Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

On March 12, Masterson Company, Inc. sold merchandise in the amount of $7,800 to Forsythe Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,500. Masterson uses the gross method of accounting for sales and a perpetual inventory system. On March 15, Forsythe was given an allowance of $600 on defective merchandise that had a cost of $350. Forsythe pays the invoice on March 20, and takes the appropriate discount. The journal entry that Masterson makes on March 15 when the allowance is given is:

Accepted Answer

A)    
B)    
C)    
D)    
E) Sales 
A)    
B)    
C)    
D)    
E) Sales

Question 3

Assuming a seller has not yet collected cash for goods sold, a credit memorandum is prepared to inform the buyer of the seller's credit to its Accounts Payable account arising from a sales return or allowance.

Accepted Answer

A) True 
 B)False

Question 4

Clausen Corporation has estimated for October, based on current sales of $1,750,000 and cost of goods sold of $950,000, that current and future returns and allowances will equal 4% of those sales. Prepare the adjusting entries necessary to record the revenue side and cost side estimates for returns and allowances.

Accepted Answer

The answer of Clausen Corporation has estimated for October, based...

Question 5

The following statements regarding merchandise inventory are true except:

Accepted Answer

A) Merchandise inventory is reported on the balance sheet as a current asset. 
B) Merchandise inventory refers to products a company owns and intends to sell. 
C) Merchandise inventory may include the costs of freight in and making them ready for sale. 
D) Merchandise inventory appears on the balance sheet of a service company. 
E) Purchasing merchandise inventory is part of the operating cycle for a business. 
A) Merchandise inventory is reported on the balance sheet as a current asset. 
B) Merchandise inventory refers to products a company owns and intends to sell. 
C) Merchandise inventory may include the costs of freight in and making them ready for sale. 
D) Merchandise inventory appears on the balance sheet of a service company. 
E) Purchasing merchandise inventory is part of the operating cycle for a business.

Question 6

The current asset account debited when recording a seller's cost-side adjusting entry for the estimated amount of current and future sales returns and allowances is ___________________________.

Accepted Answer

Inventory

Question 7

Companies that use a perpetual inventory system under the gross method debit the total purchase invoice amount and credit cash discounts taken to the Merchandise Inventory account.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

A periodic inventory system requires updating the inventory account only at the beginning of an accounting period.

Accepted Answer

A) True 
 B)False

Question 10

All of the following statements regarding sales returns and allowances are true except:

Accepted Answer

A) New revenue recognition rules require sellers to report sales net of expected returns and allowances for annual periods beginning after December 15, 2017. 
B) The Inventory Returns Estimated account is updated each time a sale is made. 
C) Sales returns and allowances estimates are typically made as period-end adjustments. 
D) When sales returns and allowances adjustments are made to sales, an estimate must also be made for the cost side. 
E) A credit memorandum is issued by the seller to inform a buyer of the seller's credit to the buyer's Accounts Receivable on the seller's books. 
A) New revenue recognition rules require sellers to report sales net of expected returns and allowances for annual periods beginning after December 15, 2017. 
B) The Inventory Returns Estimated account is updated each time a sale is made. 
C) Sales returns and allowances estimates are typically made as period-end adjustments. 
D) When sales returns and allowances adjustments are made to sales, an estimate must also be made for the cost side. 
E) A credit memorandum is issued by the seller to inform a buyer of the seller's credit to the buyer's Accounts Receivable on the seller's books.

Question 11

The periodic inventory system requires updating the inventory account at the end of the period to reflect the quantity and cost of goods available for sale and the cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 12

Following is the year-end adjusted trial balance for Fred's Corner Grocery, Inc. for the current year:   Required:
Prepare the closing entries at December 31 for the current year.

Accepted Answer

The answer of Following is the year-end adjusted trial balance...

Question 13

What is inventory shrinkage? How do managers account for shrinkage?

Accepted Answer

Inventory shrinkage is the loss of merch

Question 14

Juniper Company, Inc. uses a perpetual inventory system. 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 26, it paid the full amount due. The amount of the cash paid on August 26 equals:

Accepted Answer

A) $8,167.50. 
B) $9,652.50. 
C) $9,750.00. 
D) $8,250.00. 
E) $8,152.50. 
A) $8,167.50. 
B) $9,652.50. 
C) $9,750.00. 
D) $8,250.00. 
E) $8,152.50.

Question 15

Juniper Company, Inc. uses the gross method of recording purchases and a perpetual inventory system. 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 payment on August 16 is:

Accepted Answer

A) Debit Accounts Payable $8,250; credit Cash $8,250. 
B) Debit Cash $8,250; credit Accounts Payable $8,250. 
C) Debit Accounts Payable $8,250; credit Merchandise Inventory $82.50; credit Cash $8,167.50. 
D) Debit Accounts Payable $9,750; credit Merchandise Inventory $97.50; credit Cash $9,652.50. 
E) Debit Accounts Payable $9,652.50; credit Cash $9,652.50. 
A) Debit Accounts Payable $8,250; credit Cash $8,250. 
B) Debit Cash $8,250; credit Accounts Payable $8,250. 
C) Debit Accounts Payable $8,250; credit Merchandise Inventory $82.50; credit Cash $8,167.50. 
D) Debit Accounts Payable $9,750; credit Merchandise Inventory $97.50; credit Cash $9,652.50. 
E) Debit Accounts Payable $9,652.50; credit Cash $9,652.50.

Question 16

A company purchased $10,000 of merchandise on June 15 with terms of 3/10, n/45. On June 20, it returned $800 of that merchandise. On June 24, it paid the balance owed for the merchandise taking any discount it was entitled to. The cash paid on June 24 equals:

Accepted Answer

A) $8,924. 
B) $9,700. 
C) $10,000. 
D) $9,800. 
E) $8,724. 
A) $8,924. 
B) $9,700. 
C) $10,000. 
D) $9,800. 
E) $8,724.

Question 17

Tahoe Ski Company uses the net method of accounting for purchases and a perpetual inventory system and had the following transactions during January:   Prepare journal entries to record each of the preceding transactions.

Accepted Answer

The answer of Tahoe Ski Company uses the net method...

Question 18

A company that uses the gross method of recording purchases and a perpetual inventory system 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. The correct journal entry to record the purchase on July 5 is:

Accepted Answer

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

Question 19

A company that uses a perpetual inventory system 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. The amount of the cash paid on July 28 equals:

Accepted Answer

A) $200. 
B) $1,564. 
C) $1,568. 
D) $1,600. 
E) $1,800. 
A) $200. 
B) $1,564. 
C) $1,568. 
D) $1,600. 
E) $1,800.

Question 20

A company has sales of $695,000 and cost of goods sold of $278,000. Its gross profit equals:

Accepted Answer

A) $(417,000). 
B) $695,000. 
C) $278,000. 
D) $417,000. 
E) $973,000. 
A) $(417,000). 
B) $695,000. 
C) $278,000. 
D) $417,000. 
E) $973,000.

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

Assuming a seller has not yet collected cash for goods sold, a credit memorandum is prepared to inform the buyer of the seller's credit to its Accounts Payable account arising from a sales return or allowance.

The following statements regarding merchandise inventory are true except:

The current asset account debited when recording a seller's cost-side adjusting entry for the estimated amount of current and future sales returns and allowances is ___________________________.

Companies that use a perpetual inventory system under the gross method debit the total purchase invoice amount and credit cash discounts taken to the Merchandise Inventory account.

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

A periodic inventory system requires updating the inventory account only at the beginning of an accounting period.

All of the following statements regarding sales returns and allowances are true except:

The periodic inventory system requires updating the inventory account at the end of the period to reflect the quantity and cost of goods available for sale and the cost of goods sold.

Following is the year-end adjusted trial balance for Fred's Corner Grocery, Inc. for the current year: Required: Prepare the closing entries at December 31 for the current year.

What is inventory shrinkage? How do managers account for shrinkage?

Juniper Company, Inc. uses a perpetual inventory system. 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 26, it paid the full amount due. The amount of the cash paid on August 26 equals:

A company purchased $10,000 of merchandise on June 15 with terms of 3/10, n/45. On June 20, it returned $800 of that merchandise. On June 24, it paid the balance owed for the merchandise taking any discount it was entitled to. The cash paid on June 24 equals:

Tahoe Ski Company uses the net method of accounting for purchases and a perpetual inventory system and had the following transactions during January: Prepare journal entries to record each of the preceding transactions.

A company that uses a perpetual inventory system 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. The amount of the cash paid on July 28 equals:

A company has sales of $695,000 and cost of goods sold of $278,000. Its gross profit equals:

Introducing Financial Accounting

Accounting System and Financial Statements

Adjusting Accounts for Financial Statements

Reporting and Analyzing Inventories

Reporting and Analyzing Cash and Internal Controls

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Term Assets

Reporting and Analyzing Current Liabilities

Reporting and Analyzing Long-Term Liabilities

Reporting and Analyzing Equity

Reporting and Analyzing Cash Flows

Analyzing and Interpreting Financial Statements

Applying Present and Future Values

Investments and International Operations

Reporting and Analyzing Partnerships

Filters

Exam 4: Reporting and Analyzing Merchandising Operations

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

Assuming a seller has not yet collected cash for goods sold, a credit memorandum is prepared to inform the buyer of the seller's credit to its Accounts Payable account arising from a sales return or allowance.

The following statements regarding merchandise inventory are true except:

The current asset account debited when recording a seller's cost-side adjusting entry for the estimated amount of current and future sales returns and allowances is ___________________________.

Companies that use a perpetual inventory system under the gross method debit the total purchase invoice amount and credit cash discounts taken to the Merchandise Inventory account.

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

A periodic inventory system requires updating the inventory account only at the beginning of an accounting period.

All of the following statements regarding sales returns and allowances are true except:

The periodic inventory system requires updating the inventory account at the end of the period to reflect the quantity and cost of goods available for sale and the cost of goods sold.

Following is the year-end adjusted trial balance for Fred's Corner Grocery, Inc. for the current year: Required: Prepare the closing entries at December 31 for the current year.

What is inventory shrinkage? How do managers account for shrinkage?

Juniper Company, Inc. uses a perpetual inventory system. 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 26, it paid the full amount due. The amount of the cash paid on August 26 equals:

A company purchased $10,000 of merchandise on June 15 with terms of 3/10, n/45. On June 20, it returned $800 of that merchandise. On June 24, it paid the balance owed for the merchandise taking any discount it was entitled to. The cash paid on June 24 equals:

Tahoe Ski Company uses the net method of accounting for purchases and a perpetual inventory system and had the following transactions during January: Prepare journal entries to record each of the preceding transactions.

A company that uses a perpetual inventory system 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. The amount of the cash paid on July 28 equals:

A company has sales of $695,000 and cost of goods sold of $278,000. Its gross profit equals:

Introducing Financial Accounting

Accounting System and Financial Statements

Adjusting Accounts for Financial Statements

Reporting and Analyzing Inventories

Reporting and Analyzing Cash and Internal Controls

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Term Assets

Reporting and Analyzing Current Liabilities

Reporting and Analyzing Long-Term Liabilities

Reporting and Analyzing Equity

Reporting and Analyzing Cash Flows

Analyzing and Interpreting Financial Statements

Applying Present and Future Values

Investments and International Operations

Reporting and Analyzing Partnerships

Filters