Exam 5: Accounting for Merchandising Operations

Maia's Bike Shop uses the perpetual inventory system and had the following transactions during the month of May: Prepare the required journal entries that Maia's Bike Shop must make to record these transactions.

(Essay)

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Question 81

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. The journal entry or entries that Courtland will make on October 1 is:

(Multiple Choice)

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Question 82

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

(True/False)

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Question 83

In a periodic inventory system, cost of goods sold is recorded as each sale occurs.

(True/False)

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Question 84

What does FOB stand for? Differentiate between FOB shipping point (or FOB factory) and FOB destination.

(Essay)

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Question 85

A company records the following journal entry: debit Cash $1,470, debit Sales Discounts $30, and credit Accounts Receivable $1,500. This means that a customer has taken a ___ cash discount for early payment.

(Multiple Choice)

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Question 86

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

(True/False)

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Question 87

How do closing entries for a merchandising company that uses the perpetual inventory system differ from the closing entries for a service company?

(Essay)

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Question 88

A company has net sales and cost of goods sold of $825,000 and $547,000, respectively. Its net income is $98,500. The company's gross margin and total other expenses are and ___, respectively.

(Multiple Choice)

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Question 89

A retailer is an intermediary that buys products from manufacturers and sells them to wholesalers.

(True/False)

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Question 90

The acid-test ratio reflects the ___________ of a company.

(Essay)

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Question 91

An account used in the periodic inventory system that is not used in the perpetual inventory system is

(Multiple Choice)

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Question 92

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

(True/False)

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Question 93

A company purchases merchandise with a catalog price of $20,000. The company receives a 35% trade discount from the seller. The seller also offers credit terms of 2/10, n/30. Assuming no returns were made and that payment was made on time, what is the net cost of the merchandise?

(Multiple Choice)

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Question 94

The seller is responsible for paying shipping charges and bears the risk of damage or loss in transit if goods are shipped FOB destination.

(True/False)

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Question 95

Assets tied up in inventory are not productive assets.

(True/False)

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Question 96

Using the following year-end information for Breanna Boutique, calculate the current ratio and acid-test ratio for the boutique:

(Multiple Choice)

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Question 97

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.

(True/False)

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Question 98

The acid-test ratio is also called the quick ratio.

(True/False)

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Question 99

The adjusting entry to reflect inventory shrinkage is a debit to Income Summary and a credit to Inventory Shrinkage Expense.

(True/False)

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Question 100

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Exam 5: Accounting for Merchandising Operations

Maia's Bike Shop uses the perpetual inventory system and had the following transactions during the month of May: Prepare the required journal entries that Maia's Bike Shop must make to record these transactions.

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. The journal entry or entries that Courtland will make on October 1 is:

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

In a periodic inventory system, cost of goods sold is recorded as each sale occurs.

What does FOB stand for? Differentiate between FOB shipping point (or FOB factory) and FOB destination.

A company records the following journal entry: debit Cash $1,470, debit Sales Discounts $30, and credit Accounts Receivable $1,500. This means that a customer has taken a ___ cash discount for early payment.

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

How do closing entries for a merchandising company that uses the perpetual inventory system differ from the closing entries for a service company?

A company has net sales and cost of goods sold of $825,000 and $547,000, respectively. Its net income is $98,500. The company's gross margin and total other expenses are ________ and ___________, respectively.

A retailer is an intermediary that buys products from manufacturers and sells them to wholesalers.

The acid-test ratio reflects the ___________ of a company.

An account used in the periodic inventory system that is not used in the perpetual inventory system is

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

A company purchases merchandise with a catalog price of $20,000. The company receives a 35% trade discount from the seller. The seller also offers credit terms of 2/10, n/30. Assuming no returns were made and that payment was made on time, what is the net cost of the merchandise?

The seller is responsible for paying shipping charges and bears the risk of damage or loss in transit if goods are shipped FOB destination.

Assets tied up in inventory are not productive assets.

Using the following year-end information for Breanna Boutique, calculate the current ratio and acid-test ratio for the boutique:

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.

The acid-test ratio is also called the quick ratio.

The adjusting entry to reflect inventory shrinkage is a debit to Income Summary and a credit to Inventory Shrinkage Expense.

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

A company has net sales and cost of goods sold of $825,000 and $547,000, respectively. Its net income is $98,500. The company's gross margin and total other expenses are and ___, respectively.