Question 1

Nichole Company had net sales of $500,000 and cost of goods sold of $350,000.Calculate Nichole's gross profit.

Accepted Answer

Gross Profit = Sales...

Question 2

Expenses of promoting sales by displaying and advertising merchandise,making sales,and delivering goods to customers are:

Accepted Answer

A)  General and administrative expenses.
B)  Cost of goods sold.
C)  Selling expenses.
D)  Purchasing expenses.
E)  Non-operating activities.F) C) and E)
G) None of the above

Question 3

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 equals:

Accepted Answer

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

Question 4

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

Accepted Answer

The acid-test ratio is calculated by div...

Question 5

Cash sales shorten the operating cycle for a merchandiser; credit sales lengthen operating cycles.

Accepted Answer

A) True 
 B)False

Question 6

Describe the recording process (including costs)for sales of merchandise inventory using a perpetual inventory system.

Accepted Answer

Sales are recorded at list price less an...

Question 7

What is inventory shrinkage?
 How do managers account for shrinkage?

Accepted Answer

Inventory shrinkage is the loss of merch...

Question 8

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 9

A merchandising company's operating cycle begins with the sale of merchandise and ends with the collection of cash from the sale.

Accepted Answer

A) True 
 B)False

Question 10

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

Question 11

The acid-test ratio:

Accepted Answer

A)  Is also called the quick ratio.
B)  Measures profitability.
C)  Measures inventory turnover.
D)  Is generally greater than the current ratio.
E)  Measures return on assets.F) C) and D)
G) A) and B)

Question 12

The acid-test ratio is also called the quick ratio.

Accepted Answer

A) True 
 B)False

Question 13

Assets tied up in inventory are not productive assets.

Accepted Answer

A) True 
 B)False

Question 14

A company had net sales and cost of goods of $545,000 and $345,000,respectively.Its gross margin equals $890,000.

Accepted Answer

A) True 
 B)False

Question 15

A company had sales of $695,000 and cost of goods sold of $278,000.Its gross margin equals:

Accepted Answer

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

Question 16

The operating cycle for a merchandiser that sells only for cash moves from:

Accepted Answer

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.F) None of the above
G) A) and D)

Question 17

A company purchases merchandise with a catalog price of $20,000.The company receives a 35% trade discount from the seller.The seller also offers credit terms of 2/10,n/30.Assuming no returns were made and that payment was made on within the discount period,what is the net cost of the merchandise?

Accepted Answer

A)  $13,720.
B)  $19,600.
C)  $6,860.
D)  $13,000.
E)  $12,740.F) D) and E)
G) B) and C)

Question 18

The following statements regarding merchandise inventory are true except:

Accepted Answer

A)  Merchandise inventory is reported on the balance sheet as a current asset.
B)  Merchandise inventory refers to products a company owns and intends to sell.
C)  Merchandise inventory can include the cost of shipping the goods to the store and making them ready for sale.
D)  Merchandise inventory does not appear on the balance sheet of a service company.
E)  Merchandise inventory purchases are not considered part of the operating cycle for a business.F) A) and B)
G) A) and D)

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A)  
B)  
C)  
D)  
E)  F) A) and B)
G) C) and E)

Exam 5: Accounting for Merchandising Operations

What is inventory shrinkage? How do managers account for shrinkage?

Correct Answer
verified
Inventory shrinkage is the loss of merch...
View Answer

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.

Correct Answer
verified

The operating cycle for a merchandiser that sells only for cash moves from:

Correct Answer
verified

Cash sales shorten the operating cycle for a merchandiser; credit sales lengthen operating cycles.

Correct Answer
verified

The acid-test ratio is also called the quick ratio.

Correct Answer
verified

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 equals:

Correct Answer
verified

The following statements regarding merchandise inventory are true except:

Correct Answer
verified

The acid-test ratio:

Correct Answer
verified

A company had net sales and cost of goods of $545,000 and $345,000,respectively.Its gross margin equals $890,000.

Correct Answer
verified

A merchandising company's operating cycle begins with the sale of merchandise and ends with the collection of cash from the sale.

Correct Answer
verified

A company purchases merchandise with a catalog price of $20,000.The company receives a 35% trade discount from the seller.The seller also offers credit terms of 2/10,n/30.Assuming no returns were made and that payment was made on within the discount period,what is the net cost of the merchandise?

Correct Answer
verified

Describe the recording process (including costs)for sales of merchandise inventory using a perpetual inventory system.

Correct Answer
verified
Sales are recorded at list price less an...
View Answer

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

Correct Answer
verified

Nichole Company had net sales of $500,000 and cost of goods sold of $350,000.Calculate Nichole's gross profit.

Correct Answer
verified
Gross Profit = Sales...
View Answer

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:

Correct Answer
verified

A company had sales of $695,000 and cost of goods sold of $278,000.Its gross margin equals:

Correct Answer
verified

Correct Answer
verified

Expenses of promoting sales by displaying and advertising merchandise,making sales,and delivering goods to customers are:

Correct Answer
verified

Assets tied up in inventory are not productive assets.

Correct Answer
verified

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

Correct Answer
verified
The acid-test ratio is calculated by div...
View Answer

Exam 5: Accounting for Merchandising Operations

What is inventory shrinkage? How do managers account for shrinkage?

Correct AnswerverifiedInventory shrinkage is the loss of merch...View AnswerShow Answer

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.

Correct AnswerverifiedShow Answer

The operating cycle for a merchandiser that sells only for cash moves from:

Correct AnswerverifiedShow Answer

Cash sales shorten the operating cycle for a merchandiser; credit sales lengthen operating cycles.

Correct AnswerverifiedShow Answer

The acid-test ratio is also called the quick ratio.

Correct AnswerverifiedShow Answer

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 equals:

Correct AnswerverifiedShow Answer

The following statements regarding merchandise inventory are true except:

Correct AnswerverifiedShow Answer

The acid-test ratio:

Correct AnswerverifiedShow Answer

A company had net sales and cost of goods of $545,000 and $345,000,respectively.Its gross margin equals $890,000.

Correct AnswerverifiedShow Answer

A merchandising company's operating cycle begins with the sale of merchandise and ends with the collection of cash from the sale.

Correct AnswerverifiedShow Answer

A company purchases merchandise with a catalog price of $20,000.The company receives a 35% trade discount from the seller.The seller also offers credit terms of 2/10,n/30.Assuming no returns were made and that payment was made on within the discount period,what is the net cost of the merchandise?

Correct AnswerverifiedShow Answer

Describe the recording process (including costs)for sales of merchandise inventory using a perpetual inventory system.

Correct AnswerverifiedSales are recorded at list price less an...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Nichole Company had net sales of $500,000 and cost of goods sold of $350,000.Calculate Nichole's gross profit.

Correct AnswerverifiedGross Profit = Sales...View AnswerShow Answer

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:

Correct AnswerverifiedShow Answer

A company had sales of $695,000 and cost of goods sold of $278,000.Its gross margin equals:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Expenses of promoting sales by displaying and advertising merchandise,making sales,and delivering goods to customers are:

Correct AnswerverifiedShow Answer

Assets tied up in inventory are not productive assets.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedThe acid-test ratio is calculated by div...View AnswerShow Answer

Correct Answer
verified
Inventory shrinkage is the loss of merch...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Sales are recorded at list price less an...
View Answer

Correct Answer
verified

Correct Answer
verified
Gross Profit = Sales...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The acid-test ratio is calculated by div...
View Answer