Question 1

A service company earns net income by buying and selling merchandise.

Accepted Answer

A) True 
 B)False

Question 2

A company purchased $10,000 of merchandise on June 15 with terms of 3/10, n/45. On June 20, it returned $800 of that merchandise. On June 24, it paid the balance owed for the merchandise taking any discount it is entitled to. The cash paid on June 24 equals:

Accepted Answer

A)  $8,924. 
B)  $9,700. 
C)  $10,000. 
D)  $9,800. 
E)  $8,724. 
A)  $8,924. 
B)  $9,700. 
C)  $10,000. 
D)  $9,800. 
E)  $8,724.

Question 3

A company had net sales and cost of goods sold of $752,000 and $543,000, respectively. Its net income was $17,530. The company's gross margin ratio equals:

Accepted Answer

A)  18.9% 
B)  24.5% 
C)  27.8% 
D)  34.7% 
E)  35.2% 
A)  18.9% 
B)  24.5% 
C)  27.8% 
D)  34.7% 
E)  35.2%

Question 4

Multiple-step income statements:

Accepted Answer

A)  Are required by the FASB. 
B)  Contain more detail than a simple listing of revenues and expenses. 
C)  Are required for the perpetual inventory system. 
D)  List cost of goods sold as an operating expense. 
E)  Can only be used in perpetual inventory systems. 
A)  Are required by the FASB. 
B)  Contain more detail than a simple listing of revenues and expenses. 
C)  Are required for the perpetual inventory system. 
D)  List cost of goods sold as an operating expense. 
E)  Can only be used in perpetual inventory systems.

Question 5

A company has net sales and cost of goods sold of $752,000 and $543,000, respectively. Its net income is $17,530. The company's gross margin and operating expenses are ________ and ___________, respectively.

Accepted Answer

A)  $209,000; $191,470 
B)  $191,470; $209,000 
C)  $525,470; $227,000 
D)  $227,000; $525,470 
E)  $734,000; $191,470 
A)  $209,000; $191,470 
B)  $191,470; $209,000 
C)  $525,470; $227,000 
D)  $227,000; $525,470 
E)  $734,000; $191,470

Question 6

The gross margin ratio is defined as gross margin divided by net sales.

Accepted Answer

A) True 
 B)False

Question 7

Calculate the gross margin ratio for each of the following separate cases A through D:

Accepted Answer

The answer of Calculate the gross margin ratio for each...

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

Purchase allowances refer to merchandise a buyer acquires but then returns to the seller.

Accepted Answer

A) True 
 B)False

Question 10

A debit to Sales Returns and Allowances and a credit to Accounts Receivable:

Accepted Answer

A)  Reflects an increase in amount due from a customer. 
B)  Recognizes that a customer returned merchandise and/or received an allowance. 
C)  Requires a debit memorandum to recognize the customer's return. 
D)  Is recorded when a customer takes a discount. 
E)  Reflects a decrease in amount due a supplier. 
A)  Reflects an increase in amount due from a customer. 
B)  Recognizes that a customer returned merchandise and/or received an allowance. 
C)  Requires a debit memorandum to recognize the customer's return. 
D)  Is recorded when a customer takes a discount. 
E)  Reflects a decrease in amount due a supplier.

Question 11

The credit terms 2/10, n/30 are interpreted as:

Accepted Answer

A)  2% cash discount if the amount is paid within 10 days, or the balance due in 30 days. 
B)  10% cash discount if the amount is paid within 2 days, or the balance due in 30 days. 
C)  30% discount if paid within 2 days. 
D)  30% discount if paid within 10 days. 
E)  2% discount if paid within 30 days. 
A)  2% cash discount if the amount is paid within 10 days, or the balance due in 30 days. 
B)  10% cash discount if the amount is paid within 2 days, or the balance due in 30 days. 
C)  30% discount if paid within 2 days. 
D)  30% discount if paid within 10 days. 
E)  2% discount if paid within 30 days.

Question 12

Beginning inventory plus net purchases is:

Accepted Answer

A)  Cost of goods sold. 
B)  Merchandise available for sale. 
C)  Ending inventory. 
D)  Sales. 
E)  Shown on the balance sheet. 
A)  Cost of goods sold. 
B)  Merchandise available for sale. 
C)  Ending inventory. 
D)  Sales. 
E)  Shown on the balance sheet.

Question 13

The acid-test ratio is defined as current assets divided by current liabilities.

Accepted Answer

A) True 
 B)False

Question 14

Credit terms of 2/10, n/30 imply that the seller offers the purchaser a 2% cash discount if the amount is paid within 10 days of the invoice date. Otherwise, the full amount is due in 30 days.

Accepted Answer

A) True 
 B)False

Question 15

Sales returns:

Accepted Answer

A)  Refer to merchandise that customers return to the seller after the sale. 
B)  Refer to reductions in the selling price of merchandise sold to customers. 
C)  Represent cash discounts. 
D)  Represent trade discounts. 
E)  Are not recorded under the perpetual inventory system until the end of each accounting period. 
A)  Refer to merchandise that customers return to the seller after the sale. 
B)  Refer to reductions in the selling price of merchandise sold to customers. 
C)  Represent cash discounts. 
D)  Represent trade discounts. 
E)  Are not recorded under the perpetual inventory system until the end of each accounting period.

Question 16

Under a periodic inventory system, purchases, purchases returns and allowances, purchase discounts, and transportation in transactions are recorded in separate temporary accounts

Accepted Answer

A) True 
 B)False

Question 17

A _______________________ is a document the buyer issues to inform the seller of a debit made to the seller's account in the buyer's records.

Accepted Answer

The answer of A _______________________ is a document the buyer...

Question 18

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

Accepted Answer

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

Question 19

The following statements regarding merchandise inventory are true except:

Accepted Answer

A)  Merchandise inventory is reported on the balance sheet as a current asset. 
B)  Merchandise inventory refers to products a company owns and intends to sell. 
C)  Merchandise inventory can include the cost of shipping the goods to the store and making them ready for sale. 
D)  Merchandise inventory does not appear on the balance sheet of a service company. 
E)  Merchandise inventory purchases are not considered part of the operating cycle for a business. 
A)  Merchandise inventory is reported on the balance sheet as a current asset. 
B)  Merchandise inventory refers to products a company owns and intends to sell. 
C)  Merchandise inventory can include the cost of shipping the goods to the store and making them ready for sale. 
D)  Merchandise inventory does not appear on the balance sheet of a service company. 
E)  Merchandise inventory purchases are not considered part of the operating cycle for a business.

Question 20

Describe the recording process (including costs) for purchasing merchandise inventory using a perpetual inventory system.

Accepted Answer

The answer of Describe the recording process (including costs) for...

Exam 5: Accounting for Merchandising Operations

A service company earns net income by buying and selling merchandise.

A company purchased $10,000 of merchandise on June 15 with terms of 3/10, n/45. On June 20, it returned $800 of that merchandise. On June 24, it paid the balance owed for the merchandise taking any discount it is entitled to. The cash paid on June 24 equals:

A company had net sales and cost of goods sold of $752,000 and $543,000, respectively. Its net income was $17,530. The company's gross margin ratio equals:

Multiple-step income statements:

A company has net sales and cost of goods sold of $752,000 and $543,000, respectively. Its net income is $17,530. The company's gross margin and operating expenses are ________ and ___________, respectively.

The gross margin ratio is defined as gross margin divided by net sales.

Calculate the gross margin ratio for each of the following separate cases A through D:

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

Purchase allowances refer to merchandise a buyer acquires but then returns to the seller.

A debit to Sales Returns and Allowances and a credit to Accounts Receivable:

The credit terms 2/10, n/30 are interpreted as:

Beginning inventory plus net purchases is:

The acid-test ratio is defined as current assets divided by current liabilities.

Credit terms of 2/10, n/30 imply that the seller offers the purchaser a 2% cash discount if the amount is paid within 10 days of the invoice date. Otherwise, the full amount is due in 30 days.

Sales returns:

Under a periodic inventory system, purchases, purchases returns and allowances, purchase discounts, and transportation in transactions are recorded in separate temporary accounts

A _______________________ is a document the buyer issues to inform the seller of a debit made to the seller's account in the buyer's records.

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

The following statements regarding merchandise inventory are true except:

Describe the recording process (including costs) for purchasing merchandise inventory using a perpetual inventory system.

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

Filters

A company has net sales and cost of goods sold of $752,000 and $543,000, respectively. Its net income is $17,530. The company's gross margin and operating expenses are and ___, respectively.