,810 - ($24,180) 
= $343,630

Gross profit can be calculated as: 
Net sales - Cost of goods sold 
= $343,630 - $216,490 
= $127,140

Therefore, the correct answer is C.

Question 5

A retail chain sells 100 designer sheet sets for $199.99 a set; these sheet sets cost the company $69.95 a set to buy.The company also sells 1,000 basic sheet sets for $49.99 a set; these sheet sets cost the company $24.99 to buy.Other operating expenses total $10,000.Which of the following statements is true?

Accepted Answer

The gross profit percentage for designer sheets is calculated as ((199.99 - 69.95) / 199.99) * 100 = 65%, and for basic sheets as ((49.99 - 24.99) / 49.99) * 100 = 50%.

Question 6

All of the following are examples of a control procedure except:

Accepted Answer

Collusion of employees is not a control procedure, it is a risk that control procedures aim to mitigate. The other choices (seggregation of duties, document procedures, and restrict access) are all examples of control procedures.

Question 7

Coca-Cola reported net sales revenues of $18.8 billion and cost of goods sold of $5.6 billion while PepsiCo reported revenues of $22.3 billion and cost of goods sold of $9.3 billion.Which of the following statements is correct?

Accepted Answer

While PepsiCo generated more revenue than Coca-Cola, their cost of goods sold was also significantly higher, resulting in a lower gross profit percentage.

Question 8

The cost of goods sold equation is:

Accepted Answer

The cost of goods sold equation is the cost of the merchandise that a retailer or manufacturer sells to customers. It can be calculated by taking the beginning inventory, adding the purchases made during the period, and then subtracting any purchase discounts and purchase returns and allowances. Finally, subtract the ending inventory that was counted at the end of the period. Therefore, choice C is the correct equation for calculating cost of goods sold.

Question 9

Over a two-year period,Coca-Cola's gross profit percentage went from 70.4% to 69.7%.Which of the following was the cause of this change?

Accepted Answer

The answer of Over a two-year period,Coca-Cola's gross profit percentage...

Question 10

BC Company has a gross profit percentage of 61% while AB Company has a gross profit percentage of 37%.Which of the following is true?

Accepted Answer

Gross profit percentage alone does not determine net income, sales volume, or efficiency in controlling expenses. Other factors such as operating expenses, sales volume, and other income or expenses also affect these outcomes.

Question 11

Unlike manufacturers and merchandisers,service companies do not incur operating expenses.
BT: Knowledge

Accepted Answer

This statement is false. Service companies do incur operating expenses such as salaries, rent, utilities, and supplies just like manufacturers and merchandisers. However, the nature of their expenses may differ due to the type of service being provided.

Question 12

Internal controls include the policies and procedures a company implements to protect against theft of assets,to promote efficiency,and to ensure compliance with laws and regulations.
BT: Knowledge

Accepted Answer

Internal controls are designed to mitigate risks and ensure that the company's resources are used efficiently and effectively. They help prevent theft, fraud, and errors, and ensure compliance with laws and regulations.

Question 13

Under the periodic inventory system:

Accepted Answer

Under the periodic inventory system, inventory is only counted at the end of each accounting period. The ending inventory from the previous period can be used as the beginning inventory for the next period.

Question 14

A company has net sales of $612,850 and cost of goods sold of $441,252.The company's gross profit percentage is:

Accepted Answer

Gross Profit Percentage = (Gross Profit/Net Sales) x 100

Gross Profit = Net Sales - Cost of Goods Sold
Gross Profit = $612,850 - $441,252
Gross Profit = $171,598

Gross Profit Percentage = (171,598/612,850) x 100
Gross Profit Percentage = 28%

Question 15

A company starts the period with 100 computers in inventory,purchases 30 more,returns 4 of them to suppliers,and has 83 in inventory at the end of the period.Which of the following statements is true?

Accepted Answer

Net purchases can be calculated as follows:

Beginning inventory + Purchases - Returns = Ending Inventory
100 + 30 - 4 = 83

Therefore, net purchases would equal 26 computers. None of the other options are correct based on the given information.

Question 16

A company sells three different products.The first costs $8 and sells for $16,the second costs $18 and sells for $45,while the third costs $36 and sells for $120.

Accepted Answer

Option A is true as the gross profit percentage for the first product is 50%, the second product is 60%, and the third product is 70%. 
Option B is true as the third product has the highest markup percentage of 233.33% ($120 - $36)/$120. 
Option C is also valid as persuading customers to switch to the third product will increase the overall gross profit percentage of the company. Therefore, Options A, B, and C are correct, making Option D the correct answer.

Question 17

A company has gross profit of $58,300 and a gross profit percentage of 25%.What is the company's net sales?

Accepted Answer

The formula for calculating net sales is:

Net sales = Gross profit / Gross profit percentage

Substituting the given values, we get:

Net sales = 58,300 / 0.25
Net sales = $233,200

Therefore, the correct answer is A) $233,200.

Question 18

If a company achieves a small increase in its gross profit percentage from one year to the next,the company:

Accepted Answer

The answer of If a company achieves a small increase...

Question 19

At the beginning of the quarter Purrfect Pets has $30,000 in inventory.During the quarter the company purchases $7,900 of new inventory,has purchase returns of $700,and purchase discounts of $200.At the end of the quarter the balance in the Inventory account is $26,500.What is the cost of goods sold?

Accepted Answer

The cost of goods sold (COGS) is calculated as: Beginning Inventory + Purchases - Purchase Returns - Purchase Discounts - Ending Inventory. So, $30,000 + $7,900 - $700 - $200 - $26,500 = $10,500.

Question 20

Which of the following statements is true?

Accepted Answer

Gross profit percentages can vary significantly across different industries due to differences in cost structures and pricing strategies. Therefore, comparing gross profit percentages across industries may not provide meaningful insights. However, analyzing the gross profit percentage of a single company over time can reveal trends, efficiencies, or issues within that company's operations, making it a useful tool for internal analysis.

Quiz 6: Merchandising Operations and the Multistep Income Statement

A company must solely be a service company,a merchandising company,or a manufacturer. BT: Knowledge

Operating activities involve both inflows and outflows of cash. BT: Knowledge