Question 1

Peg had net sales of $28,496 million, its cost of goods sold was $19,092 million, and its net income was $997 million. Its gross margin ratio equals:

Accepted Answer

A)  3.5%. 
B)  5.2%. 
C)  33%. 
D)  67%. 
E)  149.3%. 
A)  3.5%. 
B)  5.2%. 
C)  33%. 
D)  67%. 
E)  149.3%.

Question 2

On October 1, Whaley Company sold merchandise in the amount of $5,800 to Lee Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Whaley uses the perpetual inventory system. Lee pays the invoice on October 8, and takes the appropriate discount. The journal entry that Whaley makes on October 8 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 3

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 4

Sellers always offer a discount to buyers for prompt payment toward purchases made on credit.

Accepted Answer

A) True 
 B)False

Question 5

A buyer did not take advantage of a supplier's credit terms of 2/10, n/30, and instead paid the invoice in full at the end of 30 days. By not taking the discount the buyer lost the equivalent of 18% annual interest on the amount of the purchase.

Accepted Answer

A) True 
 B)False

Question 6

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 7

The operating cycle for a merchandiser that sells only for cash moves from:

Accepted Answer

A)  Purchases of merchandise to inventory to cash sales. 
B)  Purchases of merchandise to inventory to accounts receivable to cash sales. 
C)  Inventory to purchases of merchandise to cash sales. 
D)  Accounts receivable to purchases of merchandise to inventory to cash sales. 
E)  Accounts receivable to inventory to cash sales. 
A)  Purchases of merchandise to inventory to cash sales. 
B)  Purchases of merchandise to inventory to accounts receivable to cash sales. 
C)  Inventory to purchases of merchandise to cash sales. 
D)  Accounts receivable to purchases of merchandise to inventory to cash sales. 
E)  Accounts receivable to inventory to cash sales.

Question 8

What is the difference between the periodic and perpetual inventory systems?

Accepted Answer

A periodic inventory system updates the

Question 9

The amount recorded for merchandise inventory includes all of the following except:

Accepted Answer

A)  Purchase discounts. 
B)  Returns and allowances. 
C)  Freight costs paid by the buyer. 
D)  Freight costs paid by the seller. 
E)  Trade discounts. 
A)  Purchase discounts. 
B)  Returns and allowances. 
C)  Freight costs paid by the buyer. 
D)  Freight costs paid by the seller. 
E)  Trade discounts.

Question 10

A company purchased $10,000 of merchandise on June 15 with terms of 3/10, n/45, and FOB shipping point. The freight charge was $500. 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)  $9,224. 
B)  $10,200. 
C)  $10,500. 
D)  $10,300. 
E)  $9,424. 
A)  $9,224. 
B)  $10,200. 
C)  $10,500. 
D)  $10,300. 
E)  $9,424.

Question 11

A common rule of thumb is that a company's acid-test ratio should be at least 2 or a company may face near-term liquidity problems.

Accepted Answer

A) True 
 B)False

Question 12

Prepare journal entries to record the following merchandising transactions of Dean Company, which applies the perpetual inventory system. Dean Company offers all of its credit customers credit terms of 2/10, n/30.

Accepted Answer

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

Question 13

The following information is available for Trico and its two main competitors in the industry (Duco and Unico):
The industry standard for the current ratio is 1.8 and the industry standard for the acid-test ratio is 1.
Required:
1. Calculate the current ratio and acid-test ratio for each firm.
2. Rank the firms in decreasing order of liquidity.
3. Comment on Trico's relative liquidity position.

Accepted Answer

Part 1
Part 2: Rank order:
 @#IMG-DLM& @#IMG-DLM& Part 3: Tr

Question 14

Expenses that support the overall operations of a business and include the expenses relating to accounting, human resource management, and financial management are called:

Accepted Answer

A)  Cost of goods sold. 
B)  Selling expenses. 
C)  Purchasing expenses. 
D)  Administrative expenses. 
E)  Nonoperating activities. 
A)  Cost of goods sold. 
B)  Selling expenses. 
C)  Purchasing expenses. 
D)  Administrative expenses. 
E)  Nonoperating activities.

Question 15

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 16

FOB _________________ means ownership of goods transfers to the buyer when the goods arrive at the buyer's place of business. The seller is responsible for paying shipping charges and bears the risk of damage or loss in transit.

Accepted Answer

The answer of FOB _________________ means ownership of goods transfers...

Question 17

Sam's Wholesale shows the following account balances in its ledger on June 30, its fiscal year-end. Sam's Wholesale uses the perpetual inventory system.
A physical count of its June 30 year-end inventory discloses that the cost of the merchandise inventory still available is $57,160. Prepare the entry to record any inventory shrinkage.

Accepted Answer

The answer of Sam's Wholesale shows the following account balances...

Question 18

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

Accepted Answer

Purchases, net of trade discounts, are a

Question 19

If a company sells merchandise with credit terms 2/10 n/60, the credit period is 10 days and the discount period is 60 days.

Accepted Answer

A) True 
 B)False

Question 20

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

$852,000 -

Exam 5: Accounting for Merchandising Operations

Peg had net sales of $28,496 million, its cost of goods sold was $19,092 million, and its net income was $997 million. Its gross margin ratio equals:

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.

Sellers always offer a discount to buyers for prompt payment toward purchases made on credit.

A buyer did not take advantage of a supplier's credit terms of 2/10, n/30, and instead paid the invoice in full at the end of 30 days. By not taking the discount the buyer lost the equivalent of 18% annual interest on the amount of the purchase.

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

The operating cycle for a merchandiser that sells only for cash moves from:

What is the difference between the periodic and perpetual inventory systems?

The amount recorded for merchandise inventory includes all of the following except:

A common rule of thumb is that a company's acid-test ratio should be at least 2 or a company may face near-term liquidity problems.

Prepare journal entries to record the following merchandising transactions of Dean Company, which applies the perpetual inventory system. Dean Company offers all of its credit customers credit terms of 2/10, n/30.

Expenses that support the overall operations of a business and include the expenses relating to accounting, human resource management, and financial management are called:

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:

FOB _________________ means ownership of goods transfers to the buyer when the goods arrive at the buyer's place of business. The seller is responsible for paying shipping charges and bears the risk of damage or loss in transit.

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

If a company sells merchandise with credit terms 2/10 n/60, the credit period is 10 days and the discount period is 60 days.

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

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

Long-Term Assets

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

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

Filters