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Exam 4: Accounting for Merchandising Businesses

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Question 41

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A company has a net income of $39,000 and depreciation expenses of $9,000. During the year, its accounts payable balance decreased by $5,000. What is the net cash flow from operating activities using the indirect method for preparing the statement of cash flows?

A) $48,000
B) $53,000
C) $35,000
D) $43,000

E) All of the above
F) B) and C)

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Question 42

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If a $20,000 sale is made on January 1, with terms of 2/10, n/30, how much would the discount be if payment is made on January 9?

A) $0
B) $200
C) $1,000
D) $400

E) A) and B)
F) C) and D)

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Question 43

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Using a perpetual inventory system, the return of merchandise purchased on account includes a(n) :

The merchandise inventory account is found on the balance sheet.

When the seller offers a sales discount, even if borrowing has to be done, it is generally advantageous for the buyer to pay within the discount period.

If title to merchandise purchases passes to the buyer when the goods are delivered to the buyer, the terms are:

There are two alternatives to reporting cash flows from operating activities in the statement of cash flows: (1) the direct method and (2) the indirect method.

Merchandise is sold for $2,500, terms FOB destination, 2/10, n/30, with transportation costs of $150. If $500 of the merchandise is returned prior to payment and the invoice is paid within the discount period, the amount of the sales discount is $40.

It is usual for the credit period to begin with the date the merchandise is received by the buyer.

Deana, Inc. Deana, Inc. purchased merchandise for $500,000, received credit for purchase returns of $25,000, took purchase discounts of $10,000, and paid transportation in of $20,000. Refer to Deana, Inc. What is the total cost of merchandise purchased?

Multiple-step income statements show:

East, Inc. had beginning inventory of $10,000, purchases of $25,000, and ending inventory of $5,000. What is East's cost of merchandise sold?

Gross profit is determined by subtracting the cost of merchandise sold from what?

Under the perpetual inventory system, the cost of merchandise sold is recorded when sales are made.

Which of the following would not affect the operating activities section of the statement of cash flows, using the indirect method?

When someone purchases merchandise and incurs the cost of transportation, these costs of purchasing inventory are added to the cost of the inventory.

Revenue from sources other than the primary operating activity of a business is called other income.

What is the term applied to the excess of net revenue from sales over the cost of merchandise sold?

Which of the following is not considered when figuring net purchases?

Operating expenses are subtracted from fees earned for a service business and from gross profit for a merchandising business.