Question 1

Cost of goods sold represents the cost of buying and preparing merchandise for sale.

Accepted Answer

A) True 
 B)False

Question 2

All of the following statements related to U.S. GAAP and IFRS are true except:

Accepted Answer

A) Accounting for basic inventory transactions is identical under both systems. 
B) The closing process for merchandisers is the same under both systems. 
C) U.S.GAAP offers little guidance about the presentation order of expenses. 
D) Neither system requires separate disclosure of items when their size, nature, or frequency are important. 
E) Neither system defines operating income. 
A) Accounting for basic inventory transactions is identical under both systems. 
B) The closing process for merchandisers is the same under both systems. 
C) U.S.GAAP offers little guidance about the presentation order of expenses. 
D) Neither system requires separate disclosure of items when their size, nature, or frequency are important. 
E) Neither system defines operating income.

Question 3

Serene Spa Sales, Inc. uses the gross method for recording purchases and sales and a perpetual inventory system and had the following transactions during August.   Required:
Prepare the general journal entries to record these transactions.

Accepted Answer

The answer of Serene Spa Sales, Inc. uses the gross...

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

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 6

FOB _________________ means ownership of goods transfers to the buyer when the goods arrive at the buyer's place of business. The seller is responsible for paying shipping charges and bears the risk of damage or loss in transit.

Accepted Answer

The answer of FOB _________________ means ownership of goods transfers...

Question 7

Wellington Company had sales this year of $2,180,000 and cost of goods sold of $1,050,000. Wellington expects returns and allowances in the following year to equal 6% of sales, half being returns of goods and half allowances for merchandise kept by the buyer. The adjusting entry or entries to record the expected sales returns is(are):

Accepted Answer

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

Question 8

When using the net method of recording sales, discounts not taken by the purchaser are recorded by the seller as Interest Revenue at the time of collection on account.

Accepted Answer

A) True 
 B)False

Question 9

On September 12, Vander Company, Inc. sold merchandise in the amount of $5,800 to Jepson Company on credit with terms of 2/10, n/30. The cost of the items sold is $4,000. Vander uses the gross method of accounting for sales and a periodic inventory system. On September 14, Jepson returns some of the merchandise. The selling price of the merchandise is $500 and the cost of the merchandise returned is $350. Jepson pays the invoice on September 18 and takes the appropriate discount. The journal entry that Vander makes on September 18 is:

Accepted Answer

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

Question 10

A company that uses the net 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 payment on July 28 is:

Accepted Answer

A) Debit Merchandise Inventory $1,600; credit Cash $1,600. 
B) Debit Cash $1,600; credit Accounts Payable $1,600. 
C) Debit Accounts Payable $1,600; credit Merchandise Inventory $32; credit Cash $1,568. 
D) Debit Accounts Payable $1,800; credit Cash $1,800. 
E) Debit Accounts Payable $1,568; debit Discounts Lost $32; credit Cash $1,600. 
A) Debit Merchandise Inventory $1,600; credit Cash $1,600. 
B) Debit Cash $1,600; credit Accounts Payable $1,600. 
C) Debit Accounts Payable $1,600; credit Merchandise Inventory $32; credit Cash $1,568. 
D) Debit Accounts Payable $1,800; credit Cash $1,800. 
E) Debit Accounts Payable $1,568; debit Discounts Lost $32; credit Cash $1,600.

Question 11

Which of the following accounts is used in a periodic inventory system to record the cost of freight to transport purchased merchandise?

Accepted Answer

A) Merchandise Inventory 
B) Freight Expense 
C) Miscellaneous Expense 
D) Purchases 
E) Transportation-In 
A) Merchandise Inventory 
B) Freight Expense 
C) Miscellaneous Expense 
D) Purchases 
E) Transportation-In

Question 12

Prepare journal entries to record the following merchandise transactions of Martinez Excavation Equipment, Inc., which uses the gross method of accounting for purchases and sales and a perpetual inventory system.

Accepted Answer

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

Question 13

A company using the gross method of accounting for purchases and a perpetual inventory system recorded the following entry:   This entry reflects a:

Accepted Answer

A) Purchase of merchandise on credit. 
B) Return of merchandise. 
C) Sale of merchandise on credit. 
D) Payment of the account payable less a 2% cash discount taken. 
E) Payment of the account payable less a 1% cash discount taken. 
A) Purchase of merchandise on credit. 
B) Return of merchandise. 
C) Sale of merchandise on credit. 
D) Payment of the account payable less a 2% cash discount taken. 
E) Payment of the account payable less a 1% cash discount taken.

Question 14

A buyer using a perpetual inventory system records the costs of shipping merchandise it purchases in a Delivery Expense account.

Accepted Answer

A) True 
 B)False

Question 15

Assets tied up in inventory are not considered productive assets.

Accepted Answer

A) True 
 B)False

Question 16

Sales Discounts and Sales Returns and Allowances are contra revenue accounts that are debited during the closing process.

Accepted Answer

A) True 
 B)False

Question 17

Johnnycake Restaurant uses the gross method of accounting for purchases and a periodic inventory system. Prepare general journal entries to record the following transactions for Johnnycake:

Accepted Answer

The answer of Johnnycake Restaurant uses the gross method of...

Question 18

The acid-test ratio is defined as current assets divided by current liabilities.

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

The answer of A buyer issues a _______________________ to inform...

Question 20

Morgan, Inc. uses a perpetual inventory system and the net method of recording purchases. On May 12, a merchandise purchase of $15,000 was made on credit, 2/10, n/30. Payment was made on May 20. The journal entry to record the payment is:

Accepted Answer

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

Cost of goods sold represents the cost of buying and preparing merchandise for sale.

All of the following statements related to U.S. GAAP and IFRS are true except:

Serene Spa Sales, Inc. uses the gross method for recording purchases and sales and a perpetual inventory system and had the following transactions during August. Required: Prepare the general journal entries to record these transactions.

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

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

FOB _________________ means ownership of goods transfers to the buyer when the goods arrive at the buyer's place of business. The seller is responsible for paying shipping charges and bears the risk of damage or loss in transit.

When using the net method of recording sales, discounts not taken by the purchaser are recorded by the seller as Interest Revenue at the time of collection on account.

Which of the following accounts is used in a periodic inventory system to record the cost of freight to transport purchased merchandise?

Prepare journal entries to record the following merchandise transactions of Martinez Excavation Equipment, Inc., which uses the gross method of accounting for purchases and sales and a perpetual inventory system.

A company using the gross method of accounting for purchases and a perpetual inventory system recorded the following entry: This entry reflects a:

A buyer using a perpetual inventory system records the costs of shipping merchandise it purchases in a Delivery Expense account.

Assets tied up in inventory are not considered productive assets.

Sales Discounts and Sales Returns and Allowances are contra revenue accounts that are debited during the closing process.

Johnnycake Restaurant uses the gross method of accounting for purchases and a periodic inventory system. Prepare general journal entries to record the following transactions for Johnnycake:

The acid-test ratio is defined as current assets divided by current liabilities.

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

Morgan, Inc. uses a perpetual inventory system and the net method of recording purchases. On May 12, a merchandise purchase of $15,000 was made on credit, 2/10, n/30. Payment was made on May 20. The journal entry to record the payment is:

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

Cost of goods sold represents the cost of buying and preparing merchandise for sale.

All of the following statements related to U.S. GAAP and IFRS are true except:

Serene Spa Sales, Inc. uses the gross method for recording purchases and sales and a perpetual inventory system and had the following transactions during August. Required: Prepare the general journal entries to record these transactions.

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

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

FOB _________________ means ownership of goods transfers to the buyer when the goods arrive at the buyer's place of business. The seller is responsible for paying shipping charges and bears the risk of damage or loss in transit.

When using the net method of recording sales, discounts not taken by the purchaser are recorded by the seller as Interest Revenue at the time of collection on account.

Which of the following accounts is used in a periodic inventory system to record the cost of freight to transport purchased merchandise?

Prepare journal entries to record the following merchandise transactions of Martinez Excavation Equipment, Inc., which uses the gross method of accounting for purchases and sales and a perpetual inventory system.

A company using the gross method of accounting for purchases and a perpetual inventory system recorded the following entry: This entry reflects a:

A buyer using a perpetual inventory system records the costs of shipping merchandise it purchases in a Delivery Expense account.

Assets tied up in inventory are not considered productive assets.

Sales Discounts and Sales Returns and Allowances are contra revenue accounts that are debited during the closing process.

Johnnycake Restaurant uses the gross method of accounting for purchases and a periodic inventory system. Prepare general journal entries to record the following transactions for Johnnycake:

The acid-test ratio is defined as current assets divided by current liabilities.

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

Morgan, Inc. uses a perpetual inventory system and the net method of recording purchases. On May 12, a merchandise purchase of $15,000 was made on credit, 2/10, n/30. Payment was made on May 20. The journal entry to record the payment is:

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