Question 1

The net method of recording purchases refers to recording:

Accepted Answer

A) Purchases at the invoice price less any cash discounts. 
B) Specified amounts and timing of payments that a buyer agrees to in return for being granted credit. 
C) Purchases at the full invoice price, without deducting any cash discounts. 
D) Inventory at its selling price. 
E) Inventory at the lower of cost or market. 
A) Purchases at the invoice price less any cash discounts. 
B) Specified amounts and timing of payments that a buyer agrees to in return for being granted credit. 
C) Purchases at the full invoice price, without deducting any cash discounts. 
D) Inventory at its selling price. 
E) Inventory at the lower of cost or market.

Question 2

Preston Office Furniture, Inc. uses the gross method of accounting for sales and a periodic inventory system and had the following transactions during the month of May:   Prepare the required journal entries that Preston Office Furniture, Inc. must make to record these transactions.

Accepted Answer

The answer of Preston Office Furniture, Inc. uses the gross...

Question 3

A common rule of thumb is that a company's acid-test ratio should have a value near or higher than 1 to conclude that a company is unlikely to face near-term liquidity problems.

Accepted Answer

A) True 
 B)False

Question 4

Successful use of a just-in-time inventory system can narrow the gap between the acid-test and the current ratio.

Accepted Answer

A) True 
 B)False

Question 5

Akron Company, which uses a perpetual inventory system, purchased merchandise inventory costing $10,000 with credit terms of 2/10, n/30 on March 7. On March 15, the company paid 1/2 of the amount due. The remaining balance was paid on April 7.
Required:
Record the journal entries related to this transaction using the net method of recording purchases.

Accepted Answer

The answer of Akron Company, which uses a perpetual inventory...

Question 6

Cost of goods sold is also called cost of sales.

Accepted Answer

A) True 
 B)False

Question 7

Identify and explain the key components of a merchandiser's net income as would be shown in its income statement.

Accepted Answer

The basic components of income begin wit

Question 8

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 purchase on August 7 is:

Accepted Answer

A) Debit Merchandise Inventory $9,750; credit Cash $9,750. 
B) Debit Purchases $9,652.50; credit Accounts Payable $9,652.50. 
C) Debit Merchandise Inventory $9,750; credit Sales Returns $1,500; credit Cash $8,250. 
D) Debit Merchandise Inventory $9,750; credit Accounts Payable $9,750. 
E) Debit Accounts Payable $8,250; debit Purchase Returns $1,500; credit Merchandise Inventory $9,750. 
A) Debit Merchandise Inventory $9,750; credit Cash $9,750. 
B) Debit Purchases $9,652.50; credit Accounts Payable $9,652.50. 
C) Debit Merchandise Inventory $9,750; credit Sales Returns $1,500; credit Cash $8,250. 
D) Debit Merchandise Inventory $9,750; credit Accounts Payable $9,750. 
E) Debit Accounts Payable $8,250; debit Purchase Returns $1,500; credit Merchandise Inventory $9,750.

Question 9

Cost of goods sold is:

Accepted Answer

A) Another term for merchandise sales. 
B) The term used for the expense of buying and preparing merchandise for sale. 
C) Another term for revenue. 
D) Also called gross margin. 
E) A term only used by service firms. 
A) Another term for merchandise sales. 
B) The term used for the expense of buying and preparing merchandise for sale. 
C) Another term for revenue. 
D) Also called gross margin. 
E) A term only used by service firms.

Question 10

Sellers always offer a discount to buyers for prompt payment toward purchases made on credit.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

The answer of Whitehorn Ski Company uses the gross method...

Question 12

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 before that point.

Accepted Answer

A) True 
 B)False

Question 13

The __________________ inventory system continually updates accounting records for merchandise transactions - specifically, for those records of inventory available for sale and inventory sold.

Accepted Answer

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

Question 14

Prepare journal entries to record the following merchandising transactions of Margin Company, Inc., which uses the gross method of accounting for purchases and sales and a perpetual inventory system. Margin Company, Inc. offers all of its credit customers credit terms of 2/10, n/30.

Accepted Answer

The answer of Prepare journal entries to record the following...

Question 15

In a perpetual inventory system, the Merchandise Inventory account must be closed at the end of the accounting period.

Accepted Answer

A) True 
 B)False

Question 16

The credit terms 2/10, n/30 are interpreted as:

Accepted Answer

A) 2% cash discount if the amount is paid within 10 days, or the balance due in 30 days. 
B) 10% cash discount if the amount is paid within 2 days, or the balance due in 30 days. 
C) 30% discount if paid within 2 days. 
D) 30% discount if paid within 10 days. 
E) 2% discount if paid within 30 days. 
A) 2% cash discount if the amount is paid within 10 days, or the balance due in 30 days. 
B) 10% cash discount if the amount is paid within 2 days, or the balance due in 30 days. 
C) 30% discount if paid within 2 days. 
D) 30% discount if paid within 10 days. 
E) 2% discount if paid within 30 days.

Question 17

Define Merchandise Inventory and describe the types of costs that are included in the inventory account for a merchandising company.

Accepted Answer

Merchandise inventory refers to products

Question 18

National Storage Company, Inc. had sales of $1,000,000, sales discounts of $2,500, sales returns and allowances of $15,000, and cost of goods sold of $525,000. Calculate National's gross profit.

Accepted Answer

Gross Profit = Sales - Sales D

Question 19

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

Accepted Answer

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

Question 20

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

Accepted Answer

The answer of The gross margin ratio equals net sales...

The net method of recording purchases refers to recording:

Preston Office Furniture, Inc. uses the gross method of accounting for sales and a periodic inventory system and had the following transactions during the month of May: Prepare the required journal entries that Preston Office Furniture, Inc. must make to record these transactions.

A common rule of thumb is that a company's acid-test ratio should have a value near or higher than 1 to conclude that a company is unlikely to face near-term liquidity problems.

Successful use of a just-in-time inventory system can narrow the gap between the acid-test and the current ratio.

Cost of goods sold is also called cost of sales.

Identify and explain the key components of a merchandiser's net income as would be shown in its income statement.

Cost of goods sold is:

Sellers always offer a discount to buyers for prompt payment toward purchases made on credit.

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

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 before that point.

The __________________ inventory system continually updates accounting records for merchandise transactions - specifically, for those records of inventory available for sale and inventory sold.

Prepare journal entries to record the following merchandising transactions of Margin Company, Inc., which uses the gross method of accounting for purchases and sales and a perpetual inventory system. Margin Company, Inc. offers all of its credit customers credit terms of 2/10, n/30.

In a perpetual inventory system, the Merchandise Inventory account must be closed at the end of the accounting period.

The credit terms 2/10, n/30 are interpreted as:

Define Merchandise Inventory and describe the types of costs that are included in the inventory account for a merchandising company.

National Storage Company, Inc. had sales of $1,000,000, sales discounts of $2,500, sales returns and allowances of $15,000, and cost of goods sold of $525,000. Calculate National's gross profit.

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

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

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

The net method of recording purchases refers to recording:

Preston Office Furniture, Inc. uses the gross method of accounting for sales and a periodic inventory system and had the following transactions during the month of May: Prepare the required journal entries that Preston Office Furniture, Inc. must make to record these transactions.

A common rule of thumb is that a company's acid-test ratio should have a value near or higher than 1 to conclude that a company is unlikely to face near-term liquidity problems.

Successful use of a just-in-time inventory system can narrow the gap between the acid-test and the current ratio.

Cost of goods sold is also called cost of sales.

Identify and explain the key components of a merchandiser's net income as would be shown in its income statement.

Cost of goods sold is:

Sellers always offer a discount to buyers for prompt payment toward purchases made on credit.

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

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 before that point.

The __________________ inventory system continually updates accounting records for merchandise transactions - specifically, for those records of inventory available for sale and inventory sold.

Prepare journal entries to record the following merchandising transactions of Margin Company, Inc., which uses the gross method of accounting for purchases and sales and a perpetual inventory system. Margin Company, Inc. offers all of its credit customers credit terms of 2/10, n/30.

In a perpetual inventory system, the Merchandise Inventory account must be closed at the end of the accounting period.

The credit terms 2/10, n/30 are interpreted as:

Define Merchandise Inventory and describe the types of costs that are included in the inventory account for a merchandising company.

National Storage Company, Inc. had sales of $1,000,000, sales discounts of $2,500, sales returns and allowances of $15,000, and cost of goods sold of $525,000. Calculate National's gross profit.

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

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

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