Question 1

A debit to Sales Returns and Allowances and a credit to Accounts Receivable:

Accepted Answer

A) Reflects an increase in amount due from a customer. 
B) Recognizes that a customer returned merchandise and/or received an allowance. 
C) Requires a debit memorandum to recognize the customer's return. 
D) Is recorded when a customer takes a discount. 
E) Reflects a decrease in amount due to a supplier. 
A) Reflects an increase in amount due from a customer. 
B) Recognizes that a customer returned merchandise and/or received an allowance. 
C) Requires a debit memorandum to recognize the customer's return. 
D) Is recorded when a customer takes a discount. 
E) Reflects a decrease in amount due to a supplier.

Question 2

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 3

When a company has no reportable non-operating activities, its income from operations is simply labeled net income.

Accepted Answer

A) True 
 B)False

Question 4

A company had net sales of $545,000 and cost of goods sold of $345,000. Its gross margin equals $890,000.

Accepted Answer

A) True 
 B)False

Question 5

The profit margin ratio is the same as the gross profit ratio.

Accepted Answer

A) True 
 B)False

Question 6

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 7

The acid-test ratio differs from the current ratio in that:

Accepted Answer

A) Liabilities are divided by current assets. 
B) Prepaid expenses and inventory are excluded from the calculation of the acid-test ratio. 
C) The acid-test ratio measures profitability and the current ratio does not. 
D) The acid-test ratio excludes short-term investments from the calculation. 
E) The acid-test ratio is a measure of liquidity but the current ratio is not. 
A) Liabilities are divided by current assets. 
B) Prepaid expenses and inventory are excluded from the calculation of the acid-test ratio. 
C) The acid-test ratio measures profitability and the current ratio does not. 
D) The acid-test ratio excludes short-term investments from the calculation. 
E) The acid-test ratio is a measure of liquidity but the current ratio is not.

Question 8

A company had a gross profit of $300,000 based on sales of $400,000. Its cost of goods sold equals $700,000.

Accepted Answer

A) True 
 B)False

Question 9

On September 12, Vander Company, Inc. sold merchandise in the amount of $5,800 to Jepson Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Vander uses the periodic inventory system. The journal entry or entries that Vander will make on September 12 is:

Accepted Answer

A) $$\begin{array} { | l | r | r | } 
\hline \text { Sales } & 5,800 & \
\hline \text { Accounts receivable } & & 5,800 \
\hline
\end{array}$$ 
B) $$\begin{array} { | l | r | r | } 
\hline \text { Sales } & 5,800 & \
\hline \text { Accounts receivable } & & 5,800 \
\hline \text { Cost of goods sold } & 4,000 & \
\hline \text { Merchandise Inventory } & &4,000 \
\hline
\end{array}$$ 
C) $$\begin{array} { | l | r | r | } 
\hline \text { Accounts receivable } & 5,800 & \
\hline \text { Sales } & & 5,800 \
\hline 
\end{array}$$ 
D) $$\begin{array} { | l | r | r | } 
\hline \text { Accounts receivable } & 5,800 & \
\hline \text { Sales } & & 5,800 \
\hline \text { Cost of goods sold } & 4,000 & \
\hline \text { Merchandise inventory } & & 4,000 \
\hline
\end{array}$$ 
E) $$\begin{array} { | l | r | r | } 
\hline \text { Accounts receivable } & 4,000 & \
\hline \text { Sales } & & 4,000 \
\hline
\end{array}$$ 
A) $$\begin{array} { | l | r | r | } 
\hline \text { Sales } & 5,800 & \
\hline \text { Accounts receivable } & & 5,800 \
\hline
\end{array}$$ 
B) $$\begin{array} { | l | r | r | } 
\hline \text { Sales } & 5,800 & \
\hline \text { Accounts receivable } & & 5,800 \
\hline \text { Cost of goods sold } & 4,000 & \
\hline \text { Merchandise Inventory } & &4,000 \
\hline
\end{array}$$ 
C) $$\begin{array} { | l | r | r | } 
\hline \text { Accounts receivable } & 5,800 & \
\hline \text { Sales } & & 5,800 \
\hline 
\end{array}$$ 
D) $$\begin{array} { | l | r | r | } 
\hline \text { Accounts receivable } & 5,800 & \
\hline \text { Sales } & & 5,800 \
\hline \text { Cost of goods sold } & 4,000 & \
\hline \text { Merchandise inventory } & & 4,000 \
\hline
\end{array}$$ 
E) $$\begin{array} { | l | r | r | } 
\hline \text { Accounts receivable } & 4,000 & \
\hline \text { Sales } & & 4,000 \
\hline
\end{array}$$

Question 10

A company had sales of $350,000 and cost of goods sold of $200,000. Its gross profit equals $150,000.

Accepted Answer

A) True 
 B)False

Question 11

On February 3, Smart Company, Inc. sold merchandise in the amount of $5,800 to Truman Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Smart uses the perpetual inventory system. Truman pays the invoice on February 8, and takes the appropriate discount. The journal entry that Smart makes on February 8 is:

Accepted Answer

A) $$\begin{array} { | l | r | r | } 
\hline \text { Cash } & 5,800 & \
\hline \text { Accounts receivable } & & 5,800 \
\hline
\end{array}$$ 
B) $$\begin{array} { | l | r | r | } 
\hline \text { Cash } & 4,000 & \
\hline \text { Accounts receivable } & & 4,000 \
\hline
\end{array}$$ 
C) $$\begin{array} { | l | r | r | } 
\hline \text { Cash } & 3,920 & \
\hline \text { Sales discounts } & 80 & \
\hline \text { Accounts receivable } & & 4,000 \
\hline \hline
\end{array}$$ 
D) $$\begin{array} { | l | r | r | } 
\hline \text { Cash } & 5,684 & \
\hline \text { Accounts receivable } & & 5,684 \
\hline
\end{array}$$ 
E) $$\begin{array} { | l | r | r | } 
\hline \text { Cash } & 5,684 & \
\hline \text { Sales discounts } & 116 & \
\hline \text { Accounts receivable } & & 5,800 \
\hline
\end{array}$$ 
A) $$\begin{array} { | l | r | r | } 
\hline \text { Cash } & 5,800 & \
\hline \text { Accounts receivable } & & 5,800 \
\hline
\end{array}$$ 
B) $$\begin{array} { | l | r | r | } 
\hline \text { Cash } & 4,000 & \
\hline \text { Accounts receivable } & & 4,000 \
\hline
\end{array}$$ 
C) $$\begin{array} { | l | r | r | } 
\hline \text { Cash } & 3,920 & \
\hline \text { Sales discounts } & 80 & \
\hline \text { Accounts receivable } & & 4,000 \
\hline \hline
\end{array}$$ 
D) $$\begin{array} { | l | r | r | } 
\hline \text { Cash } & 5,684 & \
\hline \text { Accounts receivable } & & 5,684 \
\hline
\end{array}$$ 
E) $$\begin{array} { | l | r | r | } 
\hline \text { Cash } & 5,684 & \
\hline \text { Sales discounts } & 116 & \
\hline \text { Accounts receivable } & & 5,800 \
\hline
\end{array}$$

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

Cushman Company, Inc. had $800,000 in sales, sales discounts of $12,000, sales returns and allowances of $18,000, cost of goods sold of $380,000, and $275,000 in operating expenses. Gross profit equals:

Accepted Answer

A) $770,000. 
B) $115,000. 
C) $390,000. 
D) $402,000. 
E) $408,000. 
A) $770,000. 
B) $115,000. 
C) $390,000. 
D) $402,000. 
E) $408,000.

Question 14

On September 12, Vander Company, Inc. sold merchandise in the amount of $5,800 to Jepson Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Vander uses the periodic inventory system. On September 14, Jepson returns some of the merchandise. The selling price of the returned merchandise is $500 and the cost of the merchandise returned is $350. The entry or entries that Vander must make on September 14 is:
A)$$\begin{array} { | l | r | r | } 
\hline \text { Sales returns and allowances } & 500 & \
\hline \text { Accounts receivable } & & 500 \
\hline \text { Merchandise inventory } & 350 & \
\hline \text { Cost of goods sold } & & 350 \
\hline
\end{array}$$
B)$$\begin{array} { | l | r | r | } 
\hline \text { Sales returns and allowances } & 500 & \
\hline \text { Accounts receivable } & & 500 \
\hline
\end{array}$$
C)$$\begin{array} { | l | r | r | } 
\hline \text { Accounts receivable } & 500 & \
\hline \text { Sales returns and allowances } & & 500 \
\hline
\end{array}$$
D)$$\begin{array} { | l | r | r | } 
\hline \text { Accounts receivable } & 500 & \
\hline \text { Sales returns and allowances } & & 500 \
\hline \text { Cost of goods sold } & 350 & \
\hline \text { Merchandise inventory } & & 350 \
\hline 
\end{array}$$
E)$$\begin{array} { | l | r | r | } 
\hline \text { Sales returns and allowances } & 350 & \
\hline \text { Accounts receivable } & & 350 \
\hline
\end{array}$$

Accepted Answer

The answer of On September 12, Vander Company, Inc. sold...

Question 15

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 selling 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 selling 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 16

A buyer using a perpetual inventory system records the costs of shipping merchandise it purchases in a Delivery Expense account.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

Expenses related to accounting, human resource management, and financial management are known as selling expenses.

Accepted Answer

A) True 
 B)False

Question 19

Multiple-step income statements:

Accepted Answer

A) Are required by the FASB and IASB. 
B) Contain more detail than a simple listing of revenues and expenses. 
C) Are required for the periodic inventory system. 
D) List cost of goods sold as an operating expense. 
E) Are only used in perpetual inventory systems. 
A) Are required by the FASB and IASB. 
B) Contain more detail than a simple listing of revenues and expenses. 
C) Are required for the periodic inventory system. 
D) List cost of goods sold as an operating expense. 
E) Are only used in perpetual inventory systems.

Question 20

A company had net sales of $752,000 and cost of goods sold of $543,000. Its net income was $17,530. The company's gross margin ratio equals:

Accepted Answer

A) 18.9% 
B) 24.5% 
C) 27.8% 
D) 34.7% 
E) 35.2% 
A) 18.9% 
B) 24.5% 
C) 27.8% 
D) 34.7% 
E) 35.2%

A debit to Sales Returns and Allowances and a credit to Accounts Receivable:

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.

When a company has no reportable non-operating activities, its income from operations is simply labeled net income.

A company had net sales of $545,000 and cost of goods sold of $345,000. Its gross margin equals $890,000.

The profit margin ratio is the same as the gross profit ratio.

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

The acid-test ratio differs from the current ratio in that:

A company had a gross profit of $300,000 based on sales of $400,000. Its cost of goods sold equals $700,000.

On September 12, Vander Company, Inc. sold merchandise in the amount of $5,800 to Jepson Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Vander uses the periodic inventory system. The journal entry or entries that Vander will make on September 12 is:

A company had sales of $350,000 and cost of goods sold of $200,000. Its gross profit equals $150,000.

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

Cushman Company, Inc. had $800,000 in sales, sales discounts of $12,000, sales returns and allowances of $18,000, cost of goods sold of $380,000, and $275,000 in operating expenses. Gross profit equals:

A trade discount is:

A buyer using a perpetual inventory system records the costs of shipping merchandise it purchases in a Delivery Expense account.

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

Expenses related to accounting, human resource management, and financial management are known as selling expenses.

Multiple-step income statements:

A company had net sales of $752,000 and cost of goods sold of $543,000. Its net income was $17,530. The company's gross margin ratio equals:

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

Exam 4: Accounting for Merchandising Operations

A debit to Sales Returns and Allowances and a credit to Accounts Receivable:

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.

When a company has no reportable non-operating activities, its income from operations is simply labeled net income.

A company had net sales of $545,000 and cost of goods sold of $345,000. Its gross margin equals $890,000.

The profit margin ratio is the same as the gross profit ratio.

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

The acid-test ratio differs from the current ratio in that:

A company had a gross profit of $300,000 based on sales of $400,000. Its cost of goods sold equals $700,000.

On September 12, Vander Company, Inc. sold merchandise in the amount of $5,800 to Jepson Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Vander uses the periodic inventory system. The journal entry or entries that Vander will make on September 12 is:

A company had sales of $350,000 and cost of goods sold of $200,000. Its gross profit equals $150,000.

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

Cushman Company, Inc. had $800,000 in sales, sales discounts of $12,000, sales returns and allowances of $18,000, cost of goods sold of $380,000, and $275,000 in operating expenses. Gross profit equals:

A trade discount is:

A buyer using a perpetual inventory system records the costs of shipping merchandise it purchases in a Delivery Expense account.

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

Expenses related to accounting, human resource management, and financial management are known as selling expenses.

Multiple-step income statements:

A company had net sales of $752,000 and cost of goods sold of $543,000. Its net income was $17,530. The company's gross margin ratio equals:

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