Question 1

All of the following statements regarding sales returns and allowances are 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 2

Sales less sales discounts less sales returns and allowances equals:

Accepted Answer

A)  Net purchases. 
B)  Cost of goods sold. 
C)  Net sales. 
D)  Gross profit. 
E)  Net income. 
A)  Net purchases. 
B)  Cost of goods sold. 
C)  Net sales. 
D)  Gross profit. 
E)  Net income.

Question 3

The __________________ inventory system continually updates accounting records for merchandise transactions for the amounts of inventory available for sale and inventory sold.

Accepted Answer

The answer of The __________________ inventory system continually updates accounting...

Question 4

Describe the key attributes of inventory for a merchandising company.

Accepted Answer

Merchandise inventory is a current asset

Question 5

The periodic inventory system requires updating the inventory account only at the end of the period to reflect the quantity and cost of both the goods available and the goods sold.

Accepted Answer

A) True 
 B)False

Question 6

When a credit customer returns merchandise to the seller, under a perpetual inventory system, the seller would debit Sales Returns and Allowances and credit Accounts Receivable and also debit Merchandise Inventory and credit Cost of Goods Sold.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

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 9

ABC Corporation's total quick assets were $5,888,000, its current assets were $11,700,000 and its current liabilities were $8,000,000. Its acid-test ratio equals:

Accepted Answer

A)  0.50. 
B)  0.68. 
C)  0.74. 
D)  1.50. 
E)  2.20. 
A)  0.50. 
B)  0.68. 
C)  0.74. 
D)  1.50. 
E)  2.20.

Question 10

A debit memorandum is:

Accepted Answer

A)  Required whenever a journal entry is recorded. 
B)  The source document for the purchase of merchandise inventory. 
C)  Required when a purchase discount is granted. 
D)  The document a buyer issues to inform the seller of a debit made to the seller's account in the buyer's records. 
E)  Not necessary in a perpetual inventory system. 
A)  Required whenever a journal entry is recorded. 
B)  The source document for the purchase of merchandise inventory. 
C)  Required when a purchase discount is granted. 
D)  The document a buyer issues to inform the seller of a debit made to the seller's account in the buyer's records. 
E)  Not necessary in a perpetual inventory system.

Question 11

Each sales transaction for a seller that uses a perpetual inventory system involves recognizing both revenue and cost of merchandise sold.

Accepted Answer

A) True 
 B)False

Question 12

What is the acid-test ratio? How does it measure a company's liquidity?

Accepted Answer

The acid-test ratio is calculated by div

Question 13

Because sellers assume that their customers will pay within the discount period, the seller usually records the discount at the time of the sale.

Accepted Answer

A) True 
 B)False

Question 14

A buyer failed to take advantage of the vendor's credit terms of 2/15, n/45, but instead paid the invoice in full at the end of 60 days. By not taking advantage of the cash discount, the buyer lost the equivalent of ____________ annual interest on the amount of the purchase.

Accepted Answer

A)  12.2% 
B)  16.2% 
C)  18.9% 
D)  24.3% 
E)  24.5% 
A)  12.2% 
B)  16.2% 
C)  18.9% 
D)  24.3% 
E)  24.5%

Question 15

Credit terms for a purchase include the amounts and timing of payments from a buyer to a seller.

Accepted Answer

A) True 
 B)False

Question 16

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

Both Chisolm's Collectibles and Bart's B

Question 17

Distinguish between selling expenses and administrative expenses.

Accepted Answer

Selling expenses include the expenses of

Question 18

A company's gross profit was $83,750 and its net sales were $347,800. Its gross margin ratio equals:

Accepted Answer

A)  4.2%. 
B)  24.1%. 
C)  75.9%. 
D)  $83,750. 
E)  $264,050. 
A)  4.2%. 
B)  24.1%. 
C)  75.9%. 
D)  $83,750. 
E)  $264,050.

Question 19

On October 1, Courtland Company sold merchandise in the amount of $5,800 to Carter Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Courtland uses the periodic inventory system. On October 4, Carter 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 Courtland 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 20

Benson Company had cash sales of $94,275, credit sales of $83,450, sales returns and allowances of $1,700, and sales discounts of $3,475. Benson's net sales for this period equal:

Accepted Answer

A)  $94,275. 
B)  $172,550. 
C)  $174,250. 
D)  $176,025. 
E)  $177,725. 
A)  $94,275. 
B)  $172,550. 
C)  $174,250. 
D)  $176,025. 
E)  $177,725.

Exam 5: Accounting for Merchandising Operations

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

Sales less sales discounts less sales returns and allowances equals:

The __________________ inventory system continually updates accounting records for merchandise transactions for the amounts of inventory available for sale and inventory sold.

Describe the key attributes of inventory for a merchandising company.

The periodic inventory system requires updating the inventory account only at the end of the period to reflect the quantity and cost of both the goods available and the goods sold.

When a credit customer returns merchandise to the seller, under a perpetual inventory system, the seller would debit Sales Returns and Allowances and credit Accounts Receivable and also debit Merchandise Inventory and credit Cost of Goods Sold.

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:

ABC Corporation's total quick assets were $5,888,000, its current assets were $11,700,000 and its current liabilities were $8,000,000. Its acid-test ratio equals:

A debit memorandum is:

Each sales transaction for a seller that uses a perpetual inventory system involves recognizing both revenue and cost of merchandise sold.

What is the acid-test ratio? How does it measure a company's liquidity?

Because sellers assume that their customers will pay within the discount period, the seller usually records the discount at the time of the sale.

A buyer failed to take advantage of the vendor's credit terms of 2/15, n/45, but instead paid the invoice in full at the end of 60 days. By not taking advantage of the cash discount, the buyer lost the equivalent of ____________ annual interest on the amount of the purchase.

Credit terms for a purchase include the amounts and timing of payments from a buyer to a seller.

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.

Distinguish between selling expenses and administrative expenses.

A company's gross profit was $83,750 and its net sales were $347,800. Its gross margin ratio equals:

Benson Company had cash sales of $94,275, credit sales of $83,450, sales returns and allowances of $1,700, and sales discounts of $3,475. Benson's net sales for this period equal:

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

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