Question

@ Test Bank for Accounting Principles, Eighth Edition The multiple-step form of income statement is easier to read than the single-step form 22 Merchandise inventory is classified as a current asset in a classified balance sheet Gain on sale of equipment and interest expense are reported under other revenues and gains in a multiple-step income statement. 23. The gross profit section for a merchandising company appears on both the multiple-step and single-step forms of an income statement. In a multiple-step income statement, income from operations excludes other revenues and gains and other expenses and losses. A single-step income statement reports all revenues, both operating and other revenues and gains, at the top of the statement. 26. If net sales are $800,000 and cost of goods sold is $600,000, the gross profit rate is 25% Gross profit represents the merchandising profit of a company. 28. Gross profit is a measure of the overall profitability of a company 29. Gross profit rate is computed by dividing cost of goods sold by net sales. 30. 31. Purchase Returns and Allowances and Purchase Discounts are subtracted from Purchases to produce net purchases. Freight-in is an account that is subtracted from the Purchases account to arrive at cost of goods purchased. Under a periodic inventory system, the acquisition of inventory is charged to the Purchases account. 32. 33 Under a periodic inventory system, freight-in on merchandise purchases should be charged to the Inventory account. *34. In a worksheet, cost of goods sold will be shown in the trial balance (Dr.), adjusted trial balance (Dr.) and income statement (Dr.) columns Additional True-False Questions 35. Merchandise inventory is reported as a long-term asset on the balance sheet 36. Under a perpetual inventory system, inventory shrinkage and lost or stolen goods are more readily determined. 37. The terms 2/10, n/30 state that a 2% discount is available if the invoice is paid within the first 10 days of the next month. 38. Sales should be recorded in accordance with the matching principle.

Answer 1

20. TRUE

21. TRUE. It is clasified as Current Asset in Balance Sheet

22. FALSE. Gain on sale of Asset is income reported as Revenue and interest expenses reported as Finance cost expenses

23. TRUE

24. TRUE

25. TRUE

26. TRUE

27. FALSE. Gross profit is equal to net sales minus cost of goods sold. Net sales are equal to total gross sales less returns inwards and discount allowed.

28. FALSE. Gross profit is equal to net sales minus cost of goods sold. Net sales are equal to total gross sales less returns inwards and discount allowed.

29. FALSE. Gross profit is equal to net sales minus cost of goods sold. Net sales are equal to total gross sales less returns inwards and discount allowed. GP Rate is Net Sales - Cost of Goods Sold / Net Sales

30. TRUE

31. FALSE. Freight in is considered to be part of the cost of the merchandise and should be included in inventory if the merchandise has not been sold. It shound Add to Cost of Goods

32. FALSE. Under Periodic inventory System, acquisition of inventory charged to inventory Account.

33. TRUE

34. FALSE . Cost of Goods sold Debited, Adj. Trial Balance Debited and income statement Credited

35. FALSE. Merchandise inventory reported as Current Asset in Balance Sheet

36. TRUE

37. TRUE

38. FALSE. Sales recorded as per Revenue Recognision Principle.

39. TRUE

40. TRUE

41. TRUE

42. TRUE