Quiz on Merchandising Operations and Inventory Systems

What is the primary source of revenue for a merchandising company?

• Service revenue

• Rental income

• Sales revenue

• Interest income

Which inventory system maintains detailed records of the cost of each inventory purchase and sale?

• Perpetual inventory system

• Accrual inventory system

• Cash basis inventory system

• Periodic inventory system

What does the cost of goods sold represent?

• Total cost of merchandise sold during the period

• Total revenue generated

• Total inventory on hand

• Total operating expenses

In a perpetual system, how is the sales of merchandise recorded?

• By debiting Purchases

• By crediting Inventory

• By debiting Sales Revenue

• By crediting Accounts Payable

What is the purpose of sales discounts?

• To increase sales revenue

• To record returns of merchandise

• To reduce inventory levels

• To promote prompt payment of the balance due

Which of the following is a feature of a multiple-step income statement?

• Gross profit calculation

• Only total revenues and expenses

• Single-step format

• No distinction between operating and non-operating activities

What is the effect of taking a purchase discount?

• Decreases inventory value

• Increases total expenses

• Decreases cash outflow

• Increases accounts payable

What is recorded when a sale is made under a perpetual inventory system?

• Only sales revenue

• Only cost of goods sold

• Cost of goods sold and sales revenue

• Sales returns and allowances

What is the primary purpose of a merchandising company's income statement?

• To report net income

• To detail inventory levels

• To summarize sales discounts

• To show cash flow

How is inventory valued in a periodic inventory system?

• Using FIFO method only

• Based on estimated sales

• At the end of the accounting period

• At the time of each sale