1. Sales revenue less cost of goods sold is called net profit.
A.True
B.False


2. In a perpetual inventory system the cost of goods sold is determined and recorded each time a sale occurs.
A.True
B.False


3. Sales Returns and Allowances is a contra revenue account to Sales and has a normal debit balance.
A.True
B.False


4. Sales taxes are considered to be revenue to the company.
A.True
B.False


5. A multiple-step income statement provides users with more information about a company's performance by distinguishing between operating and non-operating activities.
A.True
B.False


6. Gross profit is equal to:
A.sales revenue less operating expenses.
B.sales revenue less cost of goods sold.
C.net income less operating expenses.
D.net income less cost of goods sold.


7. The cost of goods sold is determined and recorded each time a sale occurs in:
A.a periodic inventory system only.
B.a perpetual inventory system only.
C.both a periodic and perpetual inventory system.
D.neither a periodic nor perpetual inventory system.


8. In a perpetual inventory system, a return of defective merchandise by a purchaser is recorded by crediting:
A.purchases.
B.purchase returns.
C.purchase allowance.
D.merchandise inventory.


9. Under a perpetual inventory system, when merchandise is purchased for resale to customers:
A.purchases is debited.
B.merchandise inventory is debited.
C.cost of goods sold is debited.
D.selling expenses is debited.


10. FOB shipping point means that the:
A.goods are placed free on board to the purchaser's place of business.
B.purchaser pays the freight costs.
C.seller pays the freight costs.
D.common carrier pays the freight costs.


11. The journal entry to record a credit sales transaction when using a perpetual inventory system would include credits to the following accounts:
A.cost of goods sold and sales
B.sales and inventory.
C.cost of goods sold and inventory.
D.accounts receivable and cost of goods sold.


12. Net sales is equal to sales less:
A.cost of goods sold.
B.selling expenses.
C.advertising expense.
D.sales returns and allowances.


13. Selling expenses include all of the following except:
A.advertising expense.
B.delivery expense.
C.accounting expense.
D.store salaries expense.


14. Which of the following accounts is not closed to Owner's Capital?
A.Cost of goods sold.
B.Merchandise inventory.
C.Sales.
D.Sales discounts.


15. All of the following items would be reported as other revenues and gains except:
A.gain from disposition of capital assets.
B.interest revenue.
C.rent revenue.
D.sales revenue.


16. Income from operations is equal to:
A.net sales less cost of goods sold.
B.net sales less operating expenses.
C.gross profit less other expenses and losses.
D.net sales less cost of goods sold and operating expenses.


17. Which of the following is shown on both a multiple-step and a single-step income statement?
A.Gross profit.
B.Net sales.
C.Income from operations.
D.Other expenses and losses.


18. In a classified balance sheet, merchandise inventory is reported as a:
A.capital asset.
B.current asset.
C.non-current asset.
D.long-term investment.


19. The inventory turnover is calculated by dividing:
A.cost of goods sold by ending inventory.
B.net sales by cost of goods sold.
C.cost of goods sold by average inventory.
D.net sales by average inventory.


20. Days sales in inventory is calculated by dividing:
A.365 days by the inventory turnover.
B.the inventory turnover by 365 days.
C.cost of goods sold by the average inventory.
D.net sales by 365 days.



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