Question 1

Sales discounts on credit sales can benefit a seller by decreasing the delay in receiving cash and reducing future collections efforts.

Accepted Answer

A) True 
 B)False  True

Question 2

Distinguish between selling expenses and general and administrative expenses.

Accepted Answer

Answers will vary

Question 3

A company that uses the perpetual inventory system purchased $8,500 on September 25. Terms of the purchase were 2/10, n/30. The invoice was paid in full on October 4. Prepare the journal entries to record these merchandise transactions.

Accepted Answer

Answers will vary

Question 4

________________________ refers to products that a company owns and intends to sell.

Accepted Answer

Merchandis

Question 5

A multiple-step income statement format shows detailed computations of net sales and other costs and expenses, and reports subtotals for various classes of items.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A)  Accounting for basic inventory transactions is the same under the two 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 for proper interpretation. 
E)  Neither system defines operating income. 
A)  Accounting for basic inventory transactions is the same under the two 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 for proper interpretation. 
E)  Neither system defines operating income.

Question 7

A perpetual inventory system continually updates accounting records for inventory transactions.

Accepted Answer

A) True 
 B)False

Question 8

Because sellers assume that their customers will pay within the discount period, the seller usually records the discount at the time of the sale.

Accepted Answer

A) True 
 B)False

Question 9

Describe how tracking inventory activities were necessary for Heritage Link Brands.

Accepted Answer

Heritage Link Brands, a company that spe

Question 10

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

Accepted Answer

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

Question 11

Benson Company had cash sales of $94,275, credit sales of $83,450, sales returns and allowances of $1,700, and sales discounts of $3,475. Benson's net sales for this period equal:

Accepted Answer

A)  $94,275. 
B)  $172,550. 
C)  $174,250. 
D)  $176,025. 
E)  $177,725. 
A)  $94,275. 
B)  $172,550. 
C)  $174,250. 
D)  $176,025. 
E)  $177,725.

Question 12

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 13

All of the following statements regarding inventory shrinkage are true except:

Accepted Answer

A)  Inventory shrinkage refers to the loss of inventory. 
B)  Inventory shrinkage is determined by comparing a physical count of inventory with recorded inventory amounts. 
C)  Inventory shrinkage is recognized by debiting an operating expense. 
D)  Inventory shrinkage is recognized by debiting Cost of Goods Sold. 
E)  Inventory shrinkage can be caused by theft or deterioration. 
A)  Inventory shrinkage refers to the loss of inventory. 
B)  Inventory shrinkage is determined by comparing a physical count of inventory with recorded inventory amounts. 
C)  Inventory shrinkage is recognized by debiting an operating expense. 
D)  Inventory shrinkage is recognized by debiting Cost of Goods Sold. 
E)  Inventory shrinkage can be caused by theft or deterioration.

Question 14

On October 1, Courtland Company sold merchandise in the amount of $5,800 to Carter Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Courtland uses the periodic inventory system. Carter pays the invoice on October 8, and takes the appropriate discount. The journal entry that Courtland makes on October 8 is:

Accepted Answer

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

Question 15

Peg had net sales of $28,496 million, its cost of goods sold was $19,092 million, and its net income was $997 million. Its gross margin ratio equals:

Accepted Answer

A)  3.5%. 
B)  5.2%. 
C)  33%. 
D)  67%. 
E)  149.3%. 
A)  3.5%. 
B)  5.2%. 
C)  33%. 
D)  67%. 
E)  149.3%.

Question 16

The year-end adjusted trial balance of ABC Supply for the current year, is shown below:   Prepare Closing entries at December 31 for the current year.

Accepted Answer

The answer of The year-end adjusted trial balance of ABC...

Question 17

Fill in the blanks (a) through (g) for the Hendricks Company for each of the income statements for 2009, 2010, and 2011.

Accepted Answer

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

Question 18

An income statement that includes cost of goods sold as another expense and shows only one subtotal for total expenses is a:

Accepted Answer

A)  Balanced income statement. 
B)  Single-step income statement. 
C)  Multiple-step income statement. 
D)  Combined income statement. 
E)  Simplified income statement. 
A)  Balanced income statement. 
B)  Single-step income statement. 
C)  Multiple-step income statement. 
D)  Combined income statement. 
E)  Simplified income statement.

Question 19

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

Accepted Answer

The answer of List the steps of the operating cycle...

Question 20

A merchandiser's classified balance sheet reports merchandise inventory as a current asset.

Accepted Answer

A) True 
 B)False

Exam 5: Accounting for Merchandising Operations

Sales discounts on credit sales can benefit a seller by decreasing the delay in receiving cash and reducing future collections efforts.

Distinguish between selling expenses and general and administrative expenses.

A company that uses the perpetual inventory system purchased $8,500 on September 25. Terms of the purchase were 2/10, n/30. The invoice was paid in full on October 4. Prepare the journal entries to record these merchandise transactions.

________________________ refers to products that a company owns and intends to sell.

A multiple-step income statement format shows detailed computations of net sales and other costs and expenses, and reports subtotals for various classes of items.

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

A perpetual inventory system continually updates accounting records for inventory transactions.

Because sellers assume that their customers will pay within the discount period, the seller usually records the discount at the time of the sale.

Describe how tracking inventory activities were necessary for Heritage Link Brands.

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

Benson Company had cash sales of $94,275, credit sales of $83,450, sales returns and allowances of $1,700, and sales discounts of $3,475. Benson's net sales for this period equal:

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.

All of the following statements regarding inventory shrinkage are true except:

Peg had net sales of $28,496 million, its cost of goods sold was $19,092 million, and its net income was $997 million. Its gross margin ratio equals:

The year-end adjusted trial balance of ABC Supply for the current year, is shown below: Prepare Closing entries at December 31 for the current year.

Fill in the blanks (a) through (g) for the Hendricks Company for each of the income statements for 2009, 2010, and 2011.

An income statement that includes cost of goods sold as another expense and shows only one subtotal for total expenses is a:

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

A merchandiser's classified balance sheet reports merchandise inventory as a current asset.

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets, Natural Resources, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Cost Accounting

Process Cost Accounting

Cost Allocation and Performance Measurement

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Capital Budgeting and Managerial Decisions

Time Value of Money

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