Question

Answer T or F

1. The ending merchandise inventory for 2005 is the as the beginning merchandise inventory or 2006.
2. In a multi-step income statement the dollar amount for income from operations is always the same as net income.
3. Net sales are equal to sales minus cost of merchandise sold.
4. Gross profit minus selling expenses equals net income.
5. The form on the balance sheet in which asserts, liabilities, and owner’s equity are presented in a downward sequence is called the report form.
6. On the income statement in the single-step form, the total of all expenses is deducted from the total of all revenues.
7. The single-step income statement is easier to prepare, but a criticism of this format is that gross profit and income from operations are nor readily available.
8. Income that cannot be associated definitely with operations, such as gains from the sale of a fixed asset, is listed as Other Income on the multi-step income statement.
9. Under the perpetual inventory system, when a sale is made, both the retail and cost values are recorded.
10. Under perpetual inventory system, the cost of merchandise sold is recorded when sales are made.
11. If payment is due by the end of the month in which sale is made, the invoice terms are expressed as n/30.
12. When merchandise that was sold is returned, a credit to sales returns and allowances is made.
13. In perpetual inventory system, when merchandise is returned to the seller, Cost of Merchandise Sold is one to the accounts debited to record the transaction.
14. Sales return is a contra-revenue account.
15. Sales Discounts is a revenue account with a credit balance.
16. Sales to customers who use bank credit cards, such as MasterCard and Visa, are generally treated as credit sales.

Answer 1

1) True - The ending merchandise inventory for 2005 is the as the beginning merchandise inventory or 2006

2) False - In a multi-step income statement the dollar amount for income from operations is always the same as net income.

3) False - Net sales are equal to sales minus cost of merchandise sold.

4) False - Gross profit minus selling expenses equals net income.

5) True - The form on the balance sheet in which asserts, liabilities, and owner’s equity are presented in a downward sequence is called the report form

6) True - On the income statement in the single-step form, the total of all expenses is deducted from the total of all revenues.

7) True - The single-step income statement is easier to prepare, but a criticism of this format is that gross profit and income from operations are nor readily available.

8) True - Income that cannot be associated definitely with operations, such as gains from the sale of a fixed asset, is listed as Other Income on the multi-step income statement.

9) True - Under the perpetual inventory system, when a sale is made, both the retail and cost values are recorded.

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

11) True - If payment is due by the end of the month in which sale is made, the invoice terms are expressed as n/30.

12) False - When merchandise that was sold is returned, a credit to sales returns and allowances is made.

13) False - In perpetual inventory system, when merchandise is returned to the seller, Cost of Merchandise Sold is one to the accounts debited to record the transaction.

14) True - Sales return is a contra-revenue account.

15) False - Sales Discounts is a revenue account with a credit balance.

16) False - Sales to customers who use bank credit cards, such as MasterCard and Visa, are generally treated as credit sales.