Question 1

Liquidity problems are likely to exist when a company's acid-test ratio:

Accepted Answer

A) Is substantially lower than 1. 
B) Is less than the current ratio. 
C) Equals 1. 
D) Is higher than the current ratio. 
E) Is higher than 1. 
A) Is substantially lower than 1. 
B) Is less than the current ratio. 
C) Equals 1. 
D) Is higher than the current ratio. 
E) Is higher than 1.

Question 2

Prentice Company had cash sales of $94,275, credit sales of $83,450, sales returns and allowances of $1,700, and sales discounts of $3,475. Prentice's net sales for this period equal:

Accepted Answer

A) $176,025. 
B) $172,550. 
C) $94,275. 
D) $177,725. 
E) $174,250. 
A) $176,025. 
B) $172,550. 
C) $94,275. 
D) $177,725. 
E) $174,250.

Question 3

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. Jepson pays the invoice on September 18, and takes the appropriate discount. The journal entry that Vander makes on September 18 is:
A)
$\begin{array}{|l|r|r|}
\hline \text { Cash } & 5,800 & \
\hline \text { Accounts receivable } & & 5,800 \
\hline
\end{array}$
B)
\begin{tabular} { | l | r | r | } 
$\begin{array}{|l|r|r|}
\hline \text { Cash } & 5,684 & \
\hline \text { Accounts receivable } & & 5,684 \
\hline
\end{array}$
C)
$\begin{array}{|l|r|r|}
\hline \text { Cash } & 3,920 & \
\hline \text { Sales discounts } & 80 & \
\hline \text { Accounts receivable } & & 4,000 \
\hline
\end{array}$
D)
$\begin{array}{|l|r|r|}
\hline \text { Cash } & 4,000 & \
\hline \text { Accounts receivable } & & 4,000 \
\hline
\end{array}$
E)
$\begin{array}{|l|r|r|}
\hline \text { Cash } & 5,684 & \
\hline \text { Sales discounts } & 116 & \
\hline \text { Accounts receivable } & & 5,800 \
\hline
\end{array}$

Accepted Answer

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

Question 4

A perpetual inventory system continually updates accounting records for merchandising transactions.

Accepted Answer

A) True 
 B)False

Question 5

A company purchased $1,800 of merchandise on July 5 with terms 2/10, n/30. On July 7, it returned $200 worth of merchandise. On July 28, it paid the full amount due. Assuming the company uses a perpetual inventory system, and records purchases using the gross method, The correct journal entry to record the purchase on July 5 is:

Accepted Answer

A) Debit Accounts Payable $1,800; credit Merchandise Inventory $1,800. 
B) Debit Merchandise Inventory $1,600; credit Cash $1,600. 
C) Debit Accounts Payable $1,800; credit Purchase Returns $200; credit Merchandise Inventory $1,600. 
D) Debit Merchandise Inventory $1,800; credit Accounts Payable $1,800. 
E) Debit Merchandise Inventory $1,800; credit Sales Returns $200; credit Cash $1,600. 
A) Debit Accounts Payable $1,800; credit Merchandise Inventory $1,800. 
B) Debit Merchandise Inventory $1,600; credit Cash $1,600. 
C) Debit Accounts Payable $1,800; credit Purchase Returns $200; credit Merchandise Inventory $1,600. 
D) Debit Merchandise Inventory $1,800; credit Accounts Payable $1,800. 
E) Debit Merchandise Inventory $1,800; credit Sales Returns $200; credit Cash $1,600.

Question 6

A company purchased $4,000 worth of merchandise. Transportation costs were an additional $350. The company returned $275 worth of merchandise and then paid the invoice within the 2% cash discount period. The total cost of this merchandise is:

Accepted Answer

A) $3,995.00. 
B) $4,075.00. 
C) $4,000.50. 
D) $3,725.00. 
E) $3,925.00. 
A) $3,995.00. 
B) $4,075.00. 
C) $4,000.50. 
D) $3,725.00. 
E) $3,925.00.

Question 7

A company's current assets are $17,980, its quick assets are $11,420 and its current liabilities are $12,190. Its quick ratio equals:

Accepted Answer

A) 2.40. 
B) 0.94. 
C) 1.48. 
D) 1.57. 
E) 1.07. 
A) 2.40. 
B) 0.94. 
C) 1.48. 
D) 1.57. 
E) 1.07.

Question 8

Merchandise inventory:

Accepted Answer

A) Is a long-term asset. 
B) Is classified with investments on the balance sheet. 
C) Is a current asset. 
D) Must be sold within one month. 
E) Includes supplies the company will use in future periods. 
A) Is a long-term asset. 
B) Is classified with investments on the balance sheet. 
C) Is a current asset. 
D) Must be sold within one month. 
E) Includes supplies the company will use in future periods.

Question 9

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

Question 10

The acid-test ratio is also called the quick ratio.

Accepted Answer

A) True 
 B)False

Question 11

Harley's Antique Shop had net sales of $772,000. The gross profit was $415,000. Calculate Harley's cost of goods sold.

Accepted Answer

Cost of Goods Sold =

Question 12

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

Question 13

Fragment Company is a wholesaler that sells merchandise in large quantities. Its catalog indicates a list price of $300 per unit on a particular product and a 40% trade discount is offered for quantity purchases of 50 units or more. The cost of shipping the merchandise is $7 per unit under terms FOB shipping point. If a customer purchases 100 units of this product, what is the amount of sales revenue that Fragment will record from this sale?

Accepted Answer

A) $30,000 
B) $29,300 
C) $18,700 
D) $30,700 
E) $18,000 
A) $30,000 
B) $29,300 
C) $18,700 
D) $30,700 
E) $18,000

Question 14

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 correct journal entry to record the purchase on August 7 is:

Accepted Answer

A) Debit Merchandise Inventory $9,750; credit Sales Returns $1,500; credit Cash $8,250. 
B) Debit Accounts Payable $8,250; debit Purchase Returns $1,500; credit Merchandise Inventory $9,750. 
C) Debit Accounts Payable $9,750; credit Merchandise Inventory $9,750. 
D) Debit Merchandise Inventory $9,750; credit Cash $9,750. 
E) Debit Merchandise Inventory $9,750; credit Accounts Payable $9,750. 
A) Debit Merchandise Inventory $9,750; credit Sales Returns $1,500; credit Cash $8,250. 
B) Debit Accounts Payable $8,250; debit Purchase Returns $1,500; credit Merchandise Inventory $9,750. 
C) Debit Accounts Payable $9,750; credit Merchandise Inventory $9,750. 
D) Debit Merchandise Inventory $9,750; credit Cash $9,750. 
E) Debit Merchandise Inventory $9,750; credit Accounts Payable $9,750.

Question 15

Quick assets include cash and cash equivalents, inventory, and current receivables.

Accepted Answer

A) True 
 B)False

Question 16

Discuss the period-end adjusting entries that are required in the new revenue recognition standards for estimating sales discounts and sales returns and allowances.

Accepted Answer

Sellers are required to estimate both ex

Question 17

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 18

On March 12, Klein Company sold merchandise in the amount of $7,800 to Babson Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,500. Klein uses the perpetual inventory system and the gross method of accounting for sales. On March 15, Babson returns some of the merchandise, which is not defective. The selling price of the returned merchandise is $600 and the cost of the merchandise returned is $350. The entry or entries that Klein must make on March 15 is:
A)
$\begin{array}{|l|r|r|}
\hline \text { Sales returns and allowances } & 350 & \
\hline \text { Accounts receivable } & & 350 \
\hline
\end{array}$
B)
$\begin{array}{|l|r|r|}
\hline \text { Accounts receivable } & 600 & \
\hline \text { Sales returns and allowances } & & 600 \
\hline \text { Cost of goods sold } & 350 & \
\hline \text { Merchandise inventory } & & 350 \
\hline
\end{array}$
C)
$\begin{array}{|l|r|r|}
\hline \text { Sales returns and allowances } & 600 & \
\hline \text { Accounts receivable } & & 600 \
\hline
\end{array}$
D)
$\begin{array}{|l|r|r|}
\hline \text { Accounts receivable } & 600 & \
\hline \text { Sales returns and allowances } & & 600 \
\hline
\end{array}$
E)
$\begin{array}{|l|r|r|}
\hline \text { Sales returns and allowances } & 600 & \
\hline \text { Accounts receivable } & & 600 \
\hline \text { Merchandise inventory } & 350 & \
\hline \text { Cost of goods sold } & & 350 \
\hline
\end{array}$

Accepted Answer

The answer of On March 12, Klein Company sold merchandise...

Question 19

Beginning inventory plus net purchases equals merchandise available for sale.

Accepted Answer

A) True 
 B)False

Question 20

Identify and explain the key components of a merchandiser's net income.

Accepted Answer

The basic components of income begin wit

Liquidity problems are likely to exist when a company's acid-test ratio:

Prentice Company had cash sales of $94,275, credit sales of $83,450, sales returns and allowances of $1,700, and sales discounts of $3,475. Prentice's net sales for this period equal:

A perpetual inventory system continually updates accounting records for merchandising transactions.

A company purchased $4,000 worth of merchandise. Transportation costs were an additional $350. The company returned $275 worth of merchandise and then paid the invoice within the 2% cash discount period. The total cost of this merchandise is:

A company's current assets are $17,980, its quick assets are $11,420 and its current liabilities are $12,190. Its quick ratio equals:

Merchandise inventory:

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?

The acid-test ratio is also called the quick ratio.

Harley's Antique Shop had net sales of $772,000. The gross profit was $415,000. Calculate Harley's cost of goods sold.

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

Quick assets include cash and cash equivalents, inventory, and current receivables.

Discuss the period-end adjusting entries that are required in the new revenue recognition standards for estimating sales discounts and sales returns and allowances.

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.

Beginning inventory plus net purchases equals merchandise available for sale.

Identify and explain the key components of a merchandiser's net income.

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

Exam 5: Accounting for Merchandising Operations

Liquidity problems are likely to exist when a company's acid-test ratio:

Prentice Company had cash sales of $94,275, credit sales of $83,450, sales returns and allowances of $1,700, and sales discounts of $3,475. Prentice's net sales for this period equal:

A perpetual inventory system continually updates accounting records for merchandising transactions.

A company purchased $4,000 worth of merchandise. Transportation costs were an additional $350. The company returned $275 worth of merchandise and then paid the invoice within the 2% cash discount period. The total cost of this merchandise is:

A company's current assets are $17,980, its quick assets are $11,420 and its current liabilities are $12,190. Its quick ratio equals:

Merchandise inventory:

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?

The acid-test ratio is also called the quick ratio.

Harley's Antique Shop had net sales of $772,000. The gross profit was $415,000. Calculate Harley's cost of goods sold.

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

Quick assets include cash and cash equivalents, inventory, and current receivables.

Discuss the period-end adjusting entries that are required in the new revenue recognition standards for estimating sales discounts and sales returns and allowances.

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.

Beginning inventory plus net purchases equals merchandise available for sale.

Identify and explain the key components of a merchandiser's net income.

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