Question 1

A single-step income statement includes cost of goods sold as another expense and shows only one subtotal for total expenses.

Accepted Answer

A) True 
 B)False

Question 2

What does the acronym FOB stand for? Describe the differences between FOB shipping point (or FOB factory)and FOB destination.

Accepted Answer

FOB stands for free on board, and it det

Question 3

Describe the difference(s)between the periodic and the perpetual inventory accounting systems.

Accepted Answer

Under a perpetual system each purchase,

Question 4

Purchase allowances refer to a price reduction (allowance)granted to a buyer of defective or unacceptable merchandise.

Accepted Answer

A) True 
 B)False

Question 5

A company's current ratio is 1.2 and its quick ratio is 0.25. This company is probably an excellent credit risk because the ratios reveal no indication of liquidity problems.

Accepted Answer

A) True 
 B)False

Question 6

The gross margin ratio:

Accepted Answer

A) Indicates the percent of sales revenue remaining after covering the cost of the goods sold. 
B) Should be greater than 1 for merchandising companies. 
C) Is a measure of liquidity and should exceed 2.0 to be acceptable. 
D) Is also called the net profit ratio. 
E) Is also called the profit margin. 
A) Indicates the percent of sales revenue remaining after covering the cost of the goods sold. 
B) Should be greater than 1 for merchandising companies. 
C) Is a measure of liquidity and should exceed 2.0 to be acceptable. 
D) Is also called the net profit ratio. 
E) Is also called the profit margin.

Question 7

A wholesaler buys products from manufacturers or other wholesalers and sells them to consumers.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following accounts is used in the periodic inventory system but not used in the perpetual inventory system?

Accepted Answer

A) Sales 
B) Merchandise Inventory 
C) Purchases 
D) Accounts Payable 
E) Sales Returns and Allowances 
A) Sales 
B) Merchandise Inventory 
C) Purchases 
D) Accounts Payable 
E) Sales Returns and Allowances

Question 9

A company has net sales of $825,000 and cost of goods sold of $547,000. Its net income is $98,500. The company's gross margin and operating expenses, respectively, are:

Accepted Answer

A) $179,500 and $98,500 
B) $645,500 and $179,500 
C) $209,000 and $191,470 
D) $278,000 and $98,500 
E) $278,000 and $179,500 
A) $179,500 and $98,500 
B) $645,500 and $179,500 
C) $209,000 and $191,470 
D) $278,000 and $98,500 
E) $278,000 and $179,500

Question 10

Inventory Returns Estimated is a current asset account used in a period-end adjusting entry to reflect the inventory estimated to be returned in the future.

Accepted Answer

A) True 
 B)False

Question 11

Beginning inventory plus net purchases is:

Accepted Answer

A) Ending inventory. 
B) Cost of goods sold. 
C) Shown on the balance sheet. 
D) Merchandise (goods)available for sale. 
E) Sales. 
A) Ending inventory. 
B) Cost of goods sold. 
C) Shown on the balance sheet. 
D) Merchandise (goods)available for sale. 
E) Sales.

Question 12

Credit terms for a purchase include the amounts and timing of payments from a buyer to a seller.

Accepted Answer

A) True 
 B)False

Question 13

A company has net sales of $752,000 and cost of goods sold of $543,000. Its net income is $17,530. The company's gross margin and operating expenses, respectively, are:

Accepted Answer

A) $227,000 and $525,470 
B) $209,000 and $191,470 
C) $191,470 and $209,000 
D) $525,470 and $227,000 
E) $734,000 and $191,470 
A) $227,000 and $525,470 
B) $209,000 and $191,470 
C) $191,470 and $209,000 
D) $525,470 and $227,000 
E) $734,000 and $191,470

Question 14

Under a perpetual inventory system, when a credit customer returns non-defective merchandise to the seller, the seller debits Sales Returns and Allowances and credits Accounts Receivable and also debits Merchandise Inventory and credits Cost of Goods Sold.

Accepted Answer

A) True 
 B)False

Question 15

Cushman Company 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. Net income equals:

Accepted Answer

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

Question 16

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 17

The operating cycle for a merchandiser that sells only for cash moves from:

Accepted Answer

A) Accounts receivable to inventory to cash sales. 
B) Accounts receivable to purchases of merchandise to inventory to cash sales. 
C) Inventory to purchases of merchandise to cash sales. 
D) Purchases of merchandise to inventory to accounts receivable to cash sales. 
E) Purchases of merchandise to inventory to cash sales. 
A) Accounts receivable to inventory to cash sales. 
B) Accounts receivable to purchases of merchandise to inventory to cash sales. 
C) Inventory to purchases of merchandise to cash sales. 
D) Purchases of merchandise to inventory to accounts receivable to cash sales. 
E) Purchases of merchandise to inventory to cash sales.

Question 18

Sales discounts has a normal debit balance because it decreases Sales, which has a normal credit balance.

Accepted Answer

A) True 
 B)False

Question 19

If goods are shipped FOB destination, 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 20

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 non-defective merchandise, which is restored to inventory. 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)
$\begin{array}{|l|r|r|}
\hline \text { Sales returns and allowances } & 350 & \
\hline \text { Accounts receivable } & & 350 \
\hline
\end{array}$
B)
$\begin{array}{|l|r|r|}
\hline \text { Accounts receivable } & 500 & \
\hline \text { Sales returns and allowances } & & 500 \
\hline
\end{array}$
C)
$\begin{array}{|l|r|r|}
\hline \text { Sales returns and allowances } & 500 & \
\hline \text { Accounts receivable } & & 500 \
\hline \text { Merchandise inventory } & 350 & \
\hline \text { Cost of goods sold } & & 350 \
\hline
\end{array}$
D)
$\begin{array}{|l|r|r|}
\hline \text { Sales returns and allowances } & 500 & \
\hline \text { Accounts receivable } & & 500 \
\hline
\end{array}$
E)
$\begin{array}{|l|r|r|}
\hline \text { Accounts receivable } & 500 & \
\hline \text { Sales returns and allowances } & & 500 \
\hline \text { Cost of goods sold } & 350 & \
\hline \text { Merchandise inventory } & & 350 \
\hline
\end{array}$

Accepted Answer

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

A single-step income statement includes cost of goods sold as another expense and shows only one subtotal for total expenses.

What does the acronym FOB stand for? Describe the differences between FOB shipping point (or FOB factory)and FOB destination.

Describe the difference(s)between the periodic and the perpetual inventory accounting systems.

Purchase allowances refer to a price reduction (allowance)granted to a buyer of defective or unacceptable merchandise.

A company's current ratio is 1.2 and its quick ratio is 0.25. This company is probably an excellent credit risk because the ratios reveal no indication of liquidity problems.

The gross margin ratio:

A wholesaler buys products from manufacturers or other wholesalers and sells them to consumers.

Which of the following accounts is used in the periodic inventory system but not used in the perpetual inventory system?

A company has net sales of $825,000 and cost of goods sold of $547,000. Its net income is $98,500. The company's gross margin and operating expenses, respectively, are:

Inventory Returns Estimated is a current asset account used in a period-end adjusting entry to reflect the inventory estimated to be returned in the future.

Beginning inventory plus net purchases is:

Credit terms for a purchase include the amounts and timing of payments from a buyer to a seller.

A company has net sales of $752,000 and cost of goods sold of $543,000. Its net income is $17,530. The company's gross margin and operating expenses, respectively, are:

Under a perpetual inventory system, when a credit customer returns non-defective merchandise to the seller, the seller debits Sales Returns and Allowances and credits Accounts Receivable and also debits Merchandise Inventory and credits Cost of Goods Sold.

Cushman Company 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. Net income equals:

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

The operating cycle for a merchandiser that sells only for cash moves from:

Sales discounts has a normal debit balance because it decreases Sales, which has a normal credit balance.

If goods are shipped FOB destination, 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.

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 single-step income statement includes cost of goods sold as another expense and shows only one subtotal for total expenses.

What does the acronym FOB stand for? Describe the differences between FOB shipping point (or FOB factory)and FOB destination.

Describe the difference(s)between the periodic and the perpetual inventory accounting systems.

Purchase allowances refer to a price reduction (allowance)granted to a buyer of defective or unacceptable merchandise.

A company's current ratio is 1.2 and its quick ratio is 0.25. This company is probably an excellent credit risk because the ratios reveal no indication of liquidity problems.

The gross margin ratio:

A wholesaler buys products from manufacturers or other wholesalers and sells them to consumers.

Which of the following accounts is used in the periodic inventory system but not used in the perpetual inventory system?

A company has net sales of $825,000 and cost of goods sold of $547,000. Its net income is $98,500. The company's gross margin and operating expenses, respectively, are:

Inventory Returns Estimated is a current asset account used in a period-end adjusting entry to reflect the inventory estimated to be returned in the future.

Beginning inventory plus net purchases is:

Credit terms for a purchase include the amounts and timing of payments from a buyer to a seller.

A company has net sales of $752,000 and cost of goods sold of $543,000. Its net income is $17,530. The company's gross margin and operating expenses, respectively, are:

Under a perpetual inventory system, when a credit customer returns non-defective merchandise to the seller, the seller debits Sales Returns and Allowances and credits Accounts Receivable and also debits Merchandise Inventory and credits Cost of Goods Sold.

Cushman Company 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. Net income equals:

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

The operating cycle for a merchandiser that sells only for cash moves from:

Sales discounts has a normal debit balance because it decreases Sales, which has a normal credit balance.

If goods are shipped FOB destination, 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.

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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