Exam 4: Accounting for Merchandising Operations

A multiple-step income statement format shows detailed computations of net sales and other costs and expenses,and reports subtotals for various classes of items.

A company reported the following year-end information: 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?

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%.

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

Prepare journal entries to record the following merchandise transactions of Martinez Excavation Equipment,which applies the perpetual inventory system and the gross method of recording invoices.

On May 1,Shilling Company sold merchandise in the amount of $5,800 to Anders,with credit terms of 2/10,n/30.The cost of the items sold is $4,000.Shilling uses the perpetual inventory system and the gross method.The journal entry or entries that Shilling will make on May 1 is (are):

On September 12,Ryan Company sold merchandise in the amount of $5,800 to Johnson Company,with credit terms of 2/10,n/30.The cost of the items sold is $4,000. -Ryan uses the periodic inventory system and the net method of accounting for sales.Johnson pays the invoice on September 18,and takes the appropriate discount.The journal entry that Ryan makes on September 18 is:

Under both the periodic and perpetual inventory systems,the temporary account Purchases Returns and Allowances is used to accumulate the cost of all returns and allowances for a period.

On September 12,Vander Company sold merchandise in the amount of $5,800 to Jepson Company,with credit terms of 2/10,n/30.The cost of the items sold is $4,000. -Jepson uses the periodic inventory system and the gross method of accounting for purchases.The journal entry that Jepson will make on September 12 is:

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 and the gross method of accounting for sales. -On March 15,Babson returns some of the merchandise,which is not defective.The selling price of the returned merchandise is $600 and the cost of the merchandise returned is $350.The entry or entries that Klein must make on March 15 is (are):

A perpetual inventory system continually updates accounting records for merchandising transactions.

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

The net method of recording purchases refers to recording:

Juniper Company uses a perpetual inventory system and the gross method of accounting for purchases.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 amount of the cash paid on August 16 equals:

________ expenses are those costs that support a company's overall operations and include expenses related to accounting,human resources,and finance.

Which of the following statements regarding sales returns and allowances is not true?

Mega Skateboard Supplier had net sales of $2.8 million,its cost of goods sold was $1.6 million,and its net income was $0.9 million.Its gross margin ratio equals:

If a company sells merchandise with credit terms 2/10 n/60,the credit period is 10 days and the discount period is 60 days.

A company purchased $1,800 of merchandise on July 5 with terms 2/10,n/30.On July 7,it returned $200 worth of merchandise -On July 28,it paid the full amount due.Assuming the company uses a perpetual inventory system,and records purchases using the gross method,the correct journal entry to record the payment on July 28 is:

From the adjusted trial balance for Fabricated Products Company given below,prepare the necessary closing entries.