Question 1

Garza Company had sales of $135,000, sales discounts of $2,000, and sales returns of $3,200. Garza Company's net sales equals:

Accepted Answer

A) $5,200. 
B) $129,800. 
C) $133,000. 
D) $135,000. 
E) $140,200. 
A) $5,200. 
B) $129,800. 
C) $133,000. 
D) $135,000. 
E) $140,200. B

Question 2

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  False

Question 3

Cash sales shorten the operating cycle for a merchandiser; credit sales lengthen operating cycles.

Accepted Answer

A) True 
 B)False  True

Question 4

Describe the recording process (including costs) for the types of transactions associated with sales of merchandise inventory using a perpetual inventory system.

Accepted Answer

Sales of goods are recorded at list pric

Question 5

Cost of goods sold:

Accepted Answer

A) Is another term for merchandise sales. 
B) Is the term used for the expense of buying and preparing merchandise for sale. 
C) Is another term for revenue. 
D) Is also called gross margin. 
E) Is a term only used by service firms. 
A) Is another term for merchandise sales. 
B) Is the term used for the expense of buying and preparing merchandise for sale. 
C) Is another term for revenue. 
D) Is also called gross margin. 
E) Is a term only used by service firms.

Question 6

Offering sales discounts on credit sales can benefit a seller by decreasing the delay in receiving cash and reducing future collections efforts.

Accepted Answer

A) True 
 B)False

Question 7

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 within the discount period, what is the net cost of the merchandise?

Accepted Answer

A) $13,720. 
B) $19,600. 
C) $6,860. 
D) $13,000. 
E) $12,740. 
A) $13,720. 
B) $19,600. 
C) $6,860. 
D) $13,000. 
E) $12,740.

Question 8

Delivery expense is reported as part of general and administrative expense in the seller's income statement.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Jasper Company, Inc. is a wholesaler that buys merchandise in large quantities. Its supplier's catalog indicates a list price of $500 on merchandise Jasper intends to purchase, and offers a 30% trade discount for large quantity purchases. The cost of shipping for the merchandise is $7 per unit. Jasper's total purchase price per unit will be:

Accepted Answer

A) $507 
B) $350 
C) $357 
D) $343 
E) $493 
A) $507 
B) $350 
C) $357 
D) $343 
E) $493

Question 11

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

Question 12

In a perpetual inventory system, the Merchandise Inventory account must be closed at the end of the accounting period.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

A single-step income statement includes cost of goods sold as another expense and shows only one subtotal for total expenses.

Accepted Answer

A) True 
 B)False

Question 15

Juniper Company, Inc. uses a perpetual inventory system. The company purchased $9,750 of merchandise on August 7 with terms 1/10, n/30. On August 11, it returned $1,500 worth of merchandise. On August 26, it paid the full amount due. The correct journal entry to record the merchandise return on August 11 is:

Accepted Answer

A) Debit Accounts Payable $1,500; credit Cash $1,500. 
B) Debit Accounts Payable $1,500; credit Merchandise Inventory $1,500. 
C) Debit Merchandise Inventory $1,500; credit Sales Returns $1,500. 
D) Debit Merchandise Inventory $1,500; credit Cash $1,500. 
E) Debit Accounts Payable $1,500; credit Purchase Returns $1,500. 
A) Debit Accounts Payable $1,500; credit Cash $1,500. 
B) Debit Accounts Payable $1,500; credit Merchandise Inventory $1,500. 
C) Debit Merchandise Inventory $1,500; credit Sales Returns $1,500. 
D) Debit Merchandise Inventory $1,500; credit Cash $1,500. 
E) Debit Accounts Payable $1,500; credit Purchase Returns $1,500.

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

Merchandise inventory is reported in the long-term assets section of the balance sheet.

Accepted Answer

A) True 
 B)False

Question 18

Successful use of a just-in-time inventory system can narrow the gap between the acid-test and the current ratio.

Accepted Answer

A) True 
 B)False

Question 19

An income statement that includes cost of goods sold as another expense and shows only one subtotal for total expenses is a:

Accepted Answer

A) Balanced income statement. 
B) Single-step income statement. 
C) Multiple-step income statement. 
D) Combined income statement. 
E) Simplified income statement. 
A) Balanced income statement. 
B) Single-step income statement. 
C) Multiple-step income statement. 
D) Combined income statement. 
E) Simplified income statement.

Question 20

Assets tied up in inventory are not considered productive assets.

Accepted Answer

A) True 
 B)False

Garza Company had sales of $135,000, sales discounts of $2,000, and sales returns of $3,200. Garza Company's net sales equals:

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.

Cash sales shorten the operating cycle for a merchandiser; credit sales lengthen operating cycles.

Describe the recording process (including costs) for the types of transactions associated with sales of merchandise inventory using a perpetual inventory system.

Cost of goods sold:

Offering sales discounts on credit sales can benefit a seller by decreasing the delay in receiving cash and reducing future collections efforts.

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 within the discount period, what is the net cost of the merchandise?

Delivery expense is reported as part of general and administrative expense in the seller's income statement.

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

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

In a perpetual inventory system, the Merchandise Inventory account must be closed at the end of the accounting period.

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

A single-step income statement includes cost of goods sold as another expense and shows only one subtotal for total expenses.

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

Merchandise inventory is reported in the long-term assets section of the balance sheet.

Successful use of a just-in-time inventory system can narrow the gap between the acid-test and the current ratio.

An income statement that includes cost of goods sold as another expense and shows only one subtotal for total expenses is a:

Assets tied up in inventory are not considered productive assets.

Accounting in Business

Accounting for Business Transactions

Adjusting Accounts for Financial Statements

Inventories and Cost of Sales

Cash and Internal Controls

Accounting for Receivables

Accounting for Long-Term Assets

Accounting for Current Liabilities

Accounting for Long-Term Liabilities

Corporate Reporting and Analysis

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Exam 4: Accounting for Merchandising Operations

Garza Company had sales of $135,000, sales discounts of $2,000, and sales returns of $3,200. Garza Company's net sales equals:

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.

Cash sales shorten the operating cycle for a merchandiser; credit sales lengthen operating cycles.

Describe the recording process (including costs) for the types of transactions associated with sales of merchandise inventory using a perpetual inventory system.

Cost of goods sold:

Offering sales discounts on credit sales can benefit a seller by decreasing the delay in receiving cash and reducing future collections efforts.

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 within the discount period, what is the net cost of the merchandise?

Delivery expense is reported as part of general and administrative expense in the seller's income statement.

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

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

In a perpetual inventory system, the Merchandise Inventory account must be closed at the end of the accounting period.

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

A single-step income statement includes cost of goods sold as another expense and shows only one subtotal for total expenses.

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

Merchandise inventory is reported in the long-term assets section of the balance sheet.

Successful use of a just-in-time inventory system can narrow the gap between the acid-test and the current ratio.

An income statement that includes cost of goods sold as another expense and shows only one subtotal for total expenses is a:

Assets tied up in inventory are not considered productive assets.

Accounting in Business

Accounting for Business Transactions

Adjusting Accounts for Financial Statements

Inventories and Cost of Sales

Cash and Internal Controls

Accounting for Receivables

Accounting for Long-Term Assets

Accounting for Current Liabilities

Accounting for Long-Term Liabilities

Corporate Reporting and Analysis

Filters