Question 1

When preparing an unadjusted trial balance using a periodic inventory system, the amount shown for Merchandise Inventory is:

Accepted Answer

A)  The ending inventory amount. 
B)  The beginning inventory amount. 
C)  Equal to the cost of goods sold. 
D)  Equal to the cost of goods purchased. 
E)  Equal to the gross profit. 
A)  The ending inventory amount. 
B)  The beginning inventory amount. 
C)  Equal to the cost of goods sold. 
D)  Equal to the cost of goods purchased. 
E)  Equal to the gross profit.

Question 2

A company's net sales were $676,600, its cost of good sold was $236,810 and its net income was $33,750. Its gross margin ratio equals:

Accepted Answer

A)  5%. 
B)  9.6%. 
C)  35%. 
D)  65%. 
E)  285.7%. 
A)  5%. 
B)  9.6%. 
C)  35%. 
D)  65%. 
E)  285.7%.

Question 3

FOB shipping point (or FOB factory) implies that ownership of goods transfers to the buyer at the buyer's place of business.

Accepted Answer

A) True 
 B)False

Question 4

Sales Discounts and Sales Returns and Allowances are credited to close the accounts during the closing process.

Accepted Answer

A) True 
 B)False

Question 5

A company that uses the perpetual inventory system purchased $8,500 on September 25. Terms of the purchase were 2/10, n/30. The invoice was paid in full on October 4. Prepare the journal entries to record these merchandise transactions.

Accepted Answer

The answer of A company that uses the perpetual inventory...

Question 6

The following statements regarding gross profit are except:

Accepted Answer

A)  Gross profit is also called gross margin. 
B)  Gross profit less other operating expenses equals income from operations. 
C)  Gross profit is not calculated on the income statement. 
D)  Gross profit must cover all operating expenses to yield a return for the owner of the business. 
E)  Gross profit equals net sales less cost of goods sold. 
A)  Gross profit is also called gross margin. 
B)  Gross profit less other operating expenses equals income from operations. 
C)  Gross profit is not calculated on the income statement. 
D)  Gross profit must cover all operating expenses to yield a return for the owner of the business. 
E)  Gross profit equals net sales less cost of goods sold.

Question 7

Cost of goods sold is also called cost of sales.

Accepted Answer

A) True 
 B)False

Question 8

____________________ refer to merchandise that customers return to the seller after a sale.

Accepted Answer

The answer of ____________________ refer to merchandise that customers return...

Question 9

Shock Company purchased merchandise from Mee Company with an invoice price of $300,000 and credit terms of 2/10, n/30. The merchandise had cost Mee Company $200,000. Shock Company paid within the discount period. Assume that both buyer and seller use a perpetual inventory system.
1. Prepare entries that the buyer should record for (a) the purchase and (b) the cash payment.
2. Prepare entries that the seller should record for (a) the sale and (b) the cash collection.
3. Assume that the buyer borrowed enough cash to pay the balance on the last day of the discount period at an annual interest rate of 9% and paid it back on the last day of the credit period. Compute how much the buyer saved by following this strategy. (Assume a 365-day year and round dollar amounts to the nearest cent.)

Accepted Answer

3. By borrowing the money on the last da

Question 10

Under the perpetual inventory system, the cost of merchandise purchased is recorded in the Merchandise Inventory account.

Accepted Answer

A) True 
 B)False

Question 11

Match the following terms with the appropriate definition.

Accepted Answer

The answer of Match the following terms with the appropriate...

Question 12

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 13

From the adjusted trial balance for Worker Products Company given below, prepare an income statement.

Accepted Answer

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

Question 14

Sales of $350,000 and net sales of $323,000 could reflect sales discounts of $27,000.

Accepted Answer

A) True 
 B)False

Question 15

Expenses of promoting sales by displaying and advertising merchandise, making sales, and delivering goods to customers are:

Accepted Answer

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

Question 16

Explain the main parts of an income statement for a merchandising company.

Accepted Answer

The income statement for a merchandising

Question 17

A perpetual inventory system is able to directly measure and monitor inventory shrinkage and there is no need for a physical count of inventory.

Accepted Answer

A) True 
 B)False

Question 18

Beginning merchandise inventory plus the net cost of purchases is the merchandise available for sale.

Accepted Answer

A) True 
 B)False

Question 19

A trade discount is:

Accepted Answer

A)  A term used by a purchaser to describe a cash discount given to customers for prompt payment. 
B)  A reduction in price below the list price. 
C)  A term used by a seller to describe a cash discount granted to customers for prompt payment. 
D)  A reduction in price for prompt payment. 
E)  Also called a rebate. 
A)  A term used by a purchaser to describe a cash discount given to customers for prompt payment. 
B)  A reduction in price below the list price. 
C)  A term used by a seller to describe a cash discount granted to customers for prompt payment. 
D)  A reduction in price for prompt payment. 
E)  Also called a rebate.

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 5: Accounting for Merchandising Operations

When preparing an unadjusted trial balance using a periodic inventory system, the amount shown for Merchandise Inventory is:

A company's net sales were $676,600, its cost of good sold was $236,810 and its net income was $33,750. Its gross margin ratio equals:

FOB shipping point (or FOB factory) implies that ownership of goods transfers to the buyer at the buyer's place of business.

Sales Discounts and Sales Returns and Allowances are credited to close the accounts during the closing process.

A company that uses the perpetual inventory system purchased $8,500 on September 25. Terms of the purchase were 2/10, n/30. The invoice was paid in full on October 4. Prepare the journal entries to record these merchandise transactions.

The following statements regarding gross profit are except:

Cost of goods sold is also called cost of sales.

____________________ refer to merchandise that customers return to the seller after a sale.

Under the perpetual inventory system, the cost of merchandise purchased is recorded in the Merchandise Inventory account.

Match the following terms with the appropriate definition.

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.

From the adjusted trial balance for Worker Products Company given below, prepare an income statement.

Sales of $350,000 and net sales of $323,000 could reflect sales discounts of $27,000.

Expenses of promoting sales by displaying and advertising merchandise, making sales, and delivering goods to customers are:

Explain the main parts of an income statement for a merchandising company.

A perpetual inventory system is able to directly measure and monitor inventory shrinkage and there is no need for a physical count of inventory.

Beginning merchandise inventory plus the net cost of purchases is the merchandise available for sale.

A trade discount is:

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

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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