Question 1

If costs of goods sold is $560,000 and its gross profit rate is 20%, what is the gross profit?

Accepted Answer

A)  $140,000. 
B)  $70,000. 
C)  $120,000. 
D)  $112,000. 
A)  $140,000. 
B)  $70,000. 
C)  $120,000. 
D)  $112,000.

Question 2

Net sales is calculated by:

Accepted Answer

A)  Subtracting cost of sales from sales. 
B)  Subtracting sales returns and sales discounts from sales. 
C)  Subtracting sales returns, cost of sales, and sales discounts from sales. 
D)  Subtracting gross profit from sales. 
A)  Subtracting cost of sales from sales. 
B)  Subtracting sales returns and sales discounts from sales. 
C)  Subtracting sales returns, cost of sales, and sales discounts from sales. 
D)  Subtracting gross profit from sales.

Question 3

The average gross profit margin is a measure of relative profitability.

Accepted Answer

A) True 
 B)False

Question 4

Using gross profit rates Explain how the gross profit rate for a particular product is determined. How would you expect the manager of a large department store to use these gross profit rates in deciding which products to feature in the store's window displays and in determining the location of various types of merchandise within the store? Explain.

Accepted Answer

The gross profit rate of a particular pr

Question 5

When using a perpetual inventory system, the Purchases account is debited when merchandise is acquired.

Accepted Answer

A) True 
 B)False

Question 6

As a retailer, which of the following percentages is the least attractive to you?

Accepted Answer

A)  Gross profit of 30%. 
B)  Cost of goods sold as a percentage of net sales equal to 70%. 
C)  Gross margin of 30%. 
D)  Sales markup of 30% over cost. 
A)  Gross profit of 30%. 
B)  Cost of goods sold as a percentage of net sales equal to 70%. 
C)  Gross margin of 30%. 
D)  Sales markup of 30% over cost.

Question 7

Inventory is a relatively liquid asset and usually appears above Accounts Receivable on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 8

In a perpetual inventory system, the Inventory and Cost of Goods Sold accounts are kept up-to-date throughout the accounting period.

Accepted Answer

A) True 
 B)False

Question 9

Subsidiary ledgers Listed below are several merchandising transactions of Siegel's Garden Center, a garden supply store.
(a) Purchased merchandise from Bayview Wholesale on account.
(b) Sold merchandise for cash.
(c) Sold merchandise on account to Dom's Landscaping Co.
(d) Paid the account payable to Bayview Wholesale.
(e) Collected the account receivable from Dom's Landscaping Co.
Among the accounting records maintained by Siegel's are subsidiary ledgers for inventory, accounts receivable, and accounts payable.
For each of the five transactions, you are to indicate any subsidiary ledger (or ledgers) to which the transaction would be posted. Use the code:
Inv = Inventory subsidiary ledger
AR = Accounts receivable subsidiary ledger
AP = Accounts payable subsidiary ledger
Also indicate whether each posting causes the balance in the subsidiary ledger account to increase or decrease. Organize your answer in tabular form as illustrated below. The answer for transaction a is provided as an example.

Accepted Answer

The answer of Subsidiary ledgers Listed below are several merchandising...

Question 10

What is the gross profit?

Accepted Answer

A)  $96,800. 
B)  $133,600. 
C)  $132,200. 
D)  $230,400. 
A)  $96,800. 
B)  $133,600. 
C)  $132,200. 
D)  $230,400.

Question 11

If World of Sound uses a perpetual inventory system, the journal entry to record the purchase on May 18th would include which of the following?

Accepted Answer

A)  A debit to the Purchases account for $38,250. 
B)  A debit to the Cost of Goods Sold for $38,250. 
C)  A credit to Inventory for $38,250. 
D)  A debit to Inventory for $38,250. 
A)  A debit to the Purchases account for $38,250. 
B)  A debit to the Cost of Goods Sold for $38,250. 
C)  A credit to Inventory for $38,250. 
D)  A debit to Inventory for $38,250.

Question 12

If Bartner Furniture, Inc. purchased inventory at $1,200 list price and the terms were 3/10 n/30, what would be the value associated with the inventory if payment was made after 20 days?

Accepted Answer

A)  $1,176. 
B)  $1,236. 
C)  $1,164. 
D)  $1,200. 
A)  $1,176. 
B)  $1,236. 
C)  $1,164. 
D)  $1,200.

Question 13

The Sales Returns and Allowances account is debited when:

Accepted Answer

A)  Merchandise is returned to a supplier. 
B)  Merchandise is returned by a customer. 
C)  Payment is made to a supplier within the discount period. 
D)  An account receivable is collected within the discount period. 
A)  Merchandise is returned to a supplier. 
B)  Merchandise is returned by a customer. 
C)  Payment is made to a supplier within the discount period. 
D)  An account receivable is collected within the discount period.

Question 14

The manager of National Software wants to know how many Microsoft Excel programs the store sold in June. This information is contained in the Inventory controlling account.

Accepted Answer

A) True 
 B)False

Question 15

What is the cost of goods sold?

Accepted Answer

A)  $96,800. 
B)  $133,600. 
C)  $132,200. 
D)  $230,400. 
A)  $96,800. 
B)  $133,600. 
C)  $132,200. 
D)  $230,400.

Question 16

Sales discounts and allowances:

Accepted Answer

A)  When properly recorded will reduce net profit. 
B)  When properly recorded will increase net profit. 
C)  Will not affect net profit. 
D)  Are always immaterial and need not be recorded. 
A)  When properly recorded will reduce net profit. 
B)  When properly recorded will increase net profit. 
C)  Will not affect net profit. 
D)  Are always immaterial and need not be recorded.

Question 17

Gross profit margin is the dollar amount of gross profit expressed as a percentage of gross sales.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following companies would be more likely to use a perpetual inventory system?

Accepted Answer

A)  Corner deli. 
B)  Home Depot. 
C)  James Dean, CPA. 
D)  A manufacturer of custom sailboats. 
A)  Corner deli. 
B)  Home Depot. 
C)  James Dean, CPA. 
D)  A manufacturer of custom sailboats.

Question 19

In a perpetual inventory system, when merchandise is purchased, it is debited to an account called Purchases.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following factors would suggest the use of a periodic inventory system?

Accepted Answer

A)  A small company. 
B)  A high volume of sales and a manual accounting system. 
C)  Neither a small company or a high volume of sales and a manual accounting system. 
D)  Both a small company and a high volume of sales and a manual accounting system. 
A)  A small company. 
B)  A high volume of sales and a manual accounting system. 
C)  Neither a small company or a high volume of sales and a manual accounting system. 
D)  Both a small company and a high volume of sales and a manual accounting system.

Exam 6: Merchandising Activities

If costs of goods sold is $560,000 and its gross profit rate is 20%, what is the gross profit?

Net sales is calculated by:

The average gross profit margin is a measure of relative profitability.

When using a perpetual inventory system, the Purchases account is debited when merchandise is acquired.

As a retailer, which of the following percentages is the least attractive to you?

Inventory is a relatively liquid asset and usually appears above Accounts Receivable on the balance sheet.

In a perpetual inventory system, the Inventory and Cost of Goods Sold accounts are kept up-to-date throughout the accounting period.

What is the gross profit?

If World of Sound uses a perpetual inventory system, the journal entry to record the purchase on May 18th would include which of the following?

If Bartner Furniture, Inc. purchased inventory at $1,200 list price and the terms were 3/10 n/30, what would be the value associated with the inventory if payment was made after 20 days?

The Sales Returns and Allowances account is debited when:

The manager of National Software wants to know how many Microsoft Excel programs the store sold in June. This information is contained in the Inventory controlling account.

What is the cost of goods sold?

Sales discounts and allowances:

Gross profit margin is the dollar amount of gross profit expressed as a percentage of gross sales.

Which of the following companies would be more likely to use a perpetual inventory system?

In a perpetual inventory system, when merchandise is purchased, it is debited to an account called Purchases.

Which of the following factors would suggest the use of a periodic inventory system?

Accounting: Information for Decision Making

Basic Financial Statements

The Accounting Cycle: Capturing Economic Events

The Accounting Cycle: Accruals and Deferrals

The Accounting Cycle: Reporting Financial Results

Financial Assets

Inventories and the Cost of Goods Sold

Plant and Intangible Assets

Liabilities

Stockholders Equity: Paid-In Capital

Income and Changes in Retained Earnings

Statement of Cash Flows

Financial Statement Analysis

Global Business and Accounting

Management Accounting: a Business Partner

Job Order Cost Systems and Overhead Allocations

Process Costing

Costing and the Value Chain

Cost-Volume-Profit Analysis

Incremental Analysis

Responsibility Accounting and Transfer Pricing

Operational Budgeting

Standard Cost Systems

Rewarding Business Performance

Capital Budgeting

Forms of Business Organization

The Time Value of Money: Future Amounts and Present Values Answer Key

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