chandise sold L A merchandiser reports gross profit on its income state KNOWLEDGE CHECK-UP ment to demonstrate which of the following: 2. How much the company earns after deducting the dir ect cost of the goods purchased (cost of goods sold/ cost of sales) from the net sales (gross sales less sales discounts, sales returns, and allowances) of the mer b. How much the company earns after deducting both the direct cost of goods purchased and operating ex penses from net sales c. How much the company earns after deducting all ex- penses, including income taxes, from net sales d. All of the above. 2. The main difference between a periodic inventory system and a perpetual inventory system is: a. The length of time it takes to sell an item in inventory b. The frequency of receipt of goods by the receiving department c. The frequency with which the accounting records are updated to reflect the receipt of goods into inventory d. The length of time it takes to receive goods into inventory 3. Under a periodic inventory system, which of the follow ing journal entries are booked at the time goods with a purchase price of $200 are sold to the customer for $500: a. Dr. Purchases $500 Cr. Sales $500 b. Dr. A/RSSOO Cr. Inventory $500 c. Dr. A/R $500 Cr. Sales $500 d. Dr. A/R SS00 Cr. Sales S500 e. Dr. Inventory S200 Cr. Cost of Goods Sold $200 4. Trade discounts are provided by a manufacturer or a wholesaler for the following purpose: 2. A specific percentage discount provided to encourage the customer to engage in early payment of invoices b. A specific percentage discount provided to customers based on the quantities/volume of goods purchased c. A specific percentage discount provided to customers based on a specific industry benchmark d. A credit discount offered based on returned merchandise S. Purchase discounts are provided by a manufacturer or wholesaler for the following reason: a. Volume of goods purchased during the period b. Volume of goods returned during the period c. To encourage early payment of invoices d. To encourage payment of overdue invoices 6. FOB destination is a term used to indicate the following a. Ownership of goods transfers to the buyer when goods reach the buyer's place of business b. Ownership of goods transfers to the buyer when goods leave the shipping dock of the seller and goods are in transit c. Freight charges are paid for by the buyer. d. The buyer bears the risk of damage or loss of goods in transit 7. Sales discounts are provided for the following reason: a. To provide a volume discount for goods purchased b. To encourage early payment of invoices c. As a promotional discount provided by a sales rep d. All of the above 8. The SkB Shop sold 10 skateboards to a local summer ad- venture camp for $135 cach at a cost of $95. After five days, the summer camp decided to return two of the un used skateboards and limit the class sine to eight students The Sks Shop uses a perpetual inventory system. Which of the following journal entries is correct to record the customer's return; a. Dr. Sales Returns and Allowances $135 Cr. Accounts Receivable $135 b. Dr. Sales Returns and Allowances $270 CE Accounts Receivable $270 c. Dr. Merchandise Inventory 5190 Cr. Cost of Goods Sold 5190 d. Dr. Cash $270 Cr. Sales Discounts $270 e. Dr. Sales Returns and Allowances $190 Cr. Accounts Receivable $190 9. The purpose of a classified multiple-step format income statement is: a. To provide a detailed income statement for external reporting purposes, including the cost of goods sold and gross profit as well as other revenues and expenses b. For external reporting purposes, organizing items by function and showing one total for all expenses c. To provide additional detail regarding the merchan- dise inventory balances as well as sales discounts provided d. To provide additional detail regarding the dollar value of sales discounts, sales returns and allowances, and selling expenses and general and administrative ex- penses for internal decision-making purposes