Question 1

A debit memorandum is:

Accepted Answer

A)   Required when a purchase discount is granted.
B)   Not necessary in a perpetual inventory system.
C)   Required whenever a journal entry is recorded.
D)   The source document for the purchase of merchandise inventory.
E)   The document a buyer issues to inform the seller of a debit made to the seller's account payable in the buyer's records.F) A) and C)
G) A) and B)

Question 2

Explain the way in which costs flow through the merchandise inventory account to a merchandiser's income statement.

Accepted Answer

Beginning inventory plus the net cost of...

Question 3

Match between columns
                        Premises:  A measure of a company's ability to pay its current liabilities that excludes less liquid current assets such as inventory and prepaid expenses.
 A widely used income statement format that lists cost of goods sold as another expense and shows only one subtotal for total expenses.
 The point of transfer from seller to buyer that takes place when the goods arrive at the buyer's place of business.
 Products a company owns and intends to sell.
 The expenses that support a company's overall operations and include costs related to accounting, human resource management and financial management.
 The point of transfer from seller to buyer that takes place when goods depart the seller's place of business.
 Inventory losses that can occur as a result of theft or deterioration and require an adjusting entry to account for those losses.
 An income statement format that shows detailed computations of net sales and other costs and expenses, and reports subtotals for various classe of items.
 A given percent deducted from a list price often granted to customers purchasing large quantities of merchandise.
 The expenses of promoting sales by displaying and advertising merchandise, making sales, and delivering goods to customers.

Accepted Answer

The Answer of Trade discount and General and administrative expenses is...

Question 4

On September 12, Vander Company 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 and the gross method of accounting for sales. 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:

Accepted Answer

A)     Cash 5,194 Sales discounts 106 Accounts receivable 5,300\begin{array} { | l | r | r | } \hline 	ext { Cash } & 5,194 & \\hline 	ext { Sales discounts } & 106 & \\hline 	ext { Accounts receivable } & & 5,300 \\hline\end{array} Cash  Sales discounts  Accounts receivable ​5,194106​5,300​​ 
B)     Cash 5,684 Sales discounts 116 Accounts receivable 5,800\begin{array} { | l | r | r | } \hline 	ext { Cash } & 5,684 & \\hline 	ext { Sales discounts } & 116 & \\hline 	ext { Accounts receivable } & & 5,800 \\hline\end{array} Cash  Sales discounts  Accounts receivable ​5,684116​5,800​​ 
C)     Cash 5,684 Accounts receivable 5,684\begin{array} { | l | r | r | } \hline 	ext { Cash } & 5,684 & \\hline 	ext { Accounts receivable } & & 5,684 \\hline\end{array} Cash  Accounts receivable ​5,684​5,684​​ 
D)     Cash 4,000 Accounts receivable 4,000\begin{array} { | l | r | r | } \hline 	ext { Cash } & 4,000 & \\hline 	ext { Accounts receivable } & & 4,000 \\hline\end{array} Cash  Accounts receivable ​4,000​4,000​​ 
E)     Cash 5,800 Accounts receivable 5,800\begin{array} { | l | r | r | } \hline 	ext { Cash } & 5,800 & \\hline 	ext { Accounts receivable } & & 5,800 \\hline\end{array} Cash  Accounts receivable ​5,800​5,800​​F) C) and D)
G) A) and D)

Question 5

Calculate the gross margin ratio for each of the following separate cases A through C:
 $$\begin{array} { | l | l | l | l | } 
\hline & \text { A } & \text { B } & \text { C } \
\hline \text { Net sales } & \$ 145,000 & \$ 623,500 & \$ 37,800 \
\hline \text { Cost of goods sold } & 83,600 & 269,200 & 13,230 \
\hline
\end{array}$$

Accepted Answer

A = ($145,000 - $83,600)/$145,...

Question 6

Tahoe Ski Company uses the perpetual inventory system and the net method of accounting for purchases. The company had the following transactions during January:
January 6: Purchased $4,000 of inventory. The seller's credit terms are 2/10, n/30. January 8: Returned $200 worth of defective units and received full credit.
January 15: Paid the amount due, less the returned items.
Prepare journal entries to record each of the preceding transactions.

Accepted Answer

None...

Question 7

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

Accepted Answer

A)   Accounts receivable to inventory to cash sales.
B)   Accounts receivable to purchases of merchandise to inventory to cash sales.
C)   Inventory to purchases of merchandise to cash sales.
D)   Purchases of merchandise to inventory to accounts receivable to cash sales.
E)   Purchases of merchandise to inventory to cash sales.F) C) and D)
G) D) and E)

Question 8

Merchandise inventory refers to products that a company owns and intends to sell to customers.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

The steps are: (1) cash purcha...

Question 10

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 11

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 16, it paid the full amount due. The correct journal entry to record the payment on August 16 is:

Accepted Answer

A)   Debit Accounts Payable $8,250; credit Merchandise Inventory $82.50; credit Cash $8,167.50.
B)   Debit Cash $8,250; credit Accounts Payable $8,250.
C)   Debit Accounts Payable $9,750; credit Merchandise Inventory $97.50; credit Cash $9,652.50.
D)   Debit Accounts Payable $8,167.50; credit Cash $8,167.50.
E)   Debit Merchandise Inventory $8,250; credit Cash $8,250.F) C) and D)
G) C) and E)

Question 12

The gross margin ratio is defined as gross margin divided by net sales.

Accepted Answer

A) True 
 B)False

Question 13

The net method initially records the invoice at its net amount (net of any cash discount).

Accepted Answer

A) True 
 B)False

Question 14

Multiple-step income statements:

Accepted Answer

A)   Are only used in perpetual inventory systems.
B)   Are required by the FASB and IASB.
C)   Are required for the periodic inventory system.
D)   Contain more detail than a simple listing of revenues and expenses.
E)   List cost of goods sold as an operating expense.F) C) and D)
G) A) and E)

Question 15

When a company has no reportable nonoperating activities, its income from operations is reported as ________.

Accepted Answer

The answer of When a company has no reportable nonoperating...

Question 16

A company had a gross profit of $300,000 based on sales of $400,000. Its cost of goods sold equals
$700,000.

Accepted Answer

A) True 
 B)False

Question 17

Tahoe Ski Company uses the perpetual inventory system and the gross method of accounting for purchases. The company had the following transactions during January:
January 6: Purchased $4,000 of inventory. The seller's credit terms are 2/10, n/30. 
January 8: Returned $200 worth of defective units and received full credit.
January 15: Paid the amount due, less the returned items.
Prepare journal entries to record each of the preceding transactions.

Accepted Answer

None...

Question 18

On September 12, Ryan Company sold merchandise in the amount of $5,800 to Johnson Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. 
-Ryan uses the periodic inventory system and the net method of accounting for sales. On September 14, Johnson returns some of the merchandise. The selling price of the merchandise is $500 and the cost of the merchandise returned is $350. Johnson pays the invoice on September 18, and takes the appropriate discount. The journal entry that Ryan makes on September 18 is:

Accepted Answer

A)     Cash 5,684 Sales discounts 116 Accounts receivable 5,800\begin{array} { | l | r | r | } \hline 	ext { Cash } & 5,684 & \\hline 	ext { Sales discounts } & 116 & \\hline 	ext { Accounts receivable } & & 5,800 \\hline\end{array} Cash  Sales discounts  Accounts receivable ​5,684116​5,800​​ 
B)     Cash 5,194 Sales discounts 106 Accounts receivable 5,300\begin{array} { | l | r | r | } \hline 	ext { Cash } & 5,194 & \\hline 	ext { Sales discounts } & 106 & \\hline 	ext { Accounts receivable } & & 5,300 \\hline\end{array} Cash  Sales discounts  Accounts receivable ​5,194106​5,300​​ 
C)     Cash 5,800 Accounts receivable 5,800\begin{array} { | l | r | r | } \hline 	ext { Cash } & 5,800 & \\hline 	ext { Accounts receivable } & & 5,800 \\hline\end{array} Cash  Accounts receivable ​5,800​5,800​​ 
D)     Cash 5,684 Accounts receivable 5,684\begin{array} { | l | r | r | } \hline 	ext { Cash } & 5,684 & \\hline 	ext { Accounts receivable } & & 5,684 \\hline\end{array} Cash  Accounts receivable ​5,684​5,684​​ 
E)     Cash 5,194 Accounts receivable 5.194\begin{array} { | l | r | r | } \hline 	ext { Cash } & 5,194 & \\hline 	ext { Accounts receivable } & & 5.194 \\hline\end{array} Cash  Accounts receivable ​5,194​5.194​​F) B) and D)
G) B) and E)

Question 19

The acid-test ratio differs from the current ratio in that:

Accepted Answer

A)   The acid-test ratio measures profitability and the current ratio does not.
B)   The acid-test ratio excludes short-term investments from the calculation.
C)   The acid-test ratio is a measure of liquidity but the current ratio is not.
D)   Prepaid expenses and inventory are excluded from the calculation of the acid-test ratio.
E)   Liabilities are divided by current assets.F) B) and D)
G) None of the above

Question 20

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

Accepted Answer

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

Exam 5: Accounting for Merchandising Operations

Multiple-step income statements:

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

Correct Answer
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The steps are: (1) cash purcha...
View Answer

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

Correct Answer
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Match the following definitions with the appropriate term

Correct Answer
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Expenses to promote sales by displaying and advertising merchandise, make sales, and deliver goods to customers are known as:

Correct Answer
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The acid-test ratio differs from the current ratio in that:

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

Correct Answer
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The gross margin ratio is defined as gross margin divided by net sales.

Correct Answer
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None...
View Answer

Correct Answer
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Explain the way in which costs flow through the merchandise inventory account to a merchandiser's income statement.

Correct Answer
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Beginning inventory plus the net cost of...
View Answer

Merchandise inventory refers to products that a company owns and intends to sell to customers.

Correct Answer
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A debit memorandum is:

Correct Answer
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A company had a gross profit of $300,000 based on sales of $400,000. Its cost of goods sold equals $700,000.

Correct Answer
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Correct Answer
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None...
View Answer

When a company has no reportable nonoperating activities, its income from operations is reported as ________.

Correct Answer
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Correct Answer
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A = ($145,000 - $83,600)/$145,...
View Answer

The net method initially records the invoice at its net amount (net of any cash discount).

Correct Answer
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Exam 5: Accounting for Merchandising Operations

Multiple-step income statements:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedThe steps are: (1) cash purcha...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Match the following definitions with the appropriate term

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The acid-test ratio differs from the current ratio in that:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The gross margin ratio is defined as gross margin divided by net sales.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedNone...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Explain the way in which costs flow through the merchandise inventory account to a merchandiser's income statement.

Correct AnswerverifiedBeginning inventory plus the net cost of...View AnswerShow Answer

Merchandise inventory refers to products that a company owns and intends to sell to customers.

Correct AnswerverifiedShow Answer

A debit memorandum is:

Correct AnswerverifiedShow Answer

A company had a gross profit of $300,000 based on sales of $400,000. Its cost of goods sold equals $700,000.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedNone...View AnswerShow Answer

When a company has no reportable nonoperating activities, its income from operations is reported as ________.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedA = ($145,000 - $83,600)/$145,...View AnswerShow Answer

The net method initially records the invoice at its net amount (net of any cash discount).

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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The steps are: (1) cash purcha...
View Answer

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Correct Answer
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Correct Answer
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None...
View Answer

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Beginning inventory plus the net cost of...
View Answer

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Correct Answer
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Correct Answer
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None...
View Answer

Correct Answer
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Correct Answer
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A = ($145,000 - $83,600)/$145,...
View Answer

Correct Answer
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