Exam (elaborations)
Chapter 06 Accounting for Merchandising Businesses
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Chapter 06 Accounting for Merchandising Businesses ACCOUNTING 26TH EDITION BY WARREN -TEST BANK
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CHAPTER 6: ACCOUNTING FOR MERCHANDISING BUSINESSES1. The most important differences between a service business and a retail business are reflected in their operating
cycles and financial statements.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.06-01 - 06-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.03 - Business Forms
ACCT.ACBSP.APC.17 - Inventories Reporting
ACCT.AICPA.BB.01 - Industry
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
2. In a merchandise business, sales minus operating expenses equal net income.
a. True
b. False
ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.06-01 - 06-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 - Financial Statements
ACCT.ACBSP.APC.17 - Inventories Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
3. Cost of merchandise sold is the amount that the merchandising company pays for the merchandise it intends to sell.
a. True
b. False
ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.06-01 - 06-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.06 - Recording Transactions
ACCT.ACBSP.APC.17 - Inventories Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
,Chapter 6: Accounting for Merchandising Businesses
4. Service businesses provide services for income, while a merchandising business sells merchandise.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.06-01 - 06-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.03 - Business Forms
ACCT.ACBSP.APC.17 - Inventories Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
5. In retail businesses, inventory is reported as a current asset.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.06-01 - 06-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.17 - Inventories Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
6. Under a periodic inventory system, the cost of merchandise on hand at the end of the year is determined by a
physical count of the inventory.
a. True
b. False
ANSWER: True
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.06-02 - 06-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.17 - Inventories Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
,Chapter 6: Accounting for Merchandising Businesses
7. In a perpetual inventory system, the Merchandise Inventory account is only used to reflect the beginning inventory.
a. True
b. False
ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.06-02 - 06-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.17 - Inventories Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
8. Freight in is the amount paid by the company to deliver merchandise sold to a customer.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.06-02 - 06-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.17 - Inventories Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
9. Freight in is considered a cost of purchasing inventory.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.06-02 - 06-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.17 - Inventories Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
10. The cost of merchandise inventory is limited to the purchase price less any purchase discounts.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.06-02 - 06-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.17 - Inventories Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
, Chapter 6: Accounting for Merchandising Businesses
11. Under the perpetual inventory system, when a sale is made, both the sale and cost of merchandise sold are
recorded.
a. True
b. False
ANSWER: True
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.06-02 - 06-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.17 - Inventories Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
12. If payment is due by the end of the month in which the sale is made, the invoice terms are expressed as n/30.
a. True
b. False
ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.06-02 - 06-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 - Financial Statements
ACCT.ACBSP.APC.17 - Inventories Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
13. When merchandise that was sold is returned, a credit to sales returns and allowances is made.
a. True
b. False
ANSWER: False
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.06-02 - 06-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.09 - Financial Statements
ACCT.ACBSP.APC.17 - Inventories Reporting
ACCT.AICPA.FN.03 - Measurement
BUSPROG: Analytic
© 2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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