Question 1

A trade discount is:

Accepted Answer

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

Question 2

Juniper Company uses a perpetual inventory system and the gross method of accounting for purchases. 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 16, it paid the full amount due. The amount of the cash paid on August 16 equals:

Accepted Answer

A) $8,152.50. 
B) $8,167.50. 
C) $9,750.00. 
D) $8,250.00. 
E) $9,652.50. 
A) $8,152.50. 
B) $8,167.50. 
C) $9,750.00. 
D) $8,250.00. 
E) $9,652.50. B

Question 3

Under the net method of recording purchases, the Discounts Lost account is used when the purchaser fails to take a discount offered by the seller.

Accepted Answer

A) True 
 B)False  True

Question 4

Either the gross method or net method may be used to record sales with cash discounts, but the net method requires a period-end adjusting entry to estimate expected future sales discounts taken.

Accepted Answer

A) True 
 B)False

Question 5

Describe the key attributes of inventory for a merchandising company.

Accepted Answer

Merchandise inventory refers to products

Question 6

Sales Discounts and Sales Returns and Allowances are contra revenue accounts that are debited to close the accounts during the closing process.

Accepted Answer

A) True 
 B)False

Question 7

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 8

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 9

On February 3, Smart Company 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 and the gross method table. Truman pays the invoice on February 8, and takes the appropriate discount. The journal entry that Smart makes on February 8 is:
A)
$\begin{array}{|l|r|r|}
\hline \text { Cash } & 5,684 & \
\hline \text { Sales discounts } & 116 & \
\hline \text { Accounts receivable } & & 5,800 \
\hline
\end{array}$
B)
$\begin{array}{|l|r|r|}
\hline \text { Cash } & 5,684 & \
\hline \text { Accounts receivable } & & 5,684 \
\hline
\end{array}$
C)
$\begin{array}{|l|r|r|}
\hline \text { Cash } & 5,800 & \
\hline \text { Accounts receivable } & & 5,800 \
\hline
\end{array}$
D)
$\begin{array}{|l|r|r|}
\hline \text { Cash } & 4,000 & \
\hline \text { Accounts receivable } & & 4,000 \
\hline
\end{array}$
E)
$\begin{array}{|l|r|r|}
\hline \text { Cash } & 3,920 & \
\hline \text { Sales discounts } & 80 & \
\hline \text { Accounts receivable } & & 4,000 \
\hline
\end{array}$

Accepted Answer

The answer of On February 3, Smart Company sold merchandise...

Question 10

A merchandiser:

Accepted Answer

A) Earns net income by buying and selling merchandise. 
B) Earns profit from fares only. 
C) Earns profit from commissions only. 
D) Receives fees only in exchange for services. 
E) Buys products from consumers. 
A) Earns net income by buying and selling merchandise. 
B) Earns profit from fares only. 
C) Earns profit from commissions only. 
D) Receives fees only in exchange for services. 
E) Buys products from consumers.

Question 11

A company has sales of $695,000 and cost of goods sold of $278,000. Its gross profit equals:

Accepted Answer

A) $(417,000). 
B) $973,000. 
C) $695,000. 
D) $417,000. 
E) $278,000. 
A) $(417,000). 
B) $973,000. 
C) $695,000. 
D) $417,000. 
E) $278,000.

Question 12

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

Question 13

Gross profit is also called gross margin.

Accepted Answer

A) True 
 B)False

Question 14

A periodic inventory system requires updating of the inventory account only at the beginning of an accounting period.

Accepted Answer

A) True 
 B)False

Question 15

Under the net method, when a company uses a perpetual inventory system, an invoice for $2,000 with terms of 2/10, n/30 should be recorded with a debit to Merchandise Inventory and a credit to Accounts Payable of $2,000.

Accepted Answer

A) True 
 B)False

Question 16

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 17

Match between columns
                        Premises: A notification that informs a buyer of a seller's credit fo a buyers account.
An inventory accounting method that updates the accounting records for merchandise transactions only at the end of a period.
A notification that informs the seller of a debit made to the seller's account payable in the buyers records.
A cash discount granted from the view of the seller, indicated in the credit terms on the invoice.
A cash discount granted, from the view of the purchaser intended to encourage buyers to pay amounts owed earlier.
The description of the amounts and timing of payments from a buyer to a seller for a purchase
The calculation of net sales less cost of goods sold.
The time period in which reduced payment can be made by the buyer because of a cash discount offered by a seller of goods on credit.
An inventory accounting method that continually updates accounfing records for inventory available for sale and inventory sold.
The amount of fime allowed before full payment is dus.

Accepted Answer

The Answer of Periodic inventory system and Discount period and is...

Question 18

If goods are shipped FOB shipping point, the seller does not record revenue from the sale until the goods arrive at their destination because the transaction is not complete until that point.

Accepted Answer

A) True 
 B)False

Question 19

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 20

A company purchased $10,000 of merchandise on June 15 with terms of 3/10, n/45. On June 20, it returned $800 of that merchandise. On June 24, it paid the balance owed for the merchandise taking any discount it was entitled to. The cash paid on June 24 equals:

Accepted Answer

A) $9,700. 
B) $9,800. 
C) $10,000. 
D) $8,724. 
E) $8,924. 
A) $9,700. 
B) $9,800. 
C) $10,000. 
D) $8,724. 
E) $8,924.

A trade discount is:

Under the net method of recording purchases, the Discounts Lost account is used when the purchaser fails to take a discount offered by the seller.

Either the gross method or net method may be used to record sales with cash discounts, but the net method requires a period-end adjusting entry to estimate expected future sales discounts taken.

Describe the key attributes of inventory for a merchandising company.

Sales Discounts and Sales Returns and Allowances are contra revenue accounts that are debited to close the accounts during the closing process.

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

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 merchandiser:

A company has sales of $695,000 and cost of goods sold of $278,000. Its gross profit equals:

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

Gross profit is also called gross margin.

A periodic inventory system requires updating of the inventory account only at the beginning of an accounting period.

Under the net method, when a company uses a perpetual inventory system, an invoice for $2,000 with terms of 2/10, n/30 should be recorded with a debit to Merchandise Inventory and a credit to Accounts Payable of $2,000.

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

If goods are shipped FOB shipping point, the seller does not record revenue from the sale until the goods arrive at their destination because the transaction is not complete until that point.

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 company purchased $10,000 of merchandise on June 15 with terms of 3/10, n/45. On June 20, it returned $800 of that merchandise. On June 24, it paid the balance owed for the merchandise taking any discount it was entitled to. The cash paid on June 24 equals:

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

Plant Assets, Natural Resoures, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

Reporting the Statement of Cash Flows

Analysis of Financial Statements

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Exam 5: Accounting for Merchandising Operations

A trade discount is:

Under the net method of recording purchases, the Discounts Lost account is used when the purchaser fails to take a discount offered by the seller.

Either the gross method or net method may be used to record sales with cash discounts, but the net method requires a period-end adjusting entry to estimate expected future sales discounts taken.

Describe the key attributes of inventory for a merchandising company.

Sales Discounts and Sales Returns and Allowances are contra revenue accounts that are debited to close the accounts during the closing process.

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

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 merchandiser:

A company has sales of $695,000 and cost of goods sold of $278,000. Its gross profit equals:

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

Gross profit is also called gross margin.

A periodic inventory system requires updating of the inventory account only at the beginning of an accounting period.

Under the net method, when a company uses a perpetual inventory system, an invoice for $2,000 with terms of 2/10, n/30 should be recorded with a debit to Merchandise Inventory and a credit to Accounts Payable of $2,000.

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

If goods are shipped FOB shipping point, the seller does not record revenue from the sale until the goods arrive at their destination because the transaction is not complete until that point.

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 company purchased $10,000 of merchandise on June 15 with terms of 3/10, n/45. On June 20, it returned $800 of that merchandise. On June 24, it paid the balance owed for the merchandise taking any discount it was entitled to. The cash paid on June 24 equals:

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

Plant Assets, Natural Resoures, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

Reporting the Statement of Cash Flows

Analysis of Financial Statements

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