Exam 5: Accounting for Merchandising Operations

On October 1,Whaley Company sold merchandise in the amount of $5,800 to Lee Company,with credit terms of 2/10,n/30.The cost of the items sold is $4,000.Whaley uses the perpetual inventory system.Lee pays the invoice on October 8,and takes the appropriate discount.The journal entry that Whaley makes on October 8 is:

Cash sales shorten the operating cycle for a merchandiser; credit sales lengthen operating cycles.

Nichole Company had net sales of $500,000 and cost of goods sold of $350,000.Calculate Nichole's gross profit.

What is inventory shrinkage? How do managers account for shrinkage?

A company had sales of $695,000 and cost of goods sold of $278,000.Its gross margin equals:

The operating cycle for a merchandiser that sells only for cash moves from:

The following statements regarding merchandise inventory are true except:

Cost of goods sold represents the cost of buying and preparing merchandise for sale.

A merchandising company's operating cycle begins with the sale of merchandise and ends with the collection of cash from the sale.

What is the acid-test ratio? How does it measure a company's liquidity?

A credit memorandum from a seller informs a buyer of the seller's credit to its Accounts Payable account arising from a sales return or allowance.

Expenses of promoting sales by displaying and advertising merchandise,making sales,and delivering goods to customers are:

The acid-test ratio:

Assets tied up in inventory are not productive assets.

The acid-test ratio is also called the quick ratio.

Benson Company had cash sales of $94,275,credit sales of $83,450,sales returns and allowances of $1,700,and sales discounts of $3,475.Benson's net sales for this period equal:

A company purchases merchandise with a catalog price of $20,000.The company receives a 35% trade discount from the seller.The seller also offers credit terms of 2/10,n/30.Assuming no returns were made and that payment was made on within the discount period,what is the net cost of the merchandise?

Describe the recording process (including costs)for sales of merchandise inventory using a perpetual inventory system.

A company had net sales and cost of goods of $545,000 and $345,000,respectively.Its gross margin equals $890,000.

A company purchased $1,800 of merchandise on December 5.On December 7,it returned $200 worth of merchandise.On December 8,it paid the balance in full,taking a 2% discount.The amount of the cash paid on December 8 equals: