Question 1

A wholesaler is an intermediary that buys products from manufacturers or other wholesalers and sells them to consumers.

Accepted Answer

A) True 
 B)False

Question 2

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. Carter pays the invoice on October 8, and takes the appropriate discount. The journal entry that Courtland 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

Under the ___________ system, each purchase, purchase return and allowance, purchase discount, and transportation-in transaction is recorded in a separate temporary account.

Accepted Answer

The answer of Under the ___________ system, each purchase, purchase...

Question 4

Fill in the blanks (a) through (g) for the Hendricks Company for each of the income statements for 2009, 2010, and 2011.

Accepted Answer

@#IMG-DLM& (a) 2,770 + 375 - 2400 = 745
(b) 375, t

Question 5

A company had net sales of $340,500, its cost of goods sold was $257,000, and its net income was $13,750. The company's gross margin ratio equals 24.5%.

Accepted Answer

A) True 
 B)False

Question 6

A seller usually prepares a ____________________ to confirm a buyer's return or allowance, and informs the buyer of the seller's credit to the buyer's Account Receivable on the seller's books.

Accepted Answer

The answer of A seller usually prepares a ____________________ to...

Question 7

Purchase discounts are the same as trade discounts.

Accepted Answer

A) True 
 B)False

Question 8

All of the following statements regarding inventory shrinkage are except:

Accepted Answer

A)  Inventory shrinkage refers to the loss of inventory. 
B)  Inventory shrinkage is determined by comparing a physical count of inventory with recorded inventory amounts. 
C)  Inventory shrinkage is recognized by debiting an operating expense. 
D)  Inventory shrinkage is recognized by debiting Cost of Goods Sold. 
E)  Inventory shrinkage can be caused by theft or deterioration. 
A)  Inventory shrinkage refers to the loss of inventory. 
B)  Inventory shrinkage is determined by comparing a physical count of inventory with recorded inventory amounts. 
C)  Inventory shrinkage is recognized by debiting an operating expense. 
D)  Inventory shrinkage is recognized by debiting Cost of Goods Sold. 
E)  Inventory shrinkage can be caused by theft or deterioration.

Question 9

Under both the periodic and perpetual inventory systems, the temporary account Purchases Returns and Allowances is used to accumulate the cost of all returns and allowances for a period.

Accepted Answer

A) True 
 B)False

Question 10

A company's current ratio is 1.2 and its quick ratio is 0.25. This company is probably an excellent credit risk because the ratios reveal no indication of liquidity problems.

Accepted Answer

A) True 
 B)False

Question 11

A company purchased $4,000 worth of merchandise. Transportation costs were an additional $350. The company later returned $275 worth of merchandise and paid the invoice within the 2% cash discount period. The total amount paid for this merchandise is:

Accepted Answer

A)  $3,725.00. 
B)  $3,925.00. 
C)  $3,995.00. 
D)  $4,000.50. 
E)  $4,075.00. 
A)  $3,725.00. 
B)  $3,925.00. 
C)  $3,995.00. 
D)  $4,000.50. 
E)  $4,075.00.

Question 12

From the adjusted trial balance given below for the Mirror Company, prepare an income statement. Salaries expense and depreciation expense on the building are equally divided between selling activities and the general and administrative activities.

Accepted Answer

The answer of From the adjusted trial balance given below...

Question 13

Maia's Bike Shop uses the periodic 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.

Accepted Answer

The answer of Maia's Bike Shop uses the periodic inventory...

Question 14

Match the following definitions and terms by placing the letter for the terms a through j in the blank space next to the best definition.

Accepted Answer

The answer of Match the following definitions and terms by...

Question 15

A company's net sales are $775,420, its costs of goods sold are $413,890, and its net income is $117,220. Its gross margin ratio equals:

Accepted Answer

A)  46.6%. 
B)  53.4%. 
C)  28.3%. 
D)  31.5%. 
E)  40.5%. 
A)  46.6%. 
B)  53.4%. 
C)  28.3%. 
D)  31.5%. 
E)  40.5%.

Question 16

A company's quick assets are $147,000 and its current liabilities are $143,000. This company's acid-test ratio is 1.03.

Accepted Answer

A) True 
 B)False

Question 17

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 18

The gross margin ratio:

Accepted Answer

A)  Is also called the net profit ratio. 
B)  Measures a merchandising firm's ability to earn a profit from the sale of inventory. 
C)  Is also called the profit margin. 
D)  Is a measure of liquidity. 
E)  Should be greater than 1. 
A)  Is also called the net profit ratio. 
B)  Measures a merchandising firm's ability to earn a profit from the sale of inventory. 
C)  Is also called the profit margin. 
D)  Is a measure of liquidity. 
E)  Should be greater than 1.

Question 19

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 20

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. Carter pays the invoice on October 8, and takes the appropriate discount. The journal entry that Courtland 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

Exam 5: Accounting for Merchandising Operations

A wholesaler is an intermediary that buys products from manufacturers or other wholesalers and sells them to consumers.

Under the ___________ system, each purchase, purchase return and allowance, purchase discount, and transportation-in transaction is recorded in a separate temporary account.

Fill in the blanks (a) through (g) for the Hendricks Company for each of the income statements for 2009, 2010, and 2011.

A company had net sales of $340,500, its cost of goods sold was $257,000, and its net income was $13,750. The company's gross margin ratio equals 24.5%.

A seller usually prepares a ____________________ to confirm a buyer's return or allowance, and informs the buyer of the seller's credit to the buyer's Account Receivable on the seller's books.

Purchase discounts are the same as trade discounts.

All of the following statements regarding inventory shrinkage are except:

Under both the periodic and perpetual inventory systems, the temporary account Purchases Returns and Allowances is used to accumulate the cost of all returns and allowances for a period.

A company's current ratio is 1.2 and its quick ratio is 0.25. This company is probably an excellent credit risk because the ratios reveal no indication of liquidity problems.

A company purchased $4,000 worth of merchandise. Transportation costs were an additional $350. The company later returned $275 worth of merchandise and paid the invoice within the 2% cash discount period. The total amount paid for this merchandise is:

From the adjusted trial balance given below for the Mirror Company, prepare an income statement. Salaries expense and depreciation expense on the building are equally divided between selling activities and the general and administrative activities.

Maia's Bike Shop uses the periodic 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.

Match the following definitions and terms by placing the letter for the terms a through j in the blank space next to the best definition.

A company's net sales are $775,420, its costs of goods sold are $413,890, and its net income is $117,220. Its gross margin ratio equals:

A company's quick assets are $147,000 and its current liabilities are $143,000. This company's acid-test ratio is 1.03.

Sales returns:

The gross margin ratio:

Beginning inventory plus net purchases is:

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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