Question 1

Successful use of a just-in-time inventory system can narrow the gap between the acid-test and the current ratio.

Accepted Answer

A) True 
 B)False

Question 2

Using the following year-end information for Brim, LLC, calculate the current ratio and acid-test ratio:

Accepted Answer

A)  3.01 and 1.21 
B)  3.16 and .97 
C)  3.04 and 1.21 
D)  1.09 and 4.77 
E)  None of these 
A)  3.01 and 1.21 
B)  3.16 and .97 
C)  3.04 and 1.21 
D)  1.09 and 4.77 
E)  None of these

Question 3

A company's net sales were $676,600, its cost of good sold was $236,810 and its net income was $33,750. Its gross margin ratio equals:

Accepted Answer

A)  5%. 
B)  9.6%. 
C)  35%. 
D)  65%. 
E)  285.7%. 
A)  5%. 
B)  9.6%. 
C)  35%. 
D)  65%. 
E)  285.7%.

Question 4

The Merchandise Inventory account balance at the end of the current period is equal to the amount of beginning merchandise inventory for the next period.

Accepted Answer

A) True 
 B)False

Question 5

The 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 6

Prepare journal entries to record the following merchandise transactions of Geo Company, which applies the perpetual inventory system.

Accepted Answer

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

Question 7

In a perpetual inventory system, the merchandise inventory account must be closed at the end of the accounting period.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A)  Sales returns and allowances can include a reduction is the selling price because of damaged merchandise. 
B)  Sales returns and allowances do not reflect the possibility of lost future sales. 
C)  Sales returns and allowances are recorded in a separate contra-revenue account. 
D)  Sales returns and allowances are rarely disclosed in published financial statements. 
E)  Sales returns and allowances are closed to the Income Summary account. 
A)  Sales returns and allowances can include a reduction is the selling price because of damaged merchandise. 
B)  Sales returns and allowances do not reflect the possibility of lost future sales. 
C)  Sales returns and allowances are recorded in a separate contra-revenue account. 
D)  Sales returns and allowances are rarely disclosed in published financial statements. 
E)  Sales returns and allowances are closed to the Income Summary account.

Question 9

The current period's ending inventory is:

Accepted Answer

A)  The next period's beginning inventory. 
B)  The current period's cost of goods sold. 
C)  The prior period's beginning inventory. 
D)  The current period's net purchases. 
E)  The current period's beginning inventory. 
A)  The next period's beginning inventory. 
B)  The current period's cost of goods sold. 
C)  The prior period's beginning inventory. 
D)  The current period's net purchases. 
E)  The current period's beginning inventory.

Question 10

Sales discounts is a contra revenue account, meaning that the Sales Discounts account is added to the Sales account when computing a company's net sales.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

The answer of Explain the difference between the single-step and...

Question 12

A buyer records the costs of shipping goods in a Delivery Expense, or transportation-out account when the buyer is responsible for these costs.

Accepted Answer

A) True 
 B)False

Question 13

Nichole Company had net sales of $500,000 and cost of goods sold of $350,000. Calculate Nichole's gross profit.

Accepted Answer

The answer of Nichole Company had net sales of $500,000...

Question 14

On October 1, Robinson Company sold merchandise in the amount of $5,800 to Rosser, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Robinson uses the perpetual inventory system. The journal entry or entries that Robinson will make on October 1 is:

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

Question 15

Harriet's Toy Shop had net sales of $852,000. The gross profit was $230,000. Calculate Harriet's cost of goods sold.

Accepted Answer

The answer of Harriet's Toy Shop had net sales of...

Question 16

The following information is for Trico and its competitor Unico.   Required:
1. Calculate the dollar amount of gross margin and the gross margin ratio to the nearest percent, for each company for both years.
2. Which company had the more favorable ratio for each year?
3. Which company had the more favorable change in the gross margin ratio over this 2-year period?

Accepted Answer

The answer of The following information is for Trico and...

Question 17

On October 1, Mutch Company sold merchandise in the amount of $5,800 to Carr Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Mutch uses the perpetual inventory system. On October 4, Carr returns some of the merchandise. The selling price of the merchandise is $500 and the cost of the merchandise returned is $350. The entry or entries that Mutch must make on October 4 is:

Accepted Answer

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

Question 18

The profit margin ratio is gross margin divided by total assets.

Accepted Answer

A) True 
 B)False

Question 19

The following information refers to Annie's Attic and its competitors in the antiques business.   Required:
Comment on the relative liquidity positions of these companies.

Accepted Answer

The answer of The following information refers to Annie's Attic...

Question 20

The acid-test ratio:

Accepted Answer

A)  Is also called the quick ratio. 
B)  Measures profitability. 
C)  Measures inventory turnover. 
D)  Is generally greater than the current ratio. 
E)  Measures return on assets. 
A)  Is also called the quick ratio. 
B)  Measures profitability. 
C)  Measures inventory turnover. 
D)  Is generally greater than the current ratio. 
E)  Measures return on assets.

Exam 5: Accounting for Merchandising Operations

Successful use of a just-in-time inventory system can narrow the gap between the acid-test and the current ratio.

Using the following year-end information for Brim, LLC, calculate the current ratio and acid-test ratio:

A company's net sales were $676,600, its cost of good sold was $236,810 and its net income was $33,750. Its gross margin ratio equals:

The Merchandise Inventory account balance at the end of the current period is equal to the amount of beginning merchandise inventory for the next period.

The quick assets are defined as:

Prepare journal entries to record the following merchandise transactions of Geo Company, which applies the perpetual inventory system.

In a perpetual inventory system, the merchandise inventory account must be closed at the end of the accounting period.

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

The current period's ending inventory is:

Sales discounts is a contra revenue account, meaning that the Sales Discounts account is added to the Sales account when computing a company's net sales.

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

A buyer records the costs of shipping goods in a Delivery Expense, or transportation-out account when the buyer is responsible for these costs.

Nichole Company had net sales of $500,000 and cost of goods sold of $350,000. Calculate Nichole's gross profit.

On October 1, Robinson Company sold merchandise in the amount of $5,800 to Rosser, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Robinson uses the perpetual inventory system. The journal entry or entries that Robinson will make on October 1 is:

Harriet's Toy Shop had net sales of $852,000. The gross profit was $230,000. Calculate Harriet's cost of goods sold.

The profit margin ratio is gross margin divided by total assets.

The following information refers to Annie's Attic and its competitors in the antiques business. Required: Comment on the relative liquidity positions of these companies.

The acid-test ratio:

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 Resources, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Cost Accounting

Process Cost Accounting

Cost Allocation and Performance Measurement

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Capital Budgeting and Managerial Decisions

Time Value of Money

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