Question 1

When using the perpetual inventory method,when and how would a company normally discover that merchandise inventory has been lost or stolen?

Accepted Answer

By taking a physical count of the mercha

Question 2

The balance in the Merchandise Inventory account at December 31,2012 is:

Accepted Answer

A)  $300. 
B)  $1,500. 
C)  $2,000. 
D)  $11,150. 
A)  $300. 
B)  $1,500. 
C)  $2,000. 
D)  $11,150.

Question 3

The following events pertain to The Craft Shop,which began operations in October 2012.The company uses the perpetual inventory method.   Required:
a.What was the amount of cash that The Craft Shop paid on October 10?
b.What was the amount of cash that The Craft Shop collected on October 12?
c.What was the balance in The Craft Shop's cash account at the end of the day on October 12?

Accepted Answer

a.Amount of cash paid = $11,00

Question 4

An entry to record the purchase of inventory on account under the perpetual inventory method

Accepted Answer

A)  increases total assets. 
B)  decreases total liabilities. 
C)  decreases total assets. 
D)  increases total equity. 
A)  increases total assets. 
B)  decreases total liabilities. 
C)  decreases total assets. 
D)  increases total equity.

Question 5

What effect does the return of merchandise to the supplier have on the accounting equation?

Accepted Answer

A)  Assets and equity are reduced by $600. 
B)  Liabilities and assets are reduced by $600. 
C)  Assets and liabilities are reduced by $588. 
D)  Liabilities and equity are reduced by $600. 
A)  Assets and equity are reduced by $600. 
B)  Liabilities and assets are reduced by $600. 
C)  Assets and liabilities are reduced by $588. 
D)  Liabilities and equity are reduced by $600.

Question 6

Youkilis Co.returned some defective merchandise it had previously purchased on account from a supplier.Show how the transaction would affect Youkilis's financial statements.

Accepted Answer

The answer of Youkilis Co.returned some defective merchandise it had...

Question 7

Give an example of a period cost for a merchandising business.

Accepted Answer

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Question 8

Explain the major difference between a merchandising business and a service business.

Accepted Answer

A merchandising business earns

Question 9

When does a product cost become an expense?

Accepted Answer

When the g

Question 10

What costs should be included in the Merchandise Inventory account of a merchandising firm?

Accepted Answer

A)  the purchase price of merchandise only 
B)  all costs necessary to acquire inventory and prepare it for sale 
C)  an allocated portion of period costs 
D)  the purchase price of the merchandise + selling expenses 
A)  the purchase price of merchandise only 
B)  all costs necessary to acquire inventory and prepare it for sale 
C)  an allocated portion of period costs 
D)  the purchase price of the merchandise + selling expenses

Question 11

Common size financial statements are prepared by converting dollar amounts to percentages.

Accepted Answer

A) True 
 B)False

Question 12

The net cash flow from operating activities as a result of the four transactions is:

Accepted Answer

A)  $1,012. 
B)  $1,015. 
C)  $2,100. 
D)  $2,188. 
A)  $1,012. 
B)  $1,015. 
C)  $2,100. 
D)  $2,188.

Question 13

The term "loss" represents the excess of cost over revenue from transactions that occur on a regular basis.

Accepted Answer

A) True 
 B)False

Question 14

When Tiffany & Co.sells inventory for more than its cost,the difference between the sales revenue and the cost of goods sold is called the gross margin.

Accepted Answer

A) True 
 B)False

Question 15

The term "FOB shipping point" means

Accepted Answer

A)  the seller's responsibility ends at the destination. 
B)  the seller of the merchandise pays the shipping cost. 
C)  the buyer of the merchandise is responsible for transportation costs. 
D)  the buyer does not assume ownership until the goods are received. 
A)  the seller's responsibility ends at the destination. 
B)  the seller of the merchandise pays the shipping cost. 
C)  the buyer of the merchandise is responsible for transportation costs. 
D)  the buyer does not assume ownership until the goods are received.

Question 16

The following is a list of selected events for Unger Sales and Service for 2012.Unger uses a perpetual inventory system and had a zero inventory balance prior to these transactions.
1)Purchased merchandise on account for $67,000.
2)Sold inventory costing $48,000 for $88,000 on account.
3)Paid transportation-out cost of $1,000 on goods sold.
4)Paid salary expense of $25,000.
5)A count of the inventory revealed that there was $18,500 of inventory on hand at the end of 2010.
Required:
Answer the following questions based on the above information.
a)What was Unger's net income for 2012?
b)Compute gross margin and the gross margin percent for 2012.
c)What amount of inventory will appear on the balance sheet for 2012?
d)Prepare an income statement for 2012.

Accepted Answer

a)Net income = $88,000 - $48,0

Question 17

What is a common size income statement? Explain the benefit of the common size income statement to financial statement users.

Accepted Answer

Common size financial statements express

Question 18

Which of the following account titles is normally used in a periodic inventory system?

Accepted Answer

A)  Transportation-in 
B)  Purchases 
C)  Purchase Returns and Allowances 
D)  All of these 
A)  Transportation-in 
B)  Purchases 
C)  Purchase Returns and Allowances 
D)  All of these

Question 19

Reno Company experienced a transaction that had the following effect on the financial statements:   Which transaction would have this effect?

Accepted Answer

A)  Freight-in cost incurred; payment to be made in 30 days 
B)  Return to a supplier of merchandise that was purchased on account 
C)  Return by a customer of a sale that was made on account 
D)  A loss on land that was sold for cash 
A)  Freight-in cost incurred; payment to be made in 30 days 
B)  Return to a supplier of merchandise that was purchased on account 
C)  Return by a customer of a sale that was made on account 
D)  A loss on land that was sold for cash

Question 20

Faris Company paid the amount due on a purchase of merchandise on account.Faris uses the perpetual inventory system.Which of the following answers reflects the effect of the payment on the financial statements?

Accepted Answer

A)  Choice A 
B)  Choice B 
C)  Choice C 
D)  Choice D 
A)  Choice A 
B)  Choice B 
C)  Choice C 
D)  Choice D

When using the perpetual inventory method,when and how would a company normally discover that merchandise inventory has been lost or stolen?

The balance in the Merchandise Inventory account at December 31,2012 is:

An entry to record the purchase of inventory on account under the perpetual inventory method

What effect does the return of merchandise to the supplier have on the accounting equation?

Youkilis Co.returned some defective merchandise it had previously purchased on account from a supplier.Show how the transaction would affect Youkilis's financial statements.

Give an example of a period cost for a merchandising business.

Explain the major difference between a merchandising business and a service business.

When does a product cost become an expense?

What costs should be included in the Merchandise Inventory account of a merchandising firm?

Common size financial statements are prepared by converting dollar amounts to percentages.

The net cash flow from operating activities as a result of the four transactions is:

The term "loss" represents the excess of cost over revenue from transactions that occur on a regular basis.

When Tiffany & Co.sells inventory for more than its cost,the difference between the sales revenue and the cost of goods sold is called the gross margin.

The term "FOB shipping point" means

What is a common size income statement? Explain the benefit of the common size income statement to financial statement users.

Which of the following account titles is normally used in a periodic inventory system?

Reno Company experienced a transaction that had the following effect on the financial statements: Which transaction would have this effect?

Faris Company paid the amount due on a purchase of merchandise on account.Faris uses the perpetual inventory system.Which of the following answers reflects the effect of the payment on the financial statements?

An Introduction to Accounting

Understanding the Accounting Cycle

Internal Controls,accounting for Cash,and Ethics

Accounting for Receivables and Inventory Cost Flow

Accounting for Long-Term Operational Assets

Accounting for Liabilities

Proprietorships, partnerships, and Corporations

Filters

Exam 3: Accounting for Merchandising Businesses

When using the perpetual inventory method,when and how would a company normally discover that merchandise inventory has been lost or stolen?

The balance in the Merchandise Inventory account at December 31,2012 is:

An entry to record the purchase of inventory on account under the perpetual inventory method

What effect does the return of merchandise to the supplier have on the accounting equation?

Youkilis Co.returned some defective merchandise it had previously purchased on account from a supplier.Show how the transaction would affect Youkilis's financial statements.

Give an example of a period cost for a merchandising business.

Explain the major difference between a merchandising business and a service business.

When does a product cost become an expense?

What costs should be included in the Merchandise Inventory account of a merchandising firm?

Common size financial statements are prepared by converting dollar amounts to percentages.

The net cash flow from operating activities as a result of the four transactions is:

The term "loss" represents the excess of cost over revenue from transactions that occur on a regular basis.

When Tiffany & Co.sells inventory for more than its cost,the difference between the sales revenue and the cost of goods sold is called the gross margin.

The term "FOB shipping point" means

What is a common size income statement? Explain the benefit of the common size income statement to financial statement users.

Which of the following account titles is normally used in a periodic inventory system?

Reno Company experienced a transaction that had the following effect on the financial statements: Which transaction would have this effect?

Faris Company paid the amount due on a purchase of merchandise on account.Faris uses the perpetual inventory system.Which of the following answers reflects the effect of the payment on the financial statements?

An Introduction to Accounting

Understanding the Accounting Cycle

Internal Controls,accounting for Cash,and Ethics

Accounting for Receivables and Inventory Cost Flow

Accounting for Long-Term Operational Assets

Accounting for Liabilities

Proprietorships, partnerships, and Corporations

Filters