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Ch. 4 Quiz

A merchandising company:
earns net income by buying and selling merchandise.
Multiple-step income statements:
contain more detail than a simple listing of revenues and expenses.
Sales returns:
refer to merchandise that customers return to the seller after the sale.
An income statement that includes cost of goods sold as another expense and shows only one subtotal for total expenses is a:
single-step income statement.
A trade discount is:
a reduction in price below the list price.
The current period’s ending inventory is:
the next period’s beginning inventory.
Expenses that support the overall operations of a business and include the expenses relating to accounting, human resource management, and financial management are called:
general and administrative expenses.
The credit terms 2/10, n/30 are interpreted as:
2% cash discount if the amount is paid within 10 days, with the balance due in 30 days.
Merchandise inventory:
is a current asset.
A company uses the perpetual inventory system and recorded the following entry:

Debit accounts payable 2,500
Credit merchandise inventory 50
Credit cash 2,450

payment of the account payable and recognition of a cash discount taken.

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