Accounting
Anthropology
Archaeology
Art History
Banking
Biology & Life Science
Business
Business Communication
Business Development
Business Ethics
Business Law
Chemistry
Communication
Computer Science
Counseling
Criminal Law
Curriculum & Instruction
Design
Earth Science
Economic
Education
Engineering
Finance
History & Theory
Humanities
Human Resource
International Business
Investments & Securities
Journalism
Law
Management
Marketing
Medicine
Medicine & Health Science
Nursing
Philosophy
Physic
Psychology
Real Estate
Science
Social Science
Sociology
Special Education
Speech
Visual Arts
Questions
Q:
What are the differences between the periodic and the perpetual inventory systems?
Q:
How do closing entries for a merchandising company that uses the perpetual inventory system differ from the closing entries for a service company?
Q:
Describe the recording process (including costs) for sales of merchandise inventory using a perpetual inventory system.
Q:
Describe the recording process (including costs) for purchasing merchandise inventory using a perpetual inventory system.
Q:
What does FOB stand for? Differentiate between FOB shipping point (or FOB factory) and FOB destination?
Q:
What is gross margin ratio? How is it used as an indicator of profitability?
Q:
What is the acid-test ratio? How does it measure a company's liquidity?
Q:
Explain the cost flows and operating activities of a merchandising company.
Q:
What is the difference between the periodic and perpetual inventory systems?
Q:
List the steps of the operating cycle for a merchandiser with credit sales.
Q:
Identify and explain the key components of income for a merchandising company.
Q:
Match the following definitions and terms by placing the number that identifies the best definition in the blank space next to the term. 1. The description of the amounts and timing of payments from a buyer to a seller. Perpetual inventory system 2. Net sales less cost of goods sold. Periodic inventory system 3. The amount of time allowed before full payment is due. Discount period 4. An accounting method that continually updates accounting records for merchandise transactions. Debit memorandum 5. A notification that the sender has debited the recipient's account kept by the sender. Selling expenses 6. A cash discount granted to customers for paying within the discount period. Credit memorandum 7. The expenses of promoting sales, by displaying and advertising merchandise, making sales, and delivering goods to customers. Sales discount 8. An accounting method that updates the accounting records for merchandise transactions only at the end of a period. Gross profit 9. The time period in which a cash discount is available and a reduced payment can be made by the buyer. Credit terms 10. A notification that the sender has credited the recipient's account kept by the sender. Credit period
Q:
Vital Company had net income on this periods income statement in the amount of $624,240, expenses other than cost of goods sold in the amount of $381,480, and a gross profit ratio of 58%. What was the amount of net sales on the income statement?
A. $1,836,000
B. $ 1,076,276
C. $1,734,000
D. Cant be determined with the information given.
E. $1,005,720
Q:
Total Company has current liabilities in the amount of $1,250,000 and an acid test ratio of 3 and a current ratio of 7. What amount of quick assets does Total Company have on the balance sheet?
A. $8,750,000
B. $ 416,667
C. $3,750,000
D. $1,250,000
E. $2,500,000
Q:
A company has the following accounts. What is the acid test ratio? Cash
$10,000 Wages payable
$2,000 Accounts receivable
20,500 Consulting fees earned
13,718 Office supplies
2,625 Rent expense
3,673 Land
37,153 Salaries expense
6,642 Office equipment
14,535 Telephone expense
560 Accounts payable
18,352 Miscellaneous expense
280 Common stock
54,490 A. 4.50%
B. 2.30%
C. 1.75%
D. 4.00%
E. 1.50%
Q:
A company has the following accounts. What is the acid test ratio? Cash
$6,754 Dividends
$2,000 Accounts receivable
13,733 Consulting fees earned
13,718 Office supplies
2,625 Rent expense
3,673 Land
37,153 Salaries expense
6,642 Office equipment
14,535 Telephone expense
560 Accounts payable
6,463 Miscellaneous expense
280 Common stock
54,490 Retained earnings
13,847 A. 3.58%
B. 3.17%
C. 1.80%
D. 4.00%
E. 2.68%
Q:
A company has net sales of $1,500,000, sales commissions in the amount of $194,000, net income of $366,400, and the gross profit ratio of 60%. What amount is listed as gross profit on the income statement for the period?
A. $ 563,760
B. $ 600,000
C. $ 783,600
D. $ 900,000
E. $1,119,840
Q:
A company has net sales of $1,832,000, sales commissions of $194,000, net income of $366,400, and the gross profit ratio of 60%. What is the amount of cost of goods sold?
A. $ 538,800
B. $ 732,800
C. $ 655,200
D. $ 879,360
E. $1,099,200
Q:
A company has sales of $1,500,000, sales discounts of $102,000, sales returns and allowances of $123,000, shipping charges of $15,000, sales commissions of $34,000, net income of $263,500, and cost of goods sold of $420,000. What is the gross profit/margin ratio?
A. 72.0%
B. 53.7%
C. 67.1%
D. 81.7%
E. 17.6%
Q:
A company has sales of $1,500,000, sales discounts of $102,000, sales returns and allowances of $123,000, shipping charges of $15,000, sales commissions of $34,000, net income of $263,500, and cost of goods sold of $420,000. What is the gross profit/margin for the period?
A. $ 806,000
B. $1,031,000
C. $1,182,000
D. $1,080,000
E. $ 855,000
Q:
A company has sales of $1,500,000, sales discounts of $102,000, sales returns and allowances of $123,000, shipping charges of $15,000, sales commissions of $34,000,net income totaled $263,500, and cost of goods sold of $420,000. What is the net sales amount for the period?
A. $1,500,000
B. $1,275,000
C. $1,725,000
D. $1,521,000
E. $1,479,000
Q:
A company purchased merchandise inventory at a cost of $8,500 with credit terms 2/10, net 60. If the company borrows $8,330 to pay for the purchase on the last day of the discount period and pays the loan plus interest in the amount of $8,466.93 on the last day of the credit period, what is the net savings?
A. $170.00
B. $-33.07
C. $136.93
D. $33.07
E. There is no savings to the company
Q:
On July 22, a company purchased merchandise inventory at a cost of $5,250 with credit terms 2/10, net 60. If the company borrows money at 12% to pay for the purchase on the last day of the discount period and pays the loan off on the last day of the credit period, what would be the net savings for the company?
A. $99.50
B. $-20.43
C. $84.57
D. $20.43
E. $-84.57
Q:
On July 22, a company purchased merchandise inventory at a cost of $5,250 with credit terms 2/10, net 30. If the company pays for the purchase on August 7, what would be the appropriate journal entry?
A. Merchandise Inventory
5,250 Accounts Payable 5,250 B. Accounts Payable
5,250 Merchandise Inventory 5,250 C. Accounts Payable
5,250 Cash 5,250 D. Accounts Payable
5,145 Cash 5,145 E. Accounts Payable
5,250 Merchandise Inventory 105 Cash 5,145
Q:
On July 22, a company that uses the perpetual inventory system purchased merchandise inventory at a cost of $5,250 with credit terms 2/10, net 30. If the company pays for the purchase on August 1, what would be the appropriate journal entry?
A. Merchandise Inventory
5,250 Accounts Payable 5,250 B. Accounts Payable
5,250 Merchandise Inventory 5,250 C. Purchase Discount
5,145 Accounts Payable 5,145 D. Accounts Payable
5,145 Cash 5,145 E. Accounts Payable
5,250 Merchandise Inventory 105 Cash 5,145
Q:
A company that uses the perpetual inventory system purchased merchandise inventory at a cost of $4,300 with credit terms 3/15, net 45. If the company elects to pay within the discount period, what would be the appropriate journal entry to record the payment?
A. Merchandise Inventory
4,300 Accounts Payable 4,300 B. Accounts Payable
4,300 Merchandise Inventory 4,300 C. Purchase Discount
4,171 Accounts Payable 4,171 D. Accounts Payable
4,171 Cash 4,171 E. Accounts Payable
4,300 Merchandise Inventory 129 Cash 4,171
Q:
On October 1, Robertson Company sold merchandise in the amount of $5,800 to Alberts, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Robertson uses the periodic inventory system. On October 4, Alberts returns some of the merchandise. The selling price of the merchandise is $500 and the cost of the merchandise returned is $350. The entry or entries that Robertson must make on October 4 is:
A. Sales Returns and Allowances
500 Accounts Receivable 500 Merchandise Inventory
350 Cost of Goods Sold 350 B. Sales Returns and Allowances
500 Accounts Receivable 500 C. Accounts Receivable
500 Sales Returns and Allowances 500 D. Accounts Receivable
500 Sales Returns and Allowances 500 Cost of Goods Sold
350 Merchandise Inventory 350 E. Sales Returns and Allowances
350 Accounts Receivable 350
Q:
On October 1, Robertson Company sold merchandise in the amount of $5,800 to Alberts, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Robertson uses the periodic inventory system. Alberts pays the invoice on October 8 and takes the appropriate discount. The journal entry that Robertson makes on October 8 is:
A. Cash
5,800 Accounts Receivable 5,800 B. Cash
4,000 Accounts Receivable 4,000 C. Cash
3,920 Sales Discounts
80 Accounts Receivable 4,000 D. Cash
5,684 Accounts Receivable 5,684 E. Cash
5,684 Sales Discounts
116 Accounts Receivable 5,800
Q:
On October 1, Robertson Company sold merchandise in the amount of $5,800 to Alberts, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Robertson uses the periodic inventory system. The journal entry or entries that Robertson will make on October 1 is:
A. Sales
5,800 Accounts Receivable 5,800 B. Sales
5,800 Accounts Receivable 5,800 Cost of Goods Sold
4,000 Merchandise Inventory 4,000 C. Accounts Receivable
5,800 Sales 5,800 D. Accounts Receivable
5,800 Sales 5,800 Cost of Goods Sold
4,000 Merchandise Inventory 4,000 E. Accounts Receivable
4,000 Sales 4,000
Q:
When preparing an unadjusted trial balance using a periodic inventory system, the amount shown for merchandise inventory is:
A. The ending inventory amount.
B. The beginning inventory amount.
C. Equal to the cost of goods sold.
D. Equal to the cost of goods purchased.
E. Equal to the gross profit.
Q:
An account used in the periodic inventory system that is not used in the perpetual inventory system is:
A. Merchandise Inventory
B. Sales
C. Sales Returns and Allowances
D. Accounts Payable
E. Purchases
Q:
Multiple-step income statements:
A. Are required by the FASB.
B. Contain more detail than a simple listing of revenues and expenses.
C. Are required for the perpetual inventory system.
D. List cost of goods sold as an operating expense.
E. Can only be used in perpetual inventory systems.
Q:
A company had cash sales of $49,527, credit sales of $38,540, sales returns and allowances of $7,100, and sales discounts of $4,375. The company's net sales for this period equal:
A. $80,967
B. $83,692
C. $88,067
D. $76,592
E. $99,542
Q:
Alpha 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. Alpha's net sales for this period equal:
A. $94,275
B. $172,550
C. $174,250
D. $176,025
E. $177,725
Q:
Expenses that support the overall operations of a business and include the expenses relating to accounting, human resource management, and financial management are called:
A. Cost of goods sold.
B. Selling expenses.
C. Purchasing expenses.
D. General and administrative expenses.
E. Nonoperating activities.
Q:
An income statement that includes cost of goods sold as another expense and shows only one subtotal for total expenses is a:
A. Balanced income statement.
B. Single-step income statement.
C. Multiple-step income statement.
D. Combined income statement.
E. Simplified income statement.
Q:
Which of the following statements is true regarding the closing process of a merchandiser?
A. Sales Discounts, Sales Returns and Allowances, and Cost of Goods sold should all be credited during closing.
B. Sales Discounts, Sales Returns and Allowances, and Cost of Goods sold should all be debited during closing.
C. Sales Discounts and Sales Returns and Allowances should be debited; Cost of Goods Sold should be credited during closing.
D. Sales Discounts and Sales Returns and Allowances should be credited; Cost of Goods Sold should be debited during closing.
E. Sales Discounts and Sales Returns and Allowances are not closed. Cost of Goods Sold should be credited during closing.
Q:
Which of the following accounts would be closed with a debit?
A. Sales Discounts
B. Sales Returns and Allowances
C. Cost of Goods Sold
D. Operating Expenses
E. Sales
Q:
On October 1, Robertson Company sold merchandise in the amount of $5,800 to Alberts, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Robertson uses the perpetual inventory system. On October 4, Alberts returns some of the merchandise. The selling price of the merchandise is $500 and the cost of the merchandise returned is $350. The entry or entries that Robertson must make on October 4 is:
A. Sales Returns and Allowances
500 Accounts Receivable 500 Merchandise Inventory
350 Cost of Goods Sold 350 B. Sales Returns and Allowances
500 Accounts Receivable 500 C. Accounts Receivable
500 Sales Returns and Allowances 500 D. Accounts Receivable
500 Sales Returns and Allowances 500 Cost of Goods Sold
350 Merchandise Inventory 350 E. Sales Returns and Allowances
350 Accounts Receivable 350
Q:
On October 1, Robertson Company sold merchandise in the amount of $5,800 to Alberts, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Robertson uses the perpetual inventory system. Alberts pays the invoice on October 8 and takes the appropriate discount. The journal entry that Robertson makes on October 8 is:
A. Cash
5,800 Accounts Receivable 5,800 B. Cash
4,000 Accounts Receivable 4,000 C. Cash
3,920 Sales Discounts
80 Accounts Receivable 4,000 D. Cash
5,684 Accounts receivable 5,684 E. Cash
5,684 Sales Discounts
116 Accounts Receivable 5,800
Q:
On October 1, Robertson Company sold merchandise in the amount of $5,800 to Alberts, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Robertson uses the perpetual inventory system. The journal entry or entries that Robertson will make on October 1 is:
A. Sales
5,800 Accounts Receivable 5,800 B. Sales
5,800 Accounts Receivable 5,800 Cost of Goods Sold
4,000 Merchandise Inventory 4,000 C. Accounts Receivable
5,800 Sales 5,800 D. Accounts Receivable
5,800 Sales 5,800 Cost of Goods Sold
4,000 Merchandise Inventory 4,000 E. Accounts receivable
4,000 Sales 4,000
Q:
Herald Company had sales of $135,000, sales discounts of $2,000 and sales returns of $3,200. Herald Company's net sales equals:
A. $5,200
B. $129,800
C. $133,000
D. $135,000
E. $140,200
Q:
Sales less sales discounts less sales returns and allowances equals:
A. Net purchases.
B. Cost of goods sold.
C. Net sales.
D. Gross profit.
E. Net income.
Q:
A debit to Sales Returns and Allowances and a credit to Accounts Receivable:
A. Reflects an increase in amount due from a customer.
B. Recognizes that a customer returned merchandise and/or received an allowance.
C. Requires a debit memorandum to recognize the customer's return.
D. Is recorded when a customer takes a discount.
E. Reflects an increase in net sales.
Q:
Sales returns:
A. Refer to merchandise that customers return to the seller after the sale.
B. Refer to reductions in the selling price of merchandise sold to customers.
C. Represent cash discounts.
D. Represent trade discounts.
E. Are not recorded under the perpetual inventory system until the end of each accounting period.
Q:
A company purchased $6,000 of merchandise on credit with terms 4/15, n/30. How much will be debited to Accounts Payable if the company pays $800 cash on this account within 10 days?
A. $833.33
B. $800
C. Nothing will debited to Accounts Payable; the account should be credited in this situation.
D. $5,760
E. $5,333.33
Q:
A company purchased $1,500 of merchandise on credit with terms 3/15, n/30. How much will be debited to Accounts Payable if the company pays $485 cash on this account within 10 days?
A. $485
B. $500
C. Nothing will be debited to Accounts Payable; the account should be credited in this situation.
D. $470.45
E. $1,455
Q:
A company purchased $4,000 worth of merchandise. Transportation costs were an additional $350. The company later returned $275 worth of merchandise and paid the invoice within the 2% cash discount period. The total amount paid for this merchandise is:
A. $3,725.00
B. $3,925.00
C. $3,995.00
D. $4,000.50
E. $4,075.00
Q:
A company purchased $7,500 worth of merchandise. Transportation costs were an additional $80. The company later returned $900 worth of merchandise and paid the invoice within the 3% cash discount period. The total amount paid for this merchandise is:
A. $6,479.60
B. $6,482.00
C. $7,275.00
D. $7,355.00
E. $6,680.00
Q:
A company purchased $1,800 of merchandise on December 5. On December 7, it returned $200 worth of merchandise. On December 8, it paid the balance in full, taking a 2% discount. The amount of the cash paid on December 8 is:
A. $200
B. $1,564
C. $1,568
D. $1,600
E. $1,800
Q:
A debit memorandum is:
A. Required whenever a journal entry is recorded,
B. The source document for the purchase of merchandise inventory,
C. Required when a purchase discount is granted,
D. The document a buyer issues to inform the seller of a debit made to the seller's account in the buyer's records,
E. Not necessary in a perpetual inventory system,
Q:
A company uses the perpetual inventory system and recorded the following entry: Accounts Payable
2,500 Merchandise Inventory 50 Cash 2,450 This entry reflects a:
A. Purchase,
B. Return,
C. Sale,
D. Payment of the account payable and recognition of a cash discount taken,
E. Purchase and recognition of a cash discount taken,
Q:
A trade discount is:
A. A term used by a purchaser to describe a cash discount given to customers for prompt payment,
B. A reduction in price below the list price,
C. A term used by a seller to describe a cash discount granted to customers for prompt payment,
D. A reduction in price for prompt payment,
E. Also called a rebate,
Q:
The credit terms 2/10, n/30 are interpreted as:
A. 2% cash discount if the amount is paid within 10 days, with the balance due in 30 days,
B. 10% cash discount if the amount is paid within 2 days, with 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,
Q:
A company had net sales of $82,000, cost of goods sold of $70,000, and other expenses of $2,000. Its gross margin ratio equals:
A. 85.37%
B. 2.44%
C. 14.63%
D. 16.67%
E. 683.33%
Q:
J.C. Penny had net sales of $28,496 million, cost of goods sold of $19,092 million, and net income of $997 million. Its gross margin ratio equals:
A. 3.5%
B. 5.2%
C. 33%
D. 67%
E. 149.3%
Q:
A company's net sales were $676,600, its cost of goods sold was $236,810, and its net income was $33,750. Its gross margin ratio equals:
A. 5%
B. 9.6%
C. 35%
D. 65%
E. 285.7%
Q:
The gross margin ratio:
A. Is also called the net profit ratio.
B. Measures a merchandising firm's ability to earn a profit from the sale of inventory.
C. Is also called the profit margin.
D. Is a measure of liquidity.
E. Should be greater than 1.
Q:
The acid-test ratio differs from the current ratio in that:
A. Liabilities are divided by current assets.
B. Prepaid expenses and inventory are excluded from the calculation of the acid-test ratio.
C. The acid-test ratio measures profitability and the current ratio does not.
D. The acid-test ratio excludes short-term investments from the calculation.
E. The acid-test ratio is a measure of liquidity but the current ratio is not.
Q:
Liquidity problems are likely to exist when a company's acid-test ratio:
A. Is less than the current ratio,
B. Is 1 to 1,
C. Is higher than 1 to 1,
D. Is substantially lower than 1 to 1,
E. Is higher than the current ratio,
Q:
A company's current assets were $17,980, its quick assets were $11,420, and its current liabilities were $12,190. Its quick ratio equals:
A. 0.94
B. 1.07
C. 1.48
D. 1.57
E. 2.40
Q:
ABC Corporation had total quick assets of $5,888,000, current assets of $11,700,000, and current liabilities of $8,000,000. Its acid-test ratio equals:
A. 0.50
B. 0.68
C. 0.74
D. 1.50
E. 2.20
Q:
Quick assets are defined as:
A. Cash, short-term investments, and inventory.
B. Cash, short-term investments, and current receivables.
C. Cash, inventory, and current receivables.
D. Cash, noncurrent receivables, and prepaid expenses.
E. Accounts receivable, inventory, and prepaid expenses.
Q:
The acid-test ratio:
A. Is also called the quick ratio.
B. Measures profitability.
C. Measures inventory turnover.
D. Is generally greater than the current ratio.
E. Is not used by merchandise companies.
Q:
A company's cost of goods sold was $4,000. Determine net purchases and ending inventory given goods available for sale were $11,000 and beginning inventory was $5,000.
A. Net Purchases: $15,000; ending inventory: $7,000
B. Net Purchases: $10,000; ending inventory: $15,000
C. Net Purchases: $9,000; ending inventory: $6,000
D. Net Purchases: $6,000; ending inventory: $7,000
E. Net Purchases: $16,000; ending inventory: $20,000
Q:
Beginning inventory plus net cost of purchases is:
A. Cost of goods sold.
B. Merchandise available for sale.
C. Ending inventory.
D. Sales.
E. Shown on the balance sheet.
Q:
The current period's ending inventory is:
A. The next period's beginning inventory.
B. The current period's cost of goods sold.
C. The prior period's beginning inventory.
D. The current period's net purchases.
E. The current period's beginning inventory.
Q:
The operating cycle for a merchandiser that sells only for cash moves from:
A. Purchases of merchandise to inventory to cash sales.
B. Purchases of merchandise to inventory to accounts receivable to cash sales.
C. Inventory to purchases of merchandise to cash sales.
D. Accounts receivable to purchases of merchandise to inventory to cash sales.
E. Accounts receivable to inventory to cash sales.
Q:
Merchandise inventory:
A. Is a long-term asset.
B. Is a current asset.
C. Includes supplies.
D. Is classified with investments on the balance sheet.
E. Must be sold within one month.
Q:
A company had expenses other than cost of goods sold of $175,000. Determine sales and gross profit given cost of goods sold was $622,000 and net loss was ($41,000).
A. Sales: $838,000: gross profit: $216,000
B. Sales: $756,000: gross profit: $134,000
C. Sales: $797,000: gross profit: $756,000
D. Sales: $756,000: gross profit: $797,000
E. Sales: $134,000: gross profit: $216,000
Q:
A company had expenses other than cost of goods sold of $51,000. Determine sales and gross profit given cost of goods sold was $25,000 and net income was $60,000.
A. Sales: $136,000; gross profit: $111,000
B. Sales: $136,000; gross profit: $85,000
C. Sales: $85,000; gross profit: $136,000
D. Sales: $111,000; gross profit: $136,000
E. Sales: $60,000; gross profit: $25,000
Q:
A company had expenses other than cost of goods sold of $250,000. Determine sales and gross profit given cost of goods sold was $100,000 and net income was $150,000.
A. Sales: $350,000; gross profit: $150,000
B. Sales: $350,000; gross profit: $50,000
C. Sales: $500,000; gross profit: $400,000
D. Sales: $500,000; gross profit: $50,000
E. Sales: $400,000; gross profit: $500,000
Q:
A company had sales of $375,000 and gross profit of $157,500. Its cost of goods sold was:
A. $(217,000)
B. $375,000
C. $157,500
D. $217,500
E. $532,500
Q:
A company had sales of $695,000 and cost of goods sold of $278,000. Its gross profit equals:
A. $(417,000)
B. $695,000
C. $278,000
D. $417,000
E. $973,000
Q:
Cost of goods sold:
A. Is another term for merchandise sales.
B. Is the cost of merchandise sold to customers.
C. Is another term for revenue.
D. Is also called gross margin.
E. Is a term only used by service firms.
Q:
A merchandising company:
A. Earns net income by buying and selling merchandise.
B. Receives fees only in exchange for services.
C. Earns profit from commissions only.
D. Earns profit from fares only.
E. Buys products from consumers.
Q:
When preparing the unadjusted trial balance in a periodic inventory system, the amount that appears as Merchandise Inventory is the ending inventory amount.
Q:
In a periodic inventory system, cost of goods sold is recorded as each sale occurs.
Q:
The periodic inventory system requires updating the inventory account only at the end of the period to reflect the quantity and cost of both the goods available and the goods sold.
Q:
A single-step income statement includes cost of goods sold as another expense and shows only one subtotal for total expenses.