11) An entity that buys goods and sells them to customers at a markup is a:
B) service provider.
12) Gross profit is calculated as the difference between net sales revenue and:
B) cost of goods sold.
C) cost of merchandise inventory.
D) selling and administrative expenses.
13) The Gajet Store Inc. started its operations on January 1, 2015. It engages in buying and selling different types of electronic gadgets. The first step in its operating cycle would be to:
A) collect cash from customers.
B) sell goods to customers.
C) purchase inventory from vendors.
D) record the sales in accounts.
14) The main expense of a merchandiser is:
A) cost of goods sold.
B) current assets.
C) selling and administrative cost.
D) production overheads.
15) ________ are the expenses that occur in an entity's major line of business.
A) Selling expenses
B) Administrative expenses
C) Operating expenses
D) Overhead expenses
16) Merchandise Inventory accounting systems can be broadly categorized into two. They are:
A) FIFO; LIFO
B) perpetual; periodic
C) wholesale; retail
D) manufacturer; producer
Learning Objective 5-2
1) An invoice is a request by the seller for payment from the purchaser.
2) An invoice is also known as a bill.
3) A purchase discount is the price offered by the purchaser for delaying the payment to the seller.
4) Credit terms of a merchandising company are: 1/15, net 40. This means that the buyer can avail a discount of 1 percent, if the invoice is paid within 40 days of the invoice date.