Chapter 5 Financial Accounting Exam Questions with Correct Answers
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Course
Financial Accounting
Institution
Financial Accounting
What are Merchandising Companies? - Answer-Companies that buy and sell goods (rather than sell services)
What are the 2 types of Merchandising Companies? - Answer-Retailers
Wholesalers
Define: Retailer - Answer-company sells its merchandise to customers who are the final consumers of the pro...
Chapter 5 Financial Accounting Exam
Questions with Correct Answers
What are Merchandising Companies? - Answer-Companies that buy and sell goods
(rather than sell services)
What are the 2 types of Merchandising Companies? - Answer-Retailers
Wholesalers
Define: Retailer - Answer-company sells its merchandise to customers who are the final
consumers of the product
ex) Walmart
What are Wholesalers? - Answer-Companies who sell products to retailers who later
sell it to the final customers (much less well known)
What is the difference in how revenue is recorded for wholesalers vs. retailers? -
Answer-There is no difference- revenue is recorded the same.
The primary source of revenues is referred to as - Answer-sales revenue, sales or
revenue (These are synonyms)
What tends to be the largest expense on the income statement? - Answer-Cost of
goods sold
For this reason, it's the first expense listed
How do we find Gross Profit? - Answer-Revenues - Cost of Goods Sold
What 2 things are ignored in the income statement of a service company? - Answer-
Cost Goods Sold and Gross Profit
What is the Operating Cycle of a Service Company? - Answer-Cash-->Perform
Services-->Accounts Receivable-->Mail-->Receive Cash
What is the Operating Cycle of a Merchandising Company? - Answer-Cash-->Buy
Inventory-->Deliver-->Inventory-->Sell Inventory-->Accounts Receivable-->Mail--
>Receive Cash
The operating cycle of a __________________ company is ordinarily longer than that of
a __________________ company. - Answer-merchandising
service
How do you find the Cost of Goods Available for Sale? - Answer-Beginning Inventory +
Cost of Goods purchased
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