Question 1

A merchandising company:

Accepted Answer

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

Question 2

A journal entry with a debit to cash of $980, a debit to Sales Discounts of $20 and a credit to Accounts Receivable of $1,000 means that a customer has taken a 10% cash discount for early payment.
$20/$1,000 = 2% discount

Accepted Answer

A) True 
 B)False

Question 3

Beginning merchandise inventory plus the net cost of purchases is equal to the merchandise available for sale.

Accepted Answer

A) True 
 B)False

Question 4

Roller Blade Company uses the perpetual inventory system and had the following transactions during October:
 
Prepare journal entries to record each of the preceding transactions.

Accepted Answer

The answer of Roller Blade Company uses the perpetual inventory...

Question 5

Describe the recording process (including costs) for sales of merchandise inventory using a perpetual inventory system.

Accepted Answer

Sales are recorded at list price less an

Question 6

Explain the cost flows and operating activities of a merchandising company.

Accepted Answer

Beginning inventory plus the net cost of

Question 7

Takita Company had net sales of $500,000 and cost of goods sold of $350,000. Calculate Takita's gross profit.

Accepted Answer

$500,000 -

Question 8

The __________________ inventory system continually updates accounting records for merchandise transactions for the amounts of inventory available for sale and inventory sold.

Accepted Answer

The answer of The __________________ inventory system continually updates accounting...

Question 9

A seller usually prepares a ____________________ to confirm a buyer's return or allowance, that informs the buyer of the seller's credit to the buyer's Account Receivable on the seller's books.

Accepted Answer

The answer of A seller usually prepares a ____________________ to...

Question 10

A company had expenses other than cost of goods sold of $250,000. Determine sales and gross profit given cost of goods sold was $100,000 and net income was $150,000.

Accepted Answer

A)  Sales: $350,000; Gross Profit: $150,000 
B)  Sales: $350,000; Gross Profit: $50,000 
C)  Sales: $500,000; Gross Profit: $400,000 
D)  Sales: $500,000; Gross Profit: $50,000 
E)  Sales: $400,000; Gross Profit: $500,000 
A)  Sales: $350,000; Gross Profit: $150,000 
B)  Sales: $350,000; Gross Profit: $50,000 
C)  Sales: $500,000; Gross Profit: $400,000 
D)  Sales: $500,000; Gross Profit: $50,000 
E)  Sales: $400,000; Gross Profit: $500,000

Question 11

The adjusting entry to reflect inventory shrinkage is a debit to Income Summary and a credit to Inventory Shrinkage Expense.

Accepted Answer

A) True 
 B)False

Question 12

FOB _________________ means the buyer accepts ownership when the goods depart the seller's place of business. The buyer is responsible for paying shipping costs and bears the risk of damage or loss when goods are in transit.

Accepted Answer

Shipping p

Question 13

Which of the following statements are true regarding the closing process of a merchandiser?

Accepted Answer

A)  Sales Discounts, Sales Returns and Allowances and Cost of Goods sold should all be credited during closing 
B)  Sales Discounts, Sales Returns and Allowances and Cost of Goods sold should all be debited during closing 
C)  Sales Discounts and Sales Returns and Allowances should be debited; Cost of Goods Sold should be credited during closing 
D)  Sales Discounts and Sales Returns and Allowances should be credited; Cost of Goods Sold should be debited during closing 
E)  Sales Discounts and Sales Returns and Allowances are not closed. Cost of Goods Sold should be credited 
A)  Sales Discounts, Sales Returns and Allowances and Cost of Goods sold should all be credited during closing 
B)  Sales Discounts, Sales Returns and Allowances and Cost of Goods sold should all be debited during closing 
C)  Sales Discounts and Sales Returns and Allowances should be debited; Cost of Goods Sold should be credited during closing 
D)  Sales Discounts and Sales Returns and Allowances should be credited; Cost of Goods Sold should be debited during closing 
E)  Sales Discounts and Sales Returns and Allowances are not closed. Cost of Goods Sold should be credited

Question 14

A _______________________ is a document the buyer issues to inform the seller of a debit made to the seller's account in the buyer's records.

Accepted Answer

The answer of A _______________________ is a document the buyer...

Question 15

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

Accepted Answer

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

Question 16

A company that uses the perpetual inventory system purchased $8,500 worth of inventory on September 25. Terms of the purchase were 2/10, n/30. The invoice was paid in full on October 4. Prepare the journal entries to record these merchandise transactions.

Accepted Answer

The answer of A company that uses the perpetual inventory...

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

On July 22, a company purchased merchandise inventory at a cost of $5,250 with credit terms 2/10, net 60. If the company borrows money at 12% to pay for the purchase on the last day of the discount period and pays the loan off on the last day of the credit period, what would be the net savings for the company?

Accepted Answer

A)  $99.50 
B)  $-20.43 
C)  $84.57 
D)  $20.43 
E)  $-84.57 
A)  $99.50 
B)  $-20.43 
C)  $84.57 
D)  $20.43 
E)  $-84.57

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%.
($340,500 - $257,000)/$340,500 = 24.5%

Accepted Answer

A) True 
 B)False

Question 20

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

Exam 4: Accounting for Merchandising Operations

A merchandising company:

A journal entry with a debit to cash of $980, a debit to Sales Discounts of $20 and a credit to Accounts Receivable of $1,000 means that a customer has taken a 10% cash discount for early payment. $20/$1,000 = 2% discount

Beginning merchandise inventory plus the net cost of purchases is equal to the merchandise available for sale.

Roller Blade Company uses the perpetual inventory system and had the following transactions during October: Prepare journal entries to record each of the preceding transactions.

Describe the recording process (including costs) for sales of merchandise inventory using a perpetual inventory system.

Explain the cost flows and operating activities of a merchandising company.

Takita Company had net sales of $500,000 and cost of goods sold of $350,000. Calculate Takita's gross profit.

The __________________ inventory system continually updates accounting records for merchandise transactions for the amounts of inventory available for sale and inventory sold.

A seller usually prepares a ____________________ to confirm a buyer's return or allowance, that informs the buyer of the seller's credit to the buyer's Account Receivable on the seller's books.

A company had expenses other than cost of goods sold of $250,000. Determine sales and gross profit given cost of goods sold was $100,000 and net income was $150,000.

The adjusting entry to reflect inventory shrinkage is a debit to Income Summary and a credit to Inventory Shrinkage Expense.

FOB _________________ means the buyer accepts ownership when the goods depart the seller's place of business. The buyer is responsible for paying shipping costs and bears the risk of damage or loss when goods are in transit.

Which of the following statements are true regarding the closing process of a merchandiser?

A _______________________ is a document the buyer issues to inform the seller of a debit made to the seller's account in the buyer's records.

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

A company that uses the perpetual inventory system purchased $8,500 worth of inventory on September 25. Terms of the purchase were 2/10, n/30. The invoice was paid in full on October 4. Prepare the journal entries to record these merchandise transactions.

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

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%. ($340,500 - $257,000)/$340,500 = 24.5%

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

Introducing Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Inventories and Cost of Sales

Cash and Internal Controls

Accounts and Notes Receivable

Long-Term Assets

Current Liabilities

Long-Term Liabilities

Corporate Reporting and Analysis

Reporting and Analyzing Cash Flows

Analyzing Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

Process Costing and Analysis

Activity-Based Costing and Analysis

Cost Behavior and Cost-Volume-Profit Analysis

Variable Costing and Performance Reporting

Master Budgets and Performance Planning

Flexible Budgets and Standard Costing

Decentralization and Performance Evaluation

Relevant Costing for Managerial Decisions

Capital Budgeting and Investment Analysis

Investments and International Operations

Accounting for Partnerships

Appendix : Accounting With Special Journals

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