Question 1

What are the steps of the operating cycle for a merchandiser with credit sales?

Accepted Answer

The steps are: (1)cash purchas

Question 2

The seller is responsible for paying shipping charges and bears the risk of damage or loss in transit if goods are shipped FOB destination.

Accepted Answer

A) True 
 B)False

Question 3

Describe the difference between the periodic and perpetual inventory accounting systems.

Accepted Answer

A periodic inventory system updates the

Question 4

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

Question 5

If a company sells merchandise with credit terms 2/10 n/60, the credit period is 10 days and the discount period is 60 days.

Accepted Answer

A) True 
 B)False

Question 6

Expenses to promote sales by displaying and advertising merchandise, make sales, and deliver goods to customers are known as:

Accepted Answer

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

Question 7

Cost of goods sold is an expense, and is reported on the income statement.

Accepted Answer

A) True 
 B)False

Question 8

How do closing entries for a merchandising company that uses the perpetual inventory system differ from the closing entries for a service company?

Accepted Answer

Closing entries are similar for service

Question 9

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 10

A company's current assets are $23,420, its quick assets are $13,890 and its current liabilities are $12,220. Its acid-test ratio equals:

Accepted Answer

A) 1.14. 
B) 1.41. 
C) .52. 
D) 0.88. 
E) 1.91. 
A) 1.14. 
B) 1.41. 
C) .52. 
D) 0.88. 
E) 1.91.

Question 11

Purchase returns refer to merchandise a buyer acquires but then returns to the seller.

Accepted Answer

A) True 
 B)False

Question 12

New revenue recognition rules require that sellers report sales net of expected sales discounts.

Accepted Answer

A) True 
 B)False

Question 13

A company's gross profit was $83,750 and its net sales were $347,800. Its gross margin ratio equals:

Accepted Answer

A) 24.1%. 
B) $264,050. 
C) 75.9%. 
D) 4.2%. 
E) $83,750. 
A) 24.1%. 
B) $264,050. 
C) 75.9%. 
D) 4.2%. 
E) $83,750.

Question 14

Sales less sales discounts less sales returns and allowances equals:

Accepted Answer

A) Net income. 
B) Cost of goods sold. 
C) Gross profit. 
D) Net sales. 
E) Net purchases. 
A) Net income. 
B) Cost of goods sold. 
C) Gross profit. 
D) Net sales. 
E) Net purchases.

Question 15

The following statements regarding merchandise inventory are true except:

Accepted Answer

A) Merchandise inventory refers to products a company owns and intends to sell. 
B) Merchandise inventory appears on the balance sheet of a service company. 
C) Purchasing merchandise inventory is part of the operating cycle for a business. 
D) Merchandise inventory is reported on the balance sheet as a current asset. 
E) Merchandise inventory may include the costs of freight in and making them ready for sale. 
A) Merchandise inventory refers to products a company owns and intends to sell. 
B) Merchandise inventory appears on the balance sheet of a service company. 
C) Purchasing merchandise inventory is part of the operating cycle for a business. 
D) Merchandise inventory is reported on the balance sheet as a current asset. 
E) Merchandise inventory may include the costs of freight in and making them ready for sale.

Question 16

Jasper Company is a wholesaler that buys merchandise in large quantities. Its supplier's catalog indicates a list price of $500 per unit 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) $350 
B) $507 
C) $343 
D) $357 
E) $493 
A) $350 
B) $507 
C) $343 
D) $357 
E) $493

Question 17

National Storage Company had sales of $1,000,000, sales discounts of $2,500, sales returns and allowances of $15,000, and cost of goods sold of $525,000. Calculate National's gross profit.

Accepted Answer

The answer of National Storage Company had sales of $1,000,000,...

Question 18

A common rule of thumb is that a company's acid-test ratio should have a value near or higher than 1 to conclude that a company is unlikely to face near-term liquidity problems.

Accepted Answer

A) True 
 B)False

Question 19

Cost of goods sold represents the cost of buying and preparing merchandise for sale.

Accepted Answer

A) True 
 B)False

Question 20

On May 1, Shilling Company sold merchandise in the amount of $5,800 to Anders, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Shilling uses the perpetual inventory system and the gross method table. The journal entry or entries that Shilling will make on May 1 is:
$$\begin{array}{l}
\text { A) }\
\begin{array} { | l | r | r | } 
\hline \text { Accounts receivable } & 4,000 & \
\hline \text { Sales } & & 4,000 \
\hline
\end{array}
\end{array}$$
B)
$\begin{array}{|l|r|r|}
\hline \text { Sales } & 5,800 & \
\hline \text { Accounts receivable } & & 5,800 \
\hline
\end{array}$
C)
$\begin{array}{|l|r|r|}
\hline \text { Accounts receivable } & 5,800 & \
\hline \text { Sales } & & 5,800 \
\hline \text { Cost of goods sold } & 4,000 & \
\hline \text { Merchandise Inventory } & & 4,000 \
\hline
\end{array}$
D)
$\begin{array}{|l|r|r|}
\hline \text { Sales } & 5,800 & \
\hline \text { Accounts receivable } & & 5,800 \
\hline \text { Cost of goods sold } & 4,000 & \
\hline \text { Merchandise Inventory } & & 4,000 \
\hline
\end{array}$
E)
$\begin{array}{|l|r|r|}
\hline \text { Accounts receivable } & 5,800 & \
\hline \text { Sales } & & 5,800 \
\hline
\end{array}$

Accepted Answer

The answer of On May 1, Shilling Company sold merchandise...

What are the steps of the operating cycle for a merchandiser with credit sales?

The seller is responsible for paying shipping charges and bears the risk of damage or loss in transit if goods are shipped FOB destination.

Describe the difference between the periodic and perpetual inventory accounting systems.

If a company sells merchandise with credit terms 2/10 n/60, the credit period is 10 days and the discount period is 60 days.

Expenses to promote sales by displaying and advertising merchandise, make sales, and deliver goods to customers are known as:

Cost of goods sold is an expense, and is reported on the income statement.

How do closing entries for a merchandising company that uses the perpetual inventory system differ from the closing entries for a service company?

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

A company's current assets are $23,420, its quick assets are $13,890 and its current liabilities are $12,220. Its acid-test ratio equals:

Purchase returns refer to merchandise a buyer acquires but then returns to the seller.

New revenue recognition rules require that sellers report sales net of expected sales discounts.

A company's gross profit was $83,750 and its net sales were $347,800. Its gross margin ratio equals:

Sales less sales discounts less sales returns and allowances equals:

The following statements regarding merchandise inventory are true except:

National Storage Company had sales of $1,000,000, sales discounts of $2,500, sales returns and allowances of $15,000, and cost of goods sold of $525,000. Calculate National's gross profit.

A common rule of thumb is that a company's acid-test ratio should have a value near or higher than 1 to conclude that a company is unlikely to face near-term liquidity problems.

Cost of goods sold represents the cost of buying and preparing merchandise for sale.

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

What are the steps of the operating cycle for a merchandiser with credit sales?

The seller is responsible for paying shipping charges and bears the risk of damage or loss in transit if goods are shipped FOB destination.

Describe the difference between the periodic and perpetual inventory accounting systems.

If a company sells merchandise with credit terms 2/10 n/60, the credit period is 10 days and the discount period is 60 days.

Expenses to promote sales by displaying and advertising merchandise, make sales, and deliver goods to customers are known as:

Cost of goods sold is an expense, and is reported on the income statement.

How do closing entries for a merchandising company that uses the perpetual inventory system differ from the closing entries for a service company?

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

A company's current assets are $23,420, its quick assets are $13,890 and its current liabilities are $12,220. Its acid-test ratio equals:

Purchase returns refer to merchandise a buyer acquires but then returns to the seller.

New revenue recognition rules require that sellers report sales net of expected sales discounts.

A company's gross profit was $83,750 and its net sales were $347,800. Its gross margin ratio equals:

Sales less sales discounts less sales returns and allowances equals:

The following statements regarding merchandise inventory are true except:

National Storage Company had sales of $1,000,000, sales discounts of $2,500, sales returns and allowances of $15,000, and cost of goods sold of $525,000. Calculate National's gross profit.

A common rule of thumb is that a company's acid-test ratio should have a value near or higher than 1 to conclude that a company is unlikely to face near-term liquidity problems.

Cost of goods sold represents the cost of buying and preparing merchandise for sale.

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

Filters