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A company has sales of $695,000 and cost of goods sold of $278,000.Its gross profit (loss) equals:


A) $(417,000) .
B) $695,000.
C) $278,000.
D) $417,000.
E) $973,000.

F) A) and B)
G) B) and E)

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Austin's Pub Supply uses the periodic inventory system and the gross method of accounting for sales.The company had the following sales transactions during August: Austin's Pub Supply uses the periodic inventory system and the gross method of accounting for sales.The company had the following sales transactions during August: Prepare the journal entries that Austin's Pub Supply must make to record these transactions. Prepare the journal entries that Austin's Pub Supply must make to record these transactions.

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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 28,it paid the full amount due.Assuming the company uses a perpetual inventory system,and records purchases using the gross method,the correct journal entry to record the merchandise return on July 7 is:


A) Debit Merchandise Inventory $1,600; credit Cash $1,600.
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.

F) B) and E)
G) B) and C)

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The profit margin ratio is the same as the gross profit ratio.

A) True
B) False

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Expenses related to accounting,human resource management,and financial management are known as selling expenses.

A) True
B) False

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Fill in the blanks (a)through (g)for the Morrison Company for each of the income statements for years 1,2,and 3. Fill in the blanks (a)through (g)for the Morrison Company for each of the income statements for years 1,2,and 3.

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blured image (a)2,770 + 375 − 2400 = 745 (b)375,the ...

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Preston Office Furniture uses the periodic inventory system and the gross method of accounting for sales.It had the following transactions during the month of May: Preston Office Furniture uses the periodic inventory system and the gross method of accounting for sales.It had the following transactions during the month of May: Prepare the required journal entries that Preston Office Furniture must make to record these transactions. Prepare the required journal entries that Preston Office Furniture must make to record these transactions.

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KLM Corporation's quick assets are $5,888,000,its current assets are $11,700,000 and its current liabilities are $8,000,000.Its acid-test ratio equals:


A) 0.50.
B) 0.68.
C) 0.74.
D) 1.50.
E) 2.20.

F) C) and E)
G) All of the above

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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) Records the cost side of a sales return.
D) Is recorded when a customer takes a discount.
E) Reflects a decrease in amount due to a supplier.

F) A) and E)
G) A) and D)

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On March 12,Klein Company 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 and the gross method of accounting for sales.On March 15,Babson returns some of the merchandise.The selling price of the merchandise is $600 and the cost of the merchandise returned is $350.Babson pays the invoice on March 20,and takes the appropriate discount.The journal entry that Klein makes on March 20 is:


A)  Cash 7,800 Accounts receivable 7,800\begin{array}{|l|r|r|}\hline \text { Cash } & 7,800 & \\\hline \text { Accounts receivable } & & 7,800 \\\hline\end{array}
B)  Cash 4,500 Accounts receivable 4,500\begin{array}{|l|r|r|}\hline \text { Cash } & 4,500 & \\\hline \text { Accounts receivable } & & 4,500 \\\hline\end{array}
C)  Cash 7,056 Sales discounts 144 Accounts receivable 7,200\begin{array}{|l|r|l|}\hline \text { Cash } & 7,056 & \\\hline \text { Sales discounts } & 144 & \\\hline \text { Accounts receivable } & & 7,200 \\\hline\end{array}
D)  Cash 7,056 Accounts receivable 7,056\begin{array}{|l|r|r|}\hline \text { Cash } & 7,056 & \\\hline \text { Accounts receivable } & & 7,056 \\\hline\end{array}
E)  Cash 7,644 Sales discounts 156 Accounts receivable 7,800\begin{array}{|l|r|r|}\hline \text { Cash } & 7,644 & \\\hline \text { Sales discounts } & 156 & \\\hline \text { Accounts receivable } & & 7,800 \\\hline\end{array}

F) A) and E)
G) B) and E)

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Juniper Company uses a perpetual inventory system and the gross method of accounting for purchases.The company purchased $9,750 of merchandise on August 7 with terms 1/10,n/30.On August 11,it returned $1,500 worth of merchandise.On August 26,it paid the full amount due.The correct journal entry to record the merchandise return on August 11 is:


A) Debit Accounts Payable $1,500; credit Cash $1,500.
B) Debit Accounts Payable $1,500; credit Merchandise Inventory $1,500.
C) Debit Merchandise Inventory $1,500; credit Sales Returns $1,500.
D) Debit Merchandise Inventory $1,500; credit Cash $1,500.
E) Debit Accounts Payable $1,500; credit Purchase Returns $1,500.

F) B) and C)
G) A) and B)

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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%.

F) A) and E)
G) C) and E)

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The following statements are true regarding the operating cycle of a merchandising company except:


A) The operating cycle begins with the purchase of merchandise.
B) The operating cycle is shortened by credit sales.
C) The operating cycle ends with the collection of cash from the sale of merchandise.
D) The operating cycle can vary in length among different merchandising companies.
E) The operating cycle sometimes involves accounts receivable.

F) B) and D)
G) A) and B)

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

F) D) and E)
G) All of the above

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On March 12,Klein Company 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 and the gross method of accounting for sales.On March 15,Babson returns some of the merchandise.The selling price of the merchandise is $600 and the cost of the merchandise returned is $350.Babson pays the invoice on March 20,and takes the appropriate discount.The amount that Klein receives from Babson on March 20 is:


A) $7,800.
B) $7,644.
C) $7,044.
D) $7,056.
E) $7,200.

F) B) and D)
G) B) and C)

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Purchase allowances refer to merchandise a buyer acquires but then returns to the seller.

A) True
B) False

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Successful use of a just-in-time inventory system can narrow the gap between the acid-test and the current ratio.

A) True
B) False

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Under the perpetual inventory system,the cost of merchandise purchased is recorded in the Merchandise Inventory account.

A) True
B) False

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Gross profit is also called gross margin.

A) True
B) False

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A ________ is an intermediary that buys products from manufacturers and sells to retailers.

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