Question 1

Match between columns
                        Premises:  An inventory accounting method that continually updates accounting records for inventory available for sale and inventory sold.
 An inventorv accounting method that updates the accounting records for merchandise transactions only at the end of a period.
 The time period in which reduced payment can be made by the buyer because of a cash discount offered by a seller of goods on credit.
 A notification that informs the seller of a debit made to the seller's account payable in the buyer's records.
 A cash discount granted, from the view of the purchaser intended to encourage buyers to pay amounts owed earlier.
 A notification that informs a buyer of a seller's credit to a buyer's account.
 A cash discount granted from the view of the seller, indicated in the credit terms on the invoice.
 The calculation of net sales less cost of goods sold.
 The description of the amounts and timing of payments from a buyer to a seller for a purchase.
 The amount of time allowed before full payment is due.

Accepted Answer

The Answer of Debit memorandum and Credit period and Credit is...

Question 2

Cost of Goods Sold is debited to close the account during the closing process.

Accepted Answer

A) True 
 B)False

Question 3

Garza Company had sales of $135,000, sales discounts of $2,000, and sales returns of $3,200. Garza Company's net sales equals:

Accepted Answer

A)  $140,200. 
B)  $5,200. 
C)  $129,800. 
D)  $135,000. 
E)  $133,000. 
A)  $140,200. 
B)  $5,200. 
C)  $129,800. 
D)  $135,000. 
E)  $133,000.

Question 4

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

Accepted Answer

Inventory shrinkage is the loss of merch

Question 5

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. 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:

Accepted Answer

A)  $$\begin{array} { | l | r | r | } 
\hline \text { Cash } & 7,056 & \
\hline \text { Accounts receivable } & & 7,056 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | r | r | } 
\hline \text { Cash } & 7,800 & \
\hline \text { Accounts receivable } & & 7,800 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | r | r | } 
\hline \text { Cash } & 7,644 & \
\hline \text { Sales discounts } & 156 & \
\hline \text { Accounts receivable } & & 7,800 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | r | r | } 
\hline \text { Cash } & 4,500 & \
\hline \text { Accounts receivable } & & 4,500 \
\hline
\end{array}$$ 
E)  $$\begin{array} { | l | r | r | } 
\hline \text { Cash } & 7,056 & \
\hline \text { Sales discounts } & 144 & \
\hline \text { Accounts receivable } & & 7,200 \
\hline
\end{array}$$ 
A)  $$\begin{array} { | l | r | r | } 
\hline \text { Cash } & 7,056 & \
\hline \text { Accounts receivable } & & 7,056 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | r | r | } 
\hline \text { Cash } & 7,800 & \
\hline \text { Accounts receivable } & & 7,800 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | r | r | } 
\hline \text { Cash } & 7,644 & \
\hline \text { Sales discounts } & 156 & \
\hline \text { Accounts receivable } & & 7,800 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | r | r | } 
\hline \text { Cash } & 4,500 & \
\hline \text { Accounts receivable } & & 4,500 \
\hline
\end{array}$$ 
E)  $$\begin{array} { | l | r | r | } 
\hline \text { Cash } & 7,056 & \
\hline \text { Sales discounts } & 144 & \
\hline \text { Accounts receivable } & & 7,200 \
\hline
\end{array}$$

Question 6

A journal entry with a debit to cash of $980, a debit to Sales Discounts of $20, and a credit to Accounts Receivable of $1,000 means that a customer has taken a 10% cash discount for early payment.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

Either the gross method or net method may be used to record sales with cash discounts, but the net method requires a period-end adjusting entry to estimate expected future sales discounts taken.

Accepted Answer

A) True 
 B)False

Question 9

All of the following statements regarding sales returns and allowances are true except:

Accepted Answer

A)  Sales returns and allowances estimates are typically made as period-end adjustments. 
B)  When sales returns and allowances adjustments are made to sales, an estimate must also be made for the cost side. 
C)  The Inventory Returns Estimated account is a current liability account. 
D)  New revenue recognition rules require sellers to report sales net of expected returns and allowances for annual periods. 
E)  Sales Refund Payable is a current liability account. 
A)  Sales returns and allowances estimates are typically made as period-end adjustments. 
B)  When sales returns and allowances adjustments are made to sales, an estimate must also be made for the cost side. 
C)  The Inventory Returns Estimated account is a current liability account. 
D)  New revenue recognition rules require sellers to report sales net of expected returns and allowances for annual periods. 
E)  Sales Refund Payable is a current liability account.

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

Match the following definitions and terms by placing the letter for the terms A through J in the blank space next to the best definition.
A. Trade discount F. Acid-test ratio
B. General and administrative expenses G. Merchandise inventory
C. FOB shipping point H. Selling expenses
D. Single-step income statement I. Multiple-step income statement
E. FOB destination J. Inventory shrinkage

Accepted Answer

1. F; 2. D; 3. E; 4.

Question 13

All of the following statements regarding inventory shrinkage are true except:

Accepted Answer

A)  Inventory shrinkage refers to the loss of inventory. 
B)  Inventory shrinkage can be caused by theft or deterioration. 
C)  Inventory shrinkage is recognized by debiting an operating expense. 
D)  Inventory shrinkage is determined by comparing a physical count of inventory with recorded inventory amounts. 
E)  Inventory shrinkage is recognized by debiting Cost of Goods Sold. 
A)  Inventory shrinkage refers to the loss of inventory. 
B)  Inventory shrinkage can be caused by theft or deterioration. 
C)  Inventory shrinkage is recognized by debiting an operating expense. 
D)  Inventory shrinkage is determined by comparing a physical count of inventory with recorded inventory amounts. 
E)  Inventory shrinkage is recognized by debiting Cost of Goods Sold.

Question 14

Cushman Company had $800,000 in net sales, $350,000 in gross profit, and $200,000 in operating expenses. Cost of goods sold equals:

Accepted Answer

A)  $150,000. 
B)  $450,000. 
C)  $200,000. 
D)  $350,000. 
E)  $800,000. 
A)  $150,000. 
B)  $450,000. 
C)  $200,000. 
D)  $350,000. 
E)  $800,000.

Question 15

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 16

Merchandise that customers return to the seller after a sale is referred to as__________ .

Accepted Answer

The answer of Merchandise that customers return to the seller...

Question 17

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:

Accepted Answer

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

Question 18

Gross profit is also called gross margin.

Accepted Answer

A) True 
 B)False

Question 19

Barbara's Boats uses the periodic inventory system and the net method of accounting for purchases. The company had the following transactions during January:
January 6: Purchased $10,000 of inventory. The seller's credit terms are 2/10, n/30. January 31: Due to an oversight, the invoice was not paid within the discount period. Full payment was made on January 31.
Prepare journal entries to record each of the preceding transactions.

Accepted Answer

None

Question 20

Under the perpetual inventory system, the cost of merchandise purchased is recorded in the Merchandise Inventory account.

Accepted Answer

A) True 
 B)False

Exam 5: Accounting for Merchandising Operations

Cost of Goods Sold is debited to close the account during the closing process.

Garza Company had sales of $135,000, sales discounts of $2,000, and sales returns of $3,200. Garza Company's net sales equals:

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

A journal entry with a debit to cash of $980, a debit to Sales Discounts of $20, and a credit to Accounts Receivable of $1,000 means that a customer has taken a 10% cash discount for early payment.

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

Either the gross method or net method may be used to record sales with cash discounts, but the net method requires a period-end adjusting entry to estimate expected future sales discounts taken.

All of the following statements regarding sales returns and allowances are true except:

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

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

All of the following statements regarding inventory shrinkage are true except:

Cushman Company had $800,000 in net sales, $350,000 in gross profit, and $200,000 in operating expenses. Cost of goods sold equals:

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

Merchandise that customers return to the seller after a sale is referred to as__________ .

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:

Gross profit is also called gross margin.

Under the perpetual inventory system, the cost of merchandise purchased is recorded in the Merchandise Inventory account.

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets Natural Resoures and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments

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

Present and Future Values in Accounting

Activity-Based Costing

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