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ACC 556 WEEK 3 HOMEWORK CHAPTER 5

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ACC 556 WEEK 3 HOMEWORK CHAPTER 5 • Question 1 An advantage of using the periodic inventory system is that it requires less record keeping than the perpetual inventory system. • Question 2 The terms 2/10, net/30 mean that a 2 percent discount is allowed on payments made within the 10 days discount period. • Question 3 Sales allowances and Sales discounts are both designed to encourage customers to pay their accounts promptly. • Question 4 Freight-out appears as an operating expense in the income statement. • Question 5 With the periodic inventory system, goods available for sale must be calculated before cost of goods sold. • Question 6 Merchandising companies that sell to retailers are known as Selected Answer: wholesalers. • Question 7 The primary source of revenue for a wholesaler is • Question 8 Which of the following is a true statement about inventory systems? • Question 9 Which of the following items does not result in an adjustment in the merchandise inventory account under a perpetual system? • Question 10 Farwell Company purchased merchandise with an invoice price of $2,000 and credit terms of 1/10, n/30. Assuming a 360 day year, what is the implied annual interest rate inherent in the credit terms? • Question 11 As the president of Harter Company, you notice that no discounts have been taken when settling accounts payables. What would be an acceptable explanation? • Question 12 A sales invoice is prepared when goods • Question 13 The Sales Returns and Allowances account does not provide information to management about • Question 14 The collection of a $700 account beyond the 2 percent discount period will result in a • Question 15 Which statement is incorrect? • Question 16 Multiple-step income statements show • Question 17 Financial information is presented below: Operating expenses $ 28,000 Sales returns and allowances 7,000 Sales discounts 3,000 Sales revenue 150,000 Cost of goods sold 91,000 The gross profit rate would be Selected Answer: .35. • Question 18 What is an advantage of using the multiple-step income statement? • Question 19 Which of the following provides the best rationale regarding analysts’ views about the information value of the gross profit rate versus the gross profit amount? • Question 20 Match the items below by entering the appropriate code letter in the space provided. o Question Selected Match Net sales I. Sales less sales returns and allowances and sales discounts. Sales discount E. A reduction given by the seller for prompt payment of a credit sale. Credit terms H. Specifies the amount of cash discount and time period during which it is offered. Periodic inventory system D. Requires a physical count of goods on hand to compute cost of goods sold. Gross profit rate G. Gross profit divided by net sales. Contra revenue A. An account that is offset against a revenue account on the income statement. Freight-out C. Freight cost to deliver goods to customers reported as an operating expense. Gross profit J. Net sales less cost of goods sold. Sales invoice B. Provides support for a credit sale. Purchase discount F. A cash discount claimed by a buyer for prompt payment of a balance due. o Accounts Assignment Help, Accounts Homework help, Accounts Study Help, Accounts Course Help

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