43. MULTIPLE CHOICE QUESTIONS Income from operations is gross profit less a administrative expenses. b. operating expenses. c. other expenses and losses. d. selling expenses. An enterprise which sells goods to customers is known as a a. proprietorship. b. corporation. c. retailer. d. service firm. 45. Which of the following would not be considered a merchandising company? a. Retailer b. Wholesaler C. Service firm d. Dot Com firm 46. A. A merchandising company that sells directly to consumers is a a. retailer. b. wholesaler C. broker. d. service company. 5-8 Test Bank for Accounting Principles, Eighth Edition 47. Two categories of expenses for merchandising companies are a. cost of goods sold and financing expenses b. operating expenses and financing expenses. C. cost of goods sold and operating expenses. d. sales and cost of goods sold. 48. The primary source of revenue for a wholesaler is a investment income. b. service fees. c. the sale of merchandise. d. the sale of fixed assets the company owns. 49. Sales revenue less cost of goods sold is called a gross profit. b. net profit c. net income. d. marginal income. After gross profit is calculated, operating expenses are deducted to determine a gross margin. b. net income. c. gross profit on sales. d. net margin. 51. Cost of goods sold is determined only at the end of the accounting period in a. a perpetual inventory system. b. a periodic inventory system. c. both a perpetual and a periodic inventory system. d. neither a perpetual nor a periodic inventory system. 52. Which of the following expressions is incorrect? a. Gross profit-operating expenses = net income b. Sales - cost of goods sold-operating expenses = net income c. Net income + operating expenses = gross profit d. Operating expenses - cost of goods sold - gross profit 53. Detailed records of goods held for resale are not maintained under a a. perpetual inventory system. b. periodic inventory system. c. double entry accounting system. d. single entry accounting system. 54. A perpetual inventory system would likely be used by a(n) a. automobile dealership. b. hardware store. c. drugstore. d. convenience store. Which of the following is a true statement about inventory systems? a. Periodic inventory systems require more detailed Inventory records. b. Perpetual inventory systems require more detailed inventory records C. A periodic system requires cost of goods sold be determined after each sale. d. A perpetual system determines cost of goods sold only at the end of the accounting period. 56. 57. In a perpetual inventory system, cost of goods sold is recorded a. on a daily basis. b. on a monthly basis. c on an annual basis. d. with each sale. If a company determines cost of goods sold each time a sale occurs, it a. must have a computer accounting system. b. uses a combination of the perpetual and periodic inventory systems c. uses a periodic inventory system. d. uses a perpetual inventory system. Under a perpetual inventory system, acquisition of merchandise for resale is debited to the a. Merchandise Inventory account. b. Purchases account. c. Supplies account. d. Cost of Goods Sold account. 58. 59. The Journal entry to record a return of merchandise purchased on account under a perpetual inventory system would credit a. Accounts Payable. b. Purchase Returns and Allowances. c. Sales. d. Merchandise Inventory. 60. The Merchandise Inventory account is used in each of the following except the entry to record a. goods purchased on account. b. the return of goods purchased. c. payment of freight on goods sold. d. payment within the discount period. 61. A buyer would record a payment within the discount period under a perpetual inventory system by crediting a. Accounts Payable. b. Merchandise Inventory. c. Purchase Discounts. d. Sales Discounts. If a purchaser using a perpetual system agrees to freight terms of FOB shipping poi then the a. Merchandise Inventory account will be increased. b. Merchandise Inventory account will not be affected. c. seller will bear the freight cost. d. carrier will bear the freight cost