On September 12, Vander Company 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 and the gross method of accounting for sales. On September 14, Jepson returns some of the merchandise. The selling price of the merchandise is $500 and the cost of the merchandise returned is $350. Jepson pays the invoice on September 18, and takes the appropriate discount. The journal entry that Vander makes on September 18 is: A) $\begin{array}{|l|r|r|} \hline \text { Cash } & 5,194 & \\ \hline \text { Sales discounts } & 106 & \\ \hline \text { Accounts receivable } & & 5,300 \\ \hline \end{array}$ B) $\begin{array}{|l|r|r|} \hline \text { Cash } & 5,684 & \\ \hline \text { Sales discounts } & 116 & \\ \hline \text { Accounts receivable } & & 5,800 \\ \hline \end{array}$ C) $\begin{array}{|l|r|r|} \hline \text { Cash } & 5,684 & \\ \hline \text { Accounts receivable } & & 5,684 \\ \hline \end{array}$ D) $\begin{array}{|l|r|r|} \hline \text { Cash } & 4,000 & \\ \hline \text { Accounts receivable } & & 4,000 \\ \hline \end{array}$ E) $\begin{array}{|l|r|r|} \hline \text { Cash } & 5,800 & \\ \hline \text { Accounts receivable } & & 5,800 \\ \hline \end{array}$

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

On July 1, Ferguson Company sold merchandise in the amount of $5,800 to Tracey Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Ferguson uses the perpetual inventory system and the gross method table. On July 5, Tracey returns some of the merchandise. The selling price of the merchandise is $500 and the cost of the merchandise returned is $350. The entry or entries that Ferguson must make on July 5 is: \[\begin{array}{l} \text { A) }\\ \begin{array} { | l | r | r | } \hline \text { Sales returns and allowances } & 350 & \\ \hline \text { Accounts receivable } & & 350 \\ \hline \end{array} \end{array}\] B) $\begin{array}{|l|r|r|} \hline \text { Accounts receivable } & 500 & \\ \hline \text { Sales returns and allowances } & & 500 \\ \hline \end{array}$ C) $\begin{array}{|l|r|r|} \hline \text { Accounts receivable } & 500 & \\ \hline \text { Sales returns and allowances } & & 500 \\ \hline \text { Cost of goods sold } & 350 & \\ \hline \text { Merchandise inventory } & & 350 \\ \hline \end{array}$ D) $\begin{array}{|l|r|r|} \hline \text { Sales returns and allowances } & 500 & \\ \hline \text { Accounts receivable } & & 500 \\ \hline \text { Merchandise inventory } & 350 & \\ \hline \text { Cost of goods sold } & & 350 \\ \hline \end{array}$ E) $\begin{array}{|l|r|r|} \hline \text { Sales returns and allowances } & 500 & \\ \hline \text { Accounts receivable } & & 500 \\ \hline \end{array}$

The answer of On July 1, Ferguson Company sold merchandise...

On September 12, Vander Company 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. Jepson uses the periodic inventory system and the gross method of accounting for purchases. The journal entry that Jepson will make on September 12 is: A) $\begin{array}{|l|r|r|} \hline \text { Purchases } & 5,800 & \\ \hline \text { Accounts payable } & & 5,800 \\ \hline \end{array}$ B) $\begin{array}{|l|r|r|} \hline \text { Purchases } & 5,800 & \\ \hline \text { Accounts receivable } & & 5,800 \\ \hline \end{array}$ C) $\begin{array}{|l|r|r|} \hline \text { Merchandise inventory } & 5,800 & \\ \hline \text { Accounts payable } & & 5,800 \\ \hline \end{array}$ D) $\begin{array}{|l|r|r|} \hline \text { Accounts payable } & 4,000 & \\ \hline \text { Merchandise inventory } & & 4,000 \\ \hline \end{array}$ E) $\begin{array}{|l|r|r|} \hline \text { Purchases } & 4,000 & \\ \hline \text { Accounts receivable } & & 4,000 \\ \hline \end{array}$

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

Frisco Company's Merchandise Inventory account at year-end has a balance of $62,115, but a physical count reveals that only $61,900 of inventory exists. The adjusting entry to record this $215 of inventory shrinkage is: A) $\begin{array}{|l|r|r|} \hline \text { Cost of goods sold } & 215 & \\ \hline \text { Merchandise Inventory } & & 215 \\ \hline \end{array}$ B) $\begin{array}{|l|r|r|} \hline \text { Merchandise Inventory } & 215 & \\ \hline \text { Inventory shrinkage expense } & & 215 \\ \hline \end{array}$ C) $\begin{array}{|l|r|r|} \hline \text { Cost of goods sold } & 215 & \\ \hline \text { Purchases discounts } & & 215 \\ \hline \end{array}$ D) $\begin{array}{|l|r|r|} \hline \text { Inventory shrinkage expense } & 215 & \\ \hline \text { Cost of goods sold } & & 215 \\ \hline \end{array}$ \[\begin{array}{l} \text { E) }\\ \begin{array} { | l | r | r | } \hline \text { Purchases discounts } & 215 & \\ \hline \text { Cost of goods sold } & & 215 \\ \hline \end{array} \end{array}\]

The answer of Frisco Company's Merchandise Inventory account at year-end...

Using the following year-end information for Bauman, LLC, calculate the current ratio and acid-test ratio: $\begin{array}{lr} \text { Cash } & \$ 48,000 \\ \text { Short-term investments } & 12,000 \\ \text { Accounts receivable } & 45,000 \\ \text { Inventory } & 225,000 \\ \text { Prepaid expenses } & 12,500 \\ \text { Accounts payable } & 86,500 \\ \text { Other current payables } & 22,000 \end{array}$

A) 3.01 and 1.21 B) 3.16 and 1.21 C) 3.04 and 1.21 D) 3.16 and .97 E) 1.09 and 4.77 A) 3.01 and 1.21 B) 3.16 and 1.21 C) 3.04 and 1.21 D) 3.16 and .97 E) 1.09 and 4.77

Exam 5: Accounting for Merchandising Operations

A buyer failed to take advantage of the vendor's credit terms of 2/15, n/45, but instead paid the invoice in full at the end of 45 days. By not taking advantage of the cash discount, the equivalent annual interest lost on the amount of the purchase is:

(Multiple Choice)

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Question 41

On September 12, Vander Company 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 and the gross method of accounting for sales. On September 14, Jepson returns some of the merchandise. The selling price of the merchandise is $500 and the cost of the merchandise returned is $350. Jepson pays the invoice on September 18, and takes the appropriate discount. The journal entry that Vander makes on September 18 is: A) Cash 5,194 Sales discounts 106 Accounts receivable 5,300 B) Cash 5,684 Sales discounts 116 Accounts receivable 5,800 C) Cash 5,684 Accounts receivable 5,684 D) Cash 4,000 Accounts receivable 4,000 E) Cash 5,800 Accounts receivable 5,800

(Short Answer)

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Question 42

On July 1, Ferguson Company sold merchandise in the amount of $5,800 to Tracey Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Ferguson uses the perpetual inventory system and the gross method table. On July 5, Tracey returns some of the merchandise. The selling price of the merchandise is $500 and the cost of the merchandise returned is $350. The entry or entries that Ferguson must make on July 5 is: A) Sales returns and allowances 350 Accounts receivable 350 B) Accounts receivable 500 Sales returns and allowances 500 C) Accounts receivable 500 Sales returns and allowances 500 Cost of goods sold 350 Merchandise inventory 350 D) Sales returns and allowances 500 Accounts receivable 500 Merchandise inventory 350 Cost of goods sold 350 E) Sales returns and allowances 500 Accounts receivable 500

(Short Answer)

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Question 43

The following statements regarding gross profit are true except:

(Multiple Choice)

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Question 44

If a buyer does not take advantage of a supplier's credit terms of 2/10, n/30, and instead pays the invoice in full at the end of 30 days, by not taking the discount the buyer loses the equivalent of 18% annual interest on the amount of the purchase.

(True/False)

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Question 45

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

(Multiple Choice)

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Question 46

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.

(True/False)

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Question 47

What is gross margin ratio? How is it used as an indicator of profitability?

(Essay)

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Question 48

Which of the following accounts would be closed at the end of the accounting period with a debit?

(Multiple Choice)

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Question 49

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

(True/False)

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Question 50

On September 12, Vander Company 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. Jepson uses the periodic inventory system and the gross method of accounting for purchases. The journal entry that Jepson will make on September 12 is: A) Purchases 5,800 Accounts payable 5,800 B) Purchases 5,800 Accounts receivable 5,800 C) Merchandise inventory 5,800 Accounts payable 5,800 D) Accounts payable 4,000 Merchandise inventory 4,000 E) Purchases 4,000 Accounts receivable 4,000

(Short Answer)

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Question 51

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

(True/False)

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Question 52

In a periodic inventory system, cost of goods sold is recorded as each sale occurs.

(True/False)

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Question 53

The following statements are true regarding the operating cycle of a merchandising company except:

(Multiple Choice)

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Question 54

A retailer buys products from manufacturers and sells them to wholesalers.

(True/False)

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Question 55

Frisco Company's Merchandise Inventory account at year-end has a balance of $62,115, but a physical count reveals that only $61,900 of inventory exists. The adjusting entry to record this $215 of inventory shrinkage is: A) Cost of goods sold 215 Merchandise Inventory 215 B) Merchandise Inventory 215 Inventory shrinkage expense 215 C) Cost of goods sold 215 Purchases discounts 215 D) Inventory shrinkage expense 215 Cost of goods sold 215 E) Purchases discounts 215 Cost of goods sold 215

(Short Answer)

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Question 56

A merchandising company's operating cycle begins with the purchase of merchandise and ends with the collection of cash from the sale.

(True/False)

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Question 57

Using the following year-end information for Bauman, LLC, calculate the current ratio and acid-test ratio: Cash \ 48,000 Short-term investments 12,000 Accounts receivable 45,000 Inventory 225,000 Prepaid expenses 12,500 Accounts payable 86,500 Other current payables 22,000

(Multiple Choice)

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Question 58

Cost of goods sold is also called cost of sales.

(True/False)

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Question 59

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

(Multiple Choice)

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Question 60

A buyer failed to take advantage of the vendor's credit terms of 2/15, n/45, but instead paid the invoice in full at the end of 45 days. By not taking advantage of the cash discount, the equivalent annual interest lost on the amount of the purchase is:

The following statements regarding gross profit are true except:

If a buyer does not take advantage of a supplier's credit terms of 2/10, n/30, and instead pays the invoice in full at the end of 30 days, by not taking the discount the buyer loses the equivalent of 18% annual interest on the amount of the purchase.

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

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.

What is gross margin ratio? How is it used as an indicator of profitability?

Which of the following accounts would be closed at the end of the accounting period with a debit?

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

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

In a periodic inventory system, cost of goods sold is recorded as each sale occurs.

The following statements are true regarding the operating cycle of a merchandising company except:

A retailer buys products from manufacturers and sells them to wholesalers.

A merchandising company's operating cycle begins with the purchase of merchandise and ends with the collection of cash from the sale.

Using the following year-end information for Bauman, LLC, calculate the current ratio and acid-test ratio: Cash \ 48,000 Short-term investments 12,000 Accounts receivable 45,000 Inventory 225,000 Prepaid expenses 12,500 Accounts payable 86,500 Other current payables 22,000

Cost of goods sold is also called cost of sales.

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

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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