Exam 4: Accounting for Merchandising Operations

The following information is available for Trico and its two main competitors in the industry (Duco and Unico): Cash \ 9,800 \ 10,500 \ 26,500 Short-term investments 6,400 8,200 12,500 Accounts receivable 12,500 8,500 14,350 Merchandise inventory 30,150 40,000 40,150 Prepaid expense 900 6,750 2,450 Accounts payable 19,400 13,750 26,800 Salaries payable 1,200 3,500 6,250 Other current payables 600 1,200 2,150 The industry standard for the current ratio is 1.8 and the industry standard for the acid-test ratio is 1. Required: 1. Calculate the current ratio and acid-test ratio for each firm. 2. Rank the firms in decreasing order of liquidity. 3. Comment on Trico's relative liquidity position.

Maia's Bike Shop uses the periodic inventory system and had the following transactions during the month of May: Prepare the required journal entries that Maia's Bike Shop must make to record these transactions.

____________________ refer to merchandise that customers return to the seller after a sale.

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

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

Ceres Computer Sales uses the perpetual inventory system and had the following transactions during the month of December Required: Prepare the general journal entries to record these transactions.

A company has net sales of $1,500,000, sales commissions in the amount of $194,000, net income was $366,400, and the gross profit ratio is 60%, what amount listed as gross profit on the income statement for the period?

The acid-test ratio reflects the ___________ of a company.

An account used in the periodic inventory system that is not used in the perpetual inventory system is

List the steps of the operating cycle for a merchandiser with credit sales.

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

The gross margin ratio equals net sales less ___________ divided by net sales.

When a company has no reportable non-operating activities, its income from operations is reported as ___________________.

Herald Company had sales of $135,000, sales discounts of $2,000 and sales returns of $3,200. Herald Company's net sales equals:

A company had expenses other than cost of goods sold of $175,000. Determine sales and gross profit given cost of goods sold was $622,000 and net loss was ($41,000).

A company purchased merchandise inventory at a cost of $8,500 with credit terms 2/10, net 60. If the company borrows $8,330 to pay for the purchase on the last day of the discount period and pays the loan plus interest in the amount of $8,466.93 on the last day of the credit period, what is the net savings?

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

Sales discounts can benefit a seller by decreasing the delay in receiving cash and ___________.

Merchandise inventory consists of products that a company acquires to resell to customers.

A buyer did not take advantage of a supplier's credit terms of 2/10, n/30, but instead paid the invoice in full at the end of 30 days. By not taking the discount the buyer lost the equivalent of 18% annual interest on the amount of the purchase.