Question 1

A service company earns net income by buying and selling merchandise.

Accepted Answer

A) True 
 B)False

Question 2

Under the net method of recording purchases, the Discounts Lost account is used when the purchaser fails to take a discount offered by the seller.

Accepted Answer

A) True 
 B)False

Question 3

Cushman Company, Inc. 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. Gross profit equals:

Accepted Answer

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

Question 4

From the adjusted trial balance for Brookstone Art Supplies, Inc. given below, prepare a multiple-step income statement in good form.

Accepted Answer

The answer of From the adjusted trial balance for Brookstone...

Question 5

Describe why the use of the perpetual inventory system has dramatically increased and the benefits the system provides.

Accepted Answer

Tracking merchandise activities are nece

Question 6

Following is the adjusted trial balance for Mercer Grocery, Inc. for the current year. Mercer uses a periodic inventory system. A physical count of the inventory indicates that $60,000 of merchandise is on hand. Prepare the December 31 closing entries.

Accepted Answer

The answer of Following is the adjusted trial balance for...

Question 7

Products that a company owns and intends to sell are called _____________________.

Accepted Answer

Merchandis

Question 8

On March 12, Klein Company, Inc. sold merchandise in the amount of $9,800 to Babson Company, with credit terms of 1/10, n/30. The cost of the items sold is $5,500. Klein uses the gross method of accounting for sales and a perpetual inventory system. Babson pays the invoice on March 30, which is after the discount period. The journal entry that Klein makes on March 30 is:

Accepted Answer

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

Question 9

On March 12, Klein Company, Inc. sold merchandise in the amount of $9,800 to Babson Company, with credit terms of 1/10, n/30. The cost of the items sold is $5,500. Klein uses the gross method of accounting for sales and a perpetual inventory system. The journal entry or entries that Klein will make on March 12 is:

Accepted Answer

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

Question 10

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

Accepted Answer

A) Is less than the current ratio. 
B) Equals 1. 
C) Is higher than 1. 
D) Is substantially lower than 1. 
E) Is higher than the current ratio. 
A) Is less than the current ratio. 
B) Equals 1. 
C) Is higher than 1. 
D) Is substantially lower than 1. 
E) Is higher than the current ratio.

Question 11

A company had net sales of $545,000 and cost of goods sold of $345,000. Its gross margin equals $890,000.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

Under a periodic system, the cost of ite

Question 13

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 14

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 15

Using the following year-end information for Calvin's Clothing, Inc., calculate the current ratio and acid-test ratio for the business:

Accepted Answer

A) 1.80 and 1 
B) 1.97 and 1.52 
C) 2.73 and 1.52 
D) 3.50 and 0.90 
E) 1.80 and 0.90 
A) 1.80 and 1 
B) 1.97 and 1.52 
C) 2.73 and 1.52 
D) 3.50 and 0.90 
E) 1.80 and 0.90

Question 16

Gross profit is also called gross margin.

Accepted Answer

A) True 
 B)False

Question 17

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 merchandise return on July 7 is:

Accepted Answer

A) Debit Accounts Payable $196; credit Merchandise Inventory $196. 
B) Debit Merchandise Inventory $200; credit Accounts Payable $200. 
C) Debit Merchandise Inventory $200; credit Sales Returns $200. 
D) Debit Accounts Payable $200; credit Merchandise Inventory $200. 
E) Debit Accounts Payable $1,800; credit Purchase Returns $200; credit Merchandise Inventory $1,600. 
A) Debit Accounts Payable $196; credit Merchandise Inventory $196. 
B) Debit Merchandise Inventory $200; credit Accounts Payable $200. 
C) Debit Merchandise Inventory $200; credit Sales Returns $200. 
D) Debit Accounts Payable $200; credit Merchandise Inventory $200. 
E) Debit Accounts Payable $1,800; credit Purchase Returns $200; credit Merchandise Inventory $1,600.

Question 18

A company 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 14, it paid the full amount due. The amount of the cash paid on July 14 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 19

Match the following terms with the appropriate definitions.

Accepted Answer

The answer of Match the following terms with the appropriate...

Question 20

Fill in the blanks (a) through (g) for the Corman Company, Inc. for each of the income statements for 2016 and 2017.

Accepted Answer

The answer of Fill in the blanks (a) through (g)...

A service company earns net income by buying and selling merchandise.

Under the net method of recording purchases, the Discounts Lost account is used when the purchaser fails to take a discount offered by the seller.

Cushman Company, Inc. 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. Gross profit equals:

From the adjusted trial balance for Brookstone Art Supplies, Inc. given below, prepare a multiple-step income statement in good form.

Describe why the use of the perpetual inventory system has dramatically increased and the benefits the system provides.

Following is the adjusted trial balance for Mercer Grocery, Inc. for the current year. Mercer uses a periodic inventory system. A physical count of the inventory indicates that $60,000 of merchandise is on hand. Prepare the December 31 closing entries.

Products that a company owns and intends to sell are called _____________________.

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

A company had net sales of $545,000 and cost of goods sold of $345,000. Its gross margin equals $890,000.

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

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.

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.

Using the following year-end information for Calvin's Clothing, Inc., calculate the current ratio and acid-test ratio for the business:

Gross profit is also called gross margin.

A company 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 14, it paid the full amount due. The amount of the cash paid on July 14 equals:

Match the following terms with the appropriate definitions.

Fill in the blanks (a) through (g) for the Corman Company, Inc. for each of the income statements for 2016 and 2017.

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

A service company earns net income by buying and selling merchandise.

Under the net method of recording purchases, the Discounts Lost account is used when the purchaser fails to take a discount offered by the seller.

Cushman Company, Inc. 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. Gross profit equals:

From the adjusted trial balance for Brookstone Art Supplies, Inc. given below, prepare a multiple-step income statement in good form.

Describe why the use of the perpetual inventory system has dramatically increased and the benefits the system provides.

Following is the adjusted trial balance for Mercer Grocery, Inc. for the current year. Mercer uses a periodic inventory system. A physical count of the inventory indicates that $60,000 of merchandise is on hand. Prepare the December 31 closing entries.

Products that a company owns and intends to sell are called _____________________.

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

A company had net sales of $545,000 and cost of goods sold of $345,000. Its gross margin equals $890,000.

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

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.

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.

Using the following year-end information for Calvin's Clothing, Inc., calculate the current ratio and acid-test ratio for the business:

Gross profit is also called gross margin.

A company 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 14, it paid the full amount due. The amount of the cash paid on July 14 equals:

Match the following terms with the appropriate definitions.

Fill in the blanks (a) through (g) for the Corman Company, Inc. for each of the income statements for 2016 and 2017.

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