Exam 5: Accounting for Merchandising Operations

Cushman Company had $800,000 in sales,sales discounts of $12,000,sales returns and allowances of $18,000,cost of goods sold of $380,000,and $275,000 in operating expenses.Gross profit equals:

A company's current assets are $23,420,its quick assets are $13,890 and its current liabilities are $12,220.Its acid-test ratio equals:

The acid-test ratio differs from the current ratio in that:

A company uses the perpetual inventory system and recorded the following entry: This entry reflects a:

Juniper Company uses a perpetual inventory system.The company purchased $9,750 of merchandise on August 7 with terms 1/10,n/30.On August 11,it returned $1,500 worth of merchandise.On August 26,it paid the full amount due.The amount of the cash paid on August 26 equals:

Multiple-step income statements:

On March 12,Klein Company sold merchandise in the amount of $7,800 to Babson Company,with credit terms of 2/10,n/30.The cost of the items sold is $4,500.Klein uses the perpetual inventory system.On March 15,Babson returns some of the merchandise.The selling price of the merchandise is $600 and the cost of the merchandise returned is $350.Babson pays the invoice on March 20,and takes the appropriate discount.The journal entry that Klein makes on March 20 is:

A company reported the following information for the month of July: Required: Calculate this company's gross margin ratio.

Preston Office Furniture uses the periodic inventory system and had the following transactions during the month of May: Prepare the required journal entries that Preston Office Furniture must make to record these transactions.

The __________________ inventory system continually updates accounting records for merchandise transactions for the amounts of inventory available for sale and inventory sold.

A trade discount is:

Non-operating activities that include interest expense,losses from asset disposals,and casualty losses are reported as ____________________________.

On March 12,Klein Company sold merchandise in the amount of $7,800 to Babson Company,with credit terms of 2/10,n/30.The cost of the items sold is $4,500.Klein uses the perpetual inventory system.Babson pays the invoice on March 17,and takes the appropriate discount.The journal entry that Klein makes on March 17 is:

________________________ expenses are those costs that support a company's overall operations and include expenses related to accounting,human resource management,and financial management.

Using the following year-end information for Bauman,LLC,calculate the current ratio and acid-test ratio:

Reductions in the selling price of merchandise sold to customers,often involving damaged or defective merchandise that a customer is willing to purchase with a decrease in the selling price is referred to as _____________________________.

A buyer issues a _______________________ to inform the seller of a debit made to the seller's account payable in the buyer's records.

Juniper Company uses a perpetual inventory system.The company purchased $9,750 of merchandise on August 7 with terms 1/10,n/30.On August 11,it returned $1,500 worth of merchandise.On August 16,it paid the full amount due.The correct journal entry to record the payment on August 16 is:

A seller usually prepares a ____________________ to confirm a buyer's return or allowance,and informs the buyer of the seller's credit to the buyer's Account Receivable on the seller's books.

Vincent Company purchased merchandise from Liu Company with an invoice price of $300,000 and credit terms of 2/10,n/30.Liu Company's cost for the merchandise was $200,000.Vincent Company paid within the discount period.Assume that both buyer and seller use a perpetual inventory system. 1.Prepare entries that Vincent should record for (a)the purchase and (b)the cash payment. 2.Prepare entries that Liu should record for (a)the sale and (b)the cash collection. 3.Assume that the buyer borrowed enough cash to pay the balance on the last day of the discount period at an annual interest rate of 9% and paid it back on the last day of the credit period.Compute how much the buyer saved by following this strategy.(Assume a 365-day year and round dollar amounts to the nearest cent. )