Week 3 questions

1) The operating cycle of a merchandising company is ordinarily shorter than that of a service company

True

False

 

2) The operating cycle of a merchandising company is ordinarily ___________________ that of a service firm.

shorter than

longer than

has fewer steps than

the same as

 

3) Which statement is true when recording the sale of goods for cash in a perpetual inventory system?

Only one journal entry is necessary. It will record the receipt of cash and sales revenue.

Two journal entries are necessary: one to record the receipt of cash and reduction of inventory, and one to record the the cost of goods sold and sales revenue.

Two journal entries are necessary: one to record the receipt of cash and sales revenue, and one to record the cost of goods sold and to reduce inventory.

Only one journal entry is necessary. It will record cost of goods sold and reduce of inventory.

4) Net income is $15,000, operating expenses are $20,000, and net sales total $75,000. How much is cost of goods sold?

$35,000

$60,000

$40,000

$15,000

5) Which one of the following will result in gross profit?

Sales revenue less cost of goods sold

Operating expenses less cost of goods sold

Operating expenses less net income

Sales revenue less operating expenses

6) Under what system is cost of goods sold determined at the end of an accounting period?

Periodic inventory system

Double entry inventory system

Perpetual inventory system

Single entry inventory system

7) Net income is $15,000, operating expenses are $20,000, net sales total $75,000, and sales revenues total $95,000. How much is the profit margin?

79%

20%

16%

75%

8) In a periodic inventory system, when is the cost of the merchandise sold determined?

At the time of the sale

At the end of the period

Either at time of sale, end of period or periodically during the period

Periodically during the period

9) Waymon Co. has net sales of $100,000, cost of goods sold of $70,000, and operating expenses of $18,000. What is its gross profit?

Gross profit

$

10) Masie Ascot believes revenues from credit sales may be recorded before they are collected in cash. Do you agree? Explain.