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79. Which of the following accounts has a normal credit balance? a. Sales Returns and Allowances b. Sales Discounts c. Sales d. Selling Expense

80. With respect to the income statement, a. contra-revenue accounts do not appear on the income statement. b. sales discounts increase the amount of sales. c. contra-revenue accounts increase the amount of operating expenses. d. sales discounts are included in the calculation of gross profit.

81. When a seller grants credit for returned goods, the account that is credited is a. Sales. b. Sales Returns and Allowances. c. Merchandise Inventory. d. Accounts Receivable.

82. The respective normal account balances of Sales, Sales Returns and Allowances, and Sales Discounts are a. credit, credit, credit. b. debit, credit, debit. c. credit, debit, debit. d. credit, debit, credit.

83. The operating cycle of a merchandiser is a. always one year in length. b. generally longer than it is for a service company. c. about the same as for a service company. d. generally shorter than it is for a service company.

84. In preparing closing entries for a merchandiser, the Income Summary account will be credited for the balance of a. sales. b. merchandise inventory. c. sales discounts. d. freight-out.

85. A merchandiser using a perpetual system will record a. the same number of adjusting entries as a service company. b. one less adjusting entry than a service company. c. one more adjusting entry than a service company. d. many more adjusting entries than a service company.

86. The sales revenue section of an income statement for a retailer would not include a. Sales discounts. b. Sales. c. Net sales. d. Cost of goods sold.

87. The operating expense section of an income statement for a wholesaler would not include a. freight-out. b. utilities expense. c. cost of goods sold. d. insurance expense.

88. Income from operations will always result if a. the cost of goods sold exceeds operating expenses. b. revenues exceed cost of goods sold. c. revenues exceed operating expenses. d. gross profit exceeds operating expenses.

89. Indicate which one of the following would appear on the income statement of both a merchandiser and a service enterprise. a. Gross profit b. Operating expenses c. Sales revenues d. Cost of goods sold

90. In terms of liquidity, merchandise inventory is a. more liquid than cash. b. more liquid than accounts receivable. c. more liquid than prepaid expenses. d. less liquid than store equipment.

91. On a classified balance sheet, merchandise inventory is classified as a. an intangible asset. b. property, plant, and equipment. c. a current asset. d. a long-term investment.

92. Gross profit for a merchandiser is net sales minus a. operating expenses. b. cost of goods sold. c. sales discounts. d. cost of goods available for sale.

93. If a company has net sales of $750,000 and cost of goods sold of $450,000, the gross profit percentage is a. 60%. b. 40%. c. 20%. d. 100%.

94. A company shows the following balances: Sales $1,200,000 Sales Returns and Allowances 175,000 Sales Discounts 25,000 Cost of Goods Sold 600,000 94. (cont.) What is the gross profit percentage? a. 50% b. 60% c. 40% d. 33%

95. Income from operations appears on a. both a multiple-step and a single-step income statement. b. neither a multiple-step nor a single-step income statement. c. a single-step income statement. d. a multiple-step income statement.

96. Gross profit does not appear a. on a multiple-step income statement. b. on a single-step income statement. c. to be relevant in analyzing the operation of a merchandiser. d. on the income statement if the periodic inventory system is used because it cannot be calculated.

97. Which of the following is not a true statement about a multiple-step income statement? a. Operating expenses are often classified as selling and administrative expenses. b. There may be a section for nonoperating activities. c. There may be a section for operating assets. d. There is a section for cost of goods sold.

a98. The Merchandise Inventory account balance appearing in a work sheet represents the a. ending inventory. b. beginning inventory. c. cost of merchandise purchased. d. cost of merchandise sold.

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