Question 1

A wholesaler is an intermediary that buys products from manufacturers or other wholesalers and sells them to consumers.

Accepted Answer

A) True 
 B)False

Question 2

Each sales transaction for a seller that uses a perpetual inventory system involves recognizing both revenue and cost of merchandise sold.

Accepted Answer

A) True 
 B)False

Question 3

Describe the difference between wholesalers and retailers.

Accepted Answer

The answer of Describe the difference between wholesalers and retailers....

Question 4

On September 12, Vander Company, Inc. sold merchandise in the amount of $5,800 to Jepson Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Vander uses the 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:
A)$$\begin{array} { | l | r | r | } 
\hline \text { Cash } & 5,800 & \
\hline \text { Accounts receivable } & & 5,800 \
\hline
\end{array}$$
B)$$\begin{array} { | l | r | r | } 
\hline \text { Cash } & 4,000 & \
\hline \text { Accounts receivable } & & 4,000 \
\hline
\end{array}$$
C)$$\begin{array} { | l | r | r | } 
\hline \text { Cash } & 5,194 & \
\hline \text { Sales discounts } & 106 & \
\hline \text { Accounts receivable } & & 5,300 \
\hline
\end{array}$$
D)$$\begin{array} { | l | r | r | } 
\hline \text { Cash } & 5,684 & \
\hline \text { Accounts receivable } & & 5,684 \
\hline 
\end{array}$$
E)$$\begin{array} { | l | r | r | } 
\hline  \text { Cash } & 5,684 & \
\hline \text { Sales discounts } & 116 & \
\hline \text { Accounts receivable } & & 5,800 \
\hline
\end{array}$$

Accepted Answer

The answer of On September 12, Vander Company, Inc. sold...

Question 5

On May 1, Shilling Company, Inc. sold merchandise in the amount of $5,800 to Anders, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Shilling uses the perpetual inventory system. The journal entry or entries that Shilling will make on May 1 is:

Accepted Answer

A) $$\begin{array} { | l | r | r | } 
\hline \text { Sales } & 5,800 & \
\hline \text { Accounts receivable } & & 5,800 \
\hline 
\end{array}$$ 
B) $$\begin{array} { | l | r | r | } 
\hline \text { Sales } & 5,800 & \
\hline \text { Accounts receivable } & & 5,800 \
\hline \text { Cost of goods sold } & 4,000 & \
\hline \text { Merchandise Inventory } & & 4,000 \
\hline
\end{array}$$ 
C) $$\begin{array} { | c | r | r | } 
\hline \text { Accounts receivable } & 5,800 & \
\hline \text { Sales } & & 5,800 \
\hline
\end{array}$$ 
D) $$\begin{array} { | l | r | r | } 
\hline \text { Accounts receivable } & 5,800 & \
\hline \text { Sales } & & 5,800 \
\hline \text { Cost of goods sold } & 4,000 & \
\hline \text { Merchandise inventory } & & 4,000 \
\hline
\end{array}$$ 
E) $$\begin{array} { | l | r | r | } 
\hline \text { Accounts receivable } & 4,000 & \
\hline \text { Sales } & & 4,000 \
\hline
\end{array}$$

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Harley's Antique Shop, Inc. had net sales of $772,000. The gross profit was $415,000. Calculate Harley's cost of goods sold.

Accepted Answer

The answer of Harley's Antique Shop, Inc. had net sales...

Question 8

The Merchandise Inventory account balance at the beginning of the current period is equal to the amount of ending Merchandise Inventory from the previous period.

Accepted Answer

A) True 
 B)False

Question 9

Under a periodic inventory system, purchases, purchases returns and allowances, purchase discounts, and transportation in transactions are recorded in the Merchandise Inventory account.

Accepted Answer

A) True 
 B)False

Question 10

On May 1, Anders Company, Inc. purchased merchandise in the amount of $5,800 from Shilling, with credit terms of 2/10, n/30. Anders uses the perpetual inventory system. The journal entry or entries that Anders will make on May 1 is:

Accepted Answer

A) $$\begin{array} { | l | r | r | } 
\hline \text { Sales } & 5,800 & \
\hline \text { Accounts receivable } & & 5,800 \
\hline
\end{array}$$ 
B) $$\begin{array} { | l | r | r | } 
\hline \text { Merchandise Inventory } & 5,800 & \
\hline \text { Accounts payable } & & 5,800 \
\hline
\end{array}$$ 
C) $$\begin{array} { | l | r | r | } 
\hline \text { Accounts payable } & 5,800 & \
\hline \text { Sales } & & 5,800 \
\hline
\end{array}$$ 
D) $$\begin{array} { | l | r | r | } 
\hline \text { Merchandise inventory } & 5,800 & \
\hline \text { Cash } & & 5,800 \
\hline
\end{array}$$ 
E) $$\begin{array} { | l | r | r | } 
\hline \text { Purchases } & 5,800 & \
\hline \text { Accounts Payable } & & 5,800 \
\hline
\end{array}$$

Question 11

A credit memorandum from a seller informs a 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 12

What is the acid-test ratio? How does it measure a company's liquidity?

Accepted Answer

The answer of What is the acid-test ratio? How does...

Question 13

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. 
E) Neither system defines operating income.

Question 14

What are the steps of the operating cycle for a merchandiser with credit sales?

Accepted Answer

The answer of What are the steps of the operating...

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

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 8, it paid the full amount due. The amount of the cash paid on July 8 equals:

Accepted Answer

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

Question 17

Identify and explain the key components of a merchandiser's net income.

Accepted Answer

The answer of Identify and explain the key components of...

Question 18

On March 12, Klein Company, Inc. sold merchandise in the amount of $7,800 to Babson Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,500. Klein uses the perpetual inventory system. The journal entry or entries that Klein will make on March 12 is:

Accepted Answer

A) $$\begin{array} { | l | r | r | } 
\hline \text { Sales } & 7,800 & \
\hline \text { Accounts receivable } & & 7,800 \
\hline 
\end{array}$$ 
B) $$\begin{array} { | l | r | r | } 
\hline \text { Sales } & 7,800 & \
\hline \text { Accounts receivable } & & 7,800 \
\hline \text { Cost of goods sold } & 4,500 & \
\hline \text { Merchandise Inventory } & & 4,500 \
\hline
\end{array}$$ 
C) $$\begin{array} { | l | r | r | } 
\hline \text { Accounts receivable } & 7,800 & \
\hline \text { Sales } & & 7,800 \
\hline
\end{array}$$ 
D) $$\begin{array} { | l | r | r | } 
\hline \text { Accounts receivable } & 7,800 & \
\hline \text { Sales } & & 7,800 \
\hline \text { Cost of goods sold } & 4,500 & \
\hline \text { Merchandise inventory } & & 4,500 \
\hline 
\end{array}$$ 
E) $$\begin{array} { | l | r | r | } 
\hline \text { Accounts receivable } & 4,500 & \
\hline \text { Sales } & & 4,500 \
\hline
\end{array}$$

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

Expenses to promote sales by displaying and advertising merchandise, making sales, and delivering goods to customers are known as:

Accepted Answer

A) General and administrative expenses. 
B) Cost of goods sold. 
C) Selling expenses. 
D) Purchasing expenses. 
E) Non-operating activities.

Exam 4: Accounting for Merchandising Operations

A wholesaler is an intermediary that buys products from manufacturers or other wholesalers and sells them to consumers.

Each sales transaction for a seller that uses a perpetual inventory system involves recognizing both revenue and cost of merchandise sold.

Describe the difference between wholesalers and retailers.

On May 1, Shilling Company, Inc. sold merchandise in the amount of $5,800 to Anders, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Shilling uses the perpetual inventory system. The journal entry or entries that Shilling will make on May 1 is:

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

Harley's Antique Shop, Inc. had net sales of $772,000. The gross profit was $415,000. Calculate Harley's cost of goods sold.

The Merchandise Inventory account balance at the beginning of the current period is equal to the amount of ending Merchandise Inventory from the previous period.

Under a periodic inventory system, purchases, purchases returns and allowances, purchase discounts, and transportation in transactions are recorded in the Merchandise Inventory account.

On May 1, Anders Company, Inc. purchased merchandise in the amount of $5,800 from Shilling, with credit terms of 2/10, n/30. Anders uses the perpetual inventory system. The journal entry or entries that Anders will make on May 1 is:

A credit memorandum from a seller informs a buyer of the seller's credit to its Accounts Payable account arising from a sales return or allowance.

What is the acid-test ratio? How does it measure a company's liquidity?

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

What are the steps of the operating cycle for a merchandiser with credit sales?

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

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 8, it paid the full amount due. The amount of the cash paid on July 8 equals:

Identify and explain the key components of a merchandiser's net income.

On March 12, Klein Company, Inc. sold merchandise in the amount of $7,800 to Babson Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,500. Klein uses the perpetual inventory system. The journal entry or entries that Klein will make on March 12 is:

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

Expenses to promote sales by displaying and advertising merchandise, making sales, and delivering goods to customers are known as: