Question 1

Cost of goods sold is an expense,and is reported on the income statement.

Accepted Answer

A) True 
 B)False  True

Question 2

Sellers always offer a discount to buyers for prompt payment toward purchases made on credit.

Accepted Answer

A) True 
 B)False  False

Question 3

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.
-Johnson uses the periodic inventory system and the net method of accounting for purchases.The journal entry that Johnson will make on September 12 is:

Accepted Answer

A)  $$\begin{array} { | l | r | r | } 
\hline \text { Purchases } & 5,800 & \
\hline \text { Accounts payable } & & 5,800 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | r | r | } 
\hline \text { Purchases } & 5,684 & \
\hline \text { Accounts payable } & & 5,684 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | r | r | } 
\hline \text { Merchandise inventory } & 5,684 & \
\hline \text { Accounts payable } & & 5,684 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | r | r | } 
\hline \text { Merchandise inventory } & 5,800 & \
\hline \text { Accounts payable } & & 5,800 \
\hline
\end{array}$$ 
E)  $$\begin{array} { | l | r | r | } 
\hline \text { Accounts payable } & 4,000 & \
\hline \text { Merchandise inventory } & & 4,000 \
\hline
\end{array}$$ 
A)  $$\begin{array} { | l | r | r | } 
\hline \text { Purchases } & 5,800 & \
\hline \text { Accounts payable } & & 5,800 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | r | r | } 
\hline \text { Purchases } & 5,684 & \
\hline \text { Accounts payable } & & 5,684 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | r | r | } 
\hline \text { Merchandise inventory } & 5,684 & \
\hline \text { Accounts payable } & & 5,684 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | r | r | } 
\hline \text { Merchandise inventory } & 5,800 & \
\hline \text { Accounts payable } & & 5,800 \
\hline
\end{array}$$ 
E)  $$\begin{array} { | l | r | r | } 
\hline \text { Accounts payable } & 4,000 & \
\hline \text { Merchandise inventory } & & 4,000 \
\hline
\end{array}$$ B

Question 4

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 purchase on July 5 is:

Accepted Answer

A)  Debit Merchandise Inventory $1,600; credit Cash $1,600. 
B)  Debit Merchandise Inventory $1,800; credit Accounts Payable $1,800. 
C)  Debit Merchandise Inventory $1,800; credit Sales Returns $200; credit Cash $1,600. 
D)  Debit Accounts Payable $1,800; credit Merchandise Inventory $1,800. 
E)  Debit Accounts Payable $1,800; credit Purchase Returns $200; credit Merchandise Inventory $1,600. 
A)  Debit Merchandise Inventory $1,600; credit Cash $1,600. 
B)  Debit Merchandise Inventory $1,800; credit Accounts Payable $1,800. 
C)  Debit Merchandise Inventory $1,800; credit Sales Returns $200; credit Cash $1,600. 
D)  Debit Accounts Payable $1,800; credit Merchandise Inventory $1,800. 
E)  Debit Accounts Payable $1,800; credit Purchase Returns $200; credit Merchandise Inventory $1,600.

Question 5

Under the net method,when a company uses a perpetual inventory system,an invoice for $2,000 with terms of 2/10,n/30 should be recorded with a debit to Merchandise Inventory and a credit to Accounts Payable of $2,000.

Accepted Answer

A) True 
 B)False

Question 6

Each sale of merchandise has two parts: the revenue side and the cost side.

Accepted Answer

A) True 
 B)False

Question 7

A period's beginning inventory is equal to the prior period's ________.

Accepted Answer

The answer of A period's beginning inventory is equal to...

Question 8

Match the following definitions with the appropriate terms.
-A widely used income statement format that lists cost of goods sold as another expense and shows only one subtotal for total expenses.

Accepted Answer

A) Single-step income statement 
B) Acid-test ratio 
C) Multiple-step income statement 
D) Inventory shrinkage 
E) FOB shipping point
F)Selling expenses
G)General and administrative expenses
H)Merchandise inventory
I)Trade discount
J)FOB destination 
A) Single-step income statement 
B) Acid-test ratio 
C) Multiple-step income statement 
D) Inventory shrinkage 
E) FOB shipping point
F)Selling expenses
G)General and administrative expenses
H)Merchandise inventory
I)Trade discount
J)FOB destination

Question 9

Purchase discounts are the same as trade discounts.

Accepted Answer

A) True 
 B)False

Question 10

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.On September 14,Johnson returns some of the non-defective merchandise,which is restored to inventory.The selling price of the returned merchandise is $500 and the cost of the merchandise returned is $350.The entry or entries that Ryan must make on September 14 is (are):

Accepted Answer

A)  $$\begin{array} { | l | r | r | } 
\hline \text { Bales returns and allowances } & 490 & \
\hline \text { Accounts receivable } & & 490 \
\hline \text { Mercharidise inventory } & 350 & \
\hline \text { Cost of goods sold } & & 350 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | r | r | } 
\hline \text { Sales returns and allowances } & \text { 50d } & \
\hline \text { Accounts receivable } & & 50 \mathrm { q } \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | r | r | } 
\hline \text { Sales returns and allowances } & 490 & \
\hline \text { Accounts receivable } & & 490 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | r | r | } 
\hline \text { Bales returns and allowances } & 490 & \
\hline \text { Accounts receivable } & & 490 \
\hline \text { Merchandise inventory } & 343 & \
\hline \text { Cost of goods sold } & & 343 \
\hline
\end{array}$$ 
E)  $$\begin{array} { | l | r | r | } 
\hline \text { Sales returns and allowances } & 350 & \
\hline \text { Accounts receivable } & & 350 \
\hline
\end{array}$$ 
A)  $$\begin{array} { | l | r | r | } 
\hline \text { Bales returns and allowances } & 490 & \
\hline \text { Accounts receivable } & & 490 \
\hline \text { Mercharidise inventory } & 350 & \
\hline \text { Cost of goods sold } & & 350 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | r | r | } 
\hline \text { Sales returns and allowances } & \text { 50d } & \
\hline \text { Accounts receivable } & & 50 \mathrm { q } \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | r | r | } 
\hline \text { Sales returns and allowances } & 490 & \
\hline \text { Accounts receivable } & & 490 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | r | r | } 
\hline \text { Bales returns and allowances } & 490 & \
\hline \text { Accounts receivable } & & 490 \
\hline \text { Merchandise inventory } & 343 & \
\hline \text { Cost of goods sold } & & 343 \
\hline
\end{array}$$ 
E)  $$\begin{array} { | l | r | r | } 
\hline \text { Sales returns and allowances } & 350 & \
\hline \text { Accounts receivable } & & 350 \
\hline
\end{array}$$

Question 11

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.

Question 12

In the current year,Borden Corporation had sales of $2,000,000 and cost of goods sold of $1,200,000.Borden expects returns in the following year to equal 8% of sales.The unadjusted balance in Inventory Returns Estimated is a debit of $6,000,and the unadjusted balance in Sales Refund Payable is a credit of $10,000.The adjusting entry or entries to record the expected sales returns is (are):

Accepted Answer

A)  $$\begin{array} { | l | l | l | } 
\hline \text { Accounts Receivable } & 2,000,000 & \
\hline \text { Sales } & & 2,000,000 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | r | r | } 
\hline \text { Sales returns and allowances } & 150,000 & \
\hline \text { Sales } & & 150,000 \
\hline \text { Cost of Goods Sold } & 90,000 & \
\hline \text { Inventory Returns Estimated } & & 90,000 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | l | l | } 
\hline \text { Sales } & 2,000,000 & \
\hline \text { Sales Refund Payable } & & 160,000 \
\hline \text { Accounts receivable } & & 1,840,000 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | l | l | } 
\hline \text { Sales Refund Payble } & 150,0000 & \
\hline \text { Accounts receivable } & & 150,000 \
\hline
\end{array}$$ 
E)  $$\begin{array} { | l | r | r | } 
\hline \text { Sales Returns and Allowarnes } & 150,000 & \
\hline \text { Sales Refund Payble } & & 150,000 \
\hline \text { Inventory Returns Estimated } & 90,000 & \
\hline \text { Cost of goods sold } & & 90,000 \
\hline
\end{array}$$ 
A)  $$\begin{array} { | l | l | l | } 
\hline \text { Accounts Receivable } & 2,000,000 & \
\hline \text { Sales } & & 2,000,000 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | r | r | } 
\hline \text { Sales returns and allowances } & 150,000 & \
\hline \text { Sales } & & 150,000 \
\hline \text { Cost of Goods Sold } & 90,000 & \
\hline \text { Inventory Returns Estimated } & & 90,000 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | l | l | } 
\hline \text { Sales } & 2,000,000 & \
\hline \text { Sales Refund Payable } & & 160,000 \
\hline \text { Accounts receivable } & & 1,840,000 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | l | l | } 
\hline \text { Sales Refund Payble } & 150,0000 & \
\hline \text { Accounts receivable } & & 150,000 \
\hline
\end{array}$$ 
E)  $$\begin{array} { | l | r | r | } 
\hline \text { Sales Returns and Allowarnes } & 150,000 & \
\hline \text { Sales Refund Payble } & & 150,000 \
\hline \text { Inventory Returns Estimated } & 90,000 & \
\hline \text { Cost of goods sold } & & 90,000 \
\hline
\end{array}$$

Question 13

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 45 days.By not taking advantage of the cash discount,the equivalent annual interest lost on the amount of the purchase is:

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 14

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.
-Net income equals:

Accepted Answer

A)  $770,000. 
B)  $402,000. 
C)  $390,000. 
D)  $115,000. 
E)  $408,000. 
A)  $770,000. 
B)  $402,000. 
C)  $390,000. 
D)  $115,000. 
E)  $408,000.

Question 15

What is gross margin ratio? How is it used as an indicator of profitability?

Accepted Answer

The gross margin ratio computes the rela

Question 16

Prepare journal entries to record the following merchandising transactions of Margin Company,which applies the perpetual inventory system and the gross method of recording invoices.Margin Company offers all of its credit customers credit terms of 2/10,n/30.
 $$\begin{array} { | l | l | } 
\hline \text { May } 3 & \begin{array} { l } 
\text { Sold merchandise to Sting Company for } \$ 5,600 , \mathrm {~F} O \mathrm {~B} \text { shipping point, } \
\text { invoice dated May 4. The merchandise had cost } \$ 3,000 .
\end{array} \
\hline \text { May } 8 & \begin{array} { l } 
\text { Sold merchandise to Skeet Company for } \$ 3,300 , \mathrm { FOB } \text { shipping point, } \
\text { invoice dated May } 8 \text {. The merchandise had a cost of } \$ 1,500 .
\end{array} \
\hline \text { May 13 } & \text { Received the balance due from Sting Company within the discount period. } \
\hline \text { May } 14 & \begin{array} { l } 
\text { Issued a credit } \$ 300 \text { credit memorandum to Skeet Company for an } \
\text { allowance on defective merchandise. }
\end{array} \
\hline \text { May } 17 & \begin{array} { l } 
\text { Received the balance due from Skeet Company within the discount } \
\text { period. }
\end{array} \
\hline
\end{array}$$

Accepted Answer

The answer of Prepare journal entries to record the following...

Question 17

Explain the difference between the single-step and multiple-step income statements.

Accepted Answer

A single-step income statement format in

Question 18

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

Accepted Answer

The answer of From the adjusted trial balance for Fabricated...

Question 19

The periodic inventory system requires updating the inventory account only at the end of the period to reflect the quantity and cost of goods available for sale and the cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 20

Non-operating activities that include interest,dividend,and rent revenues,and gains from asset disposals are called ________.

Accepted Answer

other reve

Cost of goods sold is an expense,and is reported on the income statement.

Sellers always offer a discount to buyers for prompt payment toward purchases made on credit.

Under the net method,when a company uses a perpetual inventory system,an invoice for $2,000 with terms of 2/10,n/30 should be recorded with a debit to Merchandise Inventory and a credit to Accounts Payable of $2,000.

Each sale of merchandise has two parts: the revenue side and the cost side.

A period's beginning inventory is equal to the prior period's ________.

Match the following definitions with the appropriate terms. -A widely used income statement format that lists cost of goods sold as another expense and shows only one subtotal for total expenses.

Purchase discounts are the same as trade discounts.

Quick assets are defined as:

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 45 days.By not taking advantage of the cash discount,the equivalent annual interest lost on the amount of the purchase is:

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. -Net income equals:

What is gross margin ratio? How is it used as an indicator of profitability?

Explain the difference between the single-step and multiple-step income statements.

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

The periodic inventory system requires updating the inventory account only at the end of the period to reflect the quantity and cost of goods available for sale and the cost of goods sold.

Non-operating activities that include interest,dividend,and rent revenues,and gains from asset disposals are called ________.

Accounting in Business

Analyzing for Business Transactions

Adjusting Accounts for Financial Statements

Inventories and Cost of Sales

Cash, fraud, and Internal Controls

Accounting for Receivables

Accounting for Long-Term Assets

Accounting for Current Liabilities

Accounting for Long-Term Liabilities

Corporate Reporting and Analysis

Reporting Cash Flows

Analysis of Financial Statements

Time Value of Money

Investments

Partnership Accounting

Filters

Exam 4: Accounting for Merchandising Operations

Cost of goods sold is an expense,and is reported on the income statement.

Sellers always offer a discount to buyers for prompt payment toward purchases made on credit.

Under the net method,when a company uses a perpetual inventory system,an invoice for $2,000 with terms of 2/10,n/30 should be recorded with a debit to Merchandise Inventory and a credit to Accounts Payable of $2,000.

Each sale of merchandise has two parts: the revenue side and the cost side.

A period's beginning inventory is equal to the prior period's ________.

Match the following definitions with the appropriate terms. -A widely used income statement format that lists cost of goods sold as another expense and shows only one subtotal for total expenses.

Purchase discounts are the same as trade discounts.

Quick assets are defined as:

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 45 days.By not taking advantage of the cash discount,the equivalent annual interest lost on the amount of the purchase is:

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. -Net income equals:

What is gross margin ratio? How is it used as an indicator of profitability?

Explain the difference between the single-step and multiple-step income statements.

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

The periodic inventory system requires updating the inventory account only at the end of the period to reflect the quantity and cost of goods available for sale and the cost of goods sold.

Non-operating activities that include interest,dividend,and rent revenues,and gains from asset disposals are called ________.

Accounting in Business

Analyzing for Business Transactions

Adjusting Accounts for Financial Statements

Inventories and Cost of Sales

Cash, fraud, and Internal Controls

Accounting for Receivables

Accounting for Long-Term Assets

Accounting for Current Liabilities

Accounting for Long-Term Liabilities

Corporate Reporting and Analysis

Reporting Cash Flows

Analysis of Financial Statements

Time Value of Money

Investments

Partnership Accounting

Filters