Question 1

A ___________ inventory system updates the accounting record for inventory only at the end of a period.

Accepted Answer

The answer of A ___________ inventory system updates the accounting...

Question 2

What is the difference between the periodic and perpetual inventory systems?

Accepted Answer

A periodic inventory system updates the

Question 3

Gross profit is also called gross margin.

Accepted Answer

A) True 
 B)False

Question 4

Under the ___________ system,each purchase,purchase return and allowance,purchase discount,and transportation-in transaction is recorded in a separate temporary account.

Accepted Answer

The answer of Under the ___________ system,each purchase,purchase return and...

Question 5

In a periodic inventory system,cost of goods sold is recorded as each sale occurs.

Accepted Answer

A) True 
 B)False

Question 6

The seller is responsible for paying shipping charges and bears the risk of damage or loss in transit if goods are shipped FOB destination.

Accepted Answer

A) True 
 B)False

Question 7

A buyer failed to take advantage of the vendor's credit terms of 2/15,n/45,but instead paid the invoice in full at the end of 60 days.By not taking advantage of the cash discount,the buyer lost the equivalent of ____________ annual interest on the amount of the purchase.

Accepted Answer

A) 12.2% 
B) 16.2% 
C) 18.9% 
D) 24.3% 
E) 24.5% 
A) 12.2% 
B) 16.2% 
C) 18.9% 
D) 24.3% 
E) 24.5%

Question 8

A retailer is an intermediary that buys products from manufacturers and sells them to wholesalers.

Accepted Answer

A) True 
 B)False

Question 9

A common rule of thumb is that a company's acid-test ratio should be at least 2 or a company may face near-term liquidity problems.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

The answer of A _______________________ is a document the buyer...

Question 11

A company reported the following year-end information:
Cash…………………………………...………..$ 52,000
Short-term investments………………………... 12,000
Accounts receivable………………………….... 54,000
Inventory………………………………..……...325,000
Prepaid expenses………………………………. 17,500
Accounts payable………………………..……..106,500
Other current payables………………………… 25,000
Required:
1.Explain the purpose of the acid-test ratio.
2.Calculate the acid-test ratio for this company.
3.What does the acid-test ratio reveal about this company?

Accepted Answer

1.The acid-test ratio measures the abili

Question 12

Operating expenses are classified into two categories:
 selling expenses and cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 13

A merchandiser's classified balance sheet reports merchandise inventory as a current asset.

Accepted Answer

A) True 
 B)False

Question 14

On October 1,Robinson Company sold merchandise in the amount of $5,800 to Rosser,with credit terms of 2/10,n/30.The cost of the items sold is $4,000.Robinson uses the perpetual inventory system.The journal entry or entries that Robinson will make on October 1 is:

Accepted Answer

A)   
B)   
C)   
D)   
E)    
A)   
B)   
C)   
D)   
E)

Question 15

A company has net sales and cost of goods sold of $825,000 and $547,000,respectively.Its net income is $98,500.The company's gross margin and operating expenses are ________ and ____________,respectively.

Accepted Answer

A) $209,000; $191,470 
B) $278,000; $179,500 
C) $278,000; $98,500 
D) $179,500; $98,500 
E) $645,500; $179,500 
A) $209,000; $191,470 
B) $278,000; $179,500 
C) $278,000; $98,500 
D) $179,500; $98,500 
E) $645,500; $179,500

Question 16

Shock Company purchased merchandise from Mee Company with an invoice price of $300,000 and credit terms of 2/10,n/30.The merchandise had cost Mee Company $200,000.Shock Company paid within the discount period.Assume that both buyer and seller use a perpetual inventory system.
1.Prepare entries that the buyer should record for (a)the purchase and (b)the cash payment.
2.Prepare entries that the seller 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.)

Accepted Answer

@#IMG-DLM& @#IMG-DLM& 3.By borrowing the money on the last d

Question 17

The credit terms 2/10,n/30 are interpreted as:

Accepted Answer

A) 2% cash discount if the amount is paid within 10 days, or the balance due in 30 days. 
B) 10% cash discount if the amount is paid within 2 days, or the balance due in 30 days. 
C) 30% discount if paid within 2 days. 
D) 30% discount if paid within 10 days. 
E) 2% discount if paid within 30 days. 
A) 2% cash discount if the amount is paid within 10 days, or the balance due in 30 days. 
B) 10% cash discount if the amount is paid within 2 days, or the balance due in 30 days. 
C) 30% discount if paid within 2 days. 
D) 30% discount if paid within 10 days. 
E) 2% discount if paid within 30 days.

Question 18

A company had net sales of $340,500,its cost of goods sold was $257,000,and its net income was $13,750.The company's gross margin ratio equals 24.5%.

Accepted Answer

A) True 
 B)False

Question 19

The profit margin ratio is gross margin divided by total assets.

Accepted Answer

A) True 
 B)False

Question 20

The quick assets are defined as:

Accepted Answer

A) Cash, short-term investments, and inventory. 
B) Cash, short-term investments, and current receivables. 
C) Cash, inventory, and current receivables. 
D) Cash, noncurrent receivables, and prepaid expenses. 
E) Accounts receivable, inventory, and prepaid expenses. 
A) Cash, short-term investments, and inventory. 
B) Cash, short-term investments, and current receivables. 
C) Cash, inventory, and current receivables. 
D) Cash, noncurrent receivables, and prepaid expenses. 
E) Accounts receivable, inventory, and prepaid expenses.

Exam 5: Accounting for Merchandising Operations

A ___________ inventory system updates the accounting record for inventory only at the end of a period.

What is the difference between the periodic and perpetual inventory systems?

Gross profit is also called gross margin.

Under the ___________ system,each purchase,purchase return and allowance,purchase discount,and transportation-in transaction is recorded in a separate temporary account.

In a periodic inventory system,cost of goods sold is recorded as each sale occurs.

The seller is responsible for paying shipping charges and bears the risk of damage or loss in transit if goods are shipped FOB destination.

A buyer failed to take advantage of the vendor's credit terms of 2/15,n/45,but instead paid the invoice in full at the end of 60 days.By not taking advantage of the cash discount,the buyer lost the equivalent of ____________ annual interest on the amount of the purchase.

A retailer is an intermediary that buys products from manufacturers and sells them to wholesalers.

A common rule of thumb is that a company's acid-test ratio should be at least 2 or a company may face near-term liquidity problems.

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

Operating expenses are classified into two categories: selling expenses and cost of goods sold.

A merchandiser's classified balance sheet reports merchandise inventory as a current asset.

On October 1,Robinson Company sold merchandise in the amount of $5,800 to Rosser,with credit terms of 2/10,n/30.The cost of the items sold is $4,000.Robinson uses the perpetual inventory system.The journal entry or entries that Robinson will make on October 1 is:

A company has net sales and cost of goods sold of $825,000 and $547,000,respectively.Its net income is $98,500.The company's gross margin and operating expenses are ________ and ____________,respectively.

The credit terms 2/10,n/30 are interpreted as:

A company had net sales of $340,500,its cost of goods sold was $257,000,and its net income was $13,750.The company's gross margin ratio equals 24.5%.

The profit margin ratio is gross margin divided by total assets.

The quick assets are defined as:

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets, natural Resources, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Capital Budgeting and Managerial Decisions

Time Value of Money B

Activity-Based Costing C

Filters

A company has net sales and cost of goods sold of $825,000 and $547,000,respectively.Its net income is $98,500.The company's gross margin and operating expenses are and ____,respectively.