Chapter 5: Merchandising Operations + the Multiple Step Income Statement

These flashcards cover key concepts and terms related to merchandising operations and the multiple step income statement as discussed in Chapter 5.

Merchandising companies primarily earn revenue through __.

The sale of merchandise.

Inventory is classified as a __ asset.

Current asset.

The __ method requires inventory changes to be recorded after a physical count at year-end.

Periodic Inventory Method.

In a perpetual inventory system, inventory and cost of goods sold are recorded __.

As changes take place in real time.

Accounts Payable is decreased when a purchaser __ inventory.

Returns.

Sales discounts are classified as __ revenues.

Contra-revenues.

The term 'n/30' indicates that the entire amount is due in __ days.

30 days.

The profit before other expenses is known as __.

Gross Profit.

The __ profit rate measures the percentage of sales revenue after deducting costs.

Gross Profit Rate.

In a multi-step income statement, which line item represents the total revenue minus sales discounts and returns?

Net Sales.

The formula to calculate Profit Margin Ratio is __.

Net Income divided by Net Sales.

The __ statement separates recurring items from non-recurring items.

Multi-step Income Statement.

If a company purchases inventory for $25,000 and pays freight of $900, the journal entry for inventory will show an increase of __.

$25,900.

If a buyer pays within the discount period of 10 days for a bill of $1,000 with terms 2/10, the amount due will be __.

$980.

The sales return and allowance for goods returned by a buyer is classified as a __ -revenue.

Contra-revenue.

The journal entry to record sales revenue includes an increase in __ Receivable.

Accounts.