Question 1

Inventory shrinkage can be computed by comparing the ___________ of inventory with recorded quantities and amounts.

Accepted Answer

Physical c...

Question 2

The credit terms 2/10, n/30 are interpreted as:

Accepted Answer

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 daysF) B) and E)
G) None of the above

Question 3

A _____________________ income statement format shows detailed computations of net sales and other costs and expenses and reports subtotals for various classes of items.

Accepted Answer

The answer of A _____________________ income statement format shows detailed...

Question 4

Beginning inventory plus net cost of purchases is:

Accepted Answer

A)   Cost of goods sold
B)   Merchandise available for sale
C)   Ending inventory
D)   Sales
E)   Shown on the balance sheetF) A) and C)
G) C) and D)

Question 5

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 salesF) B) and D)
G) C) and E)

Question 6

________________________ refers to products that a company owns and intends to sell.

Accepted Answer

Merchandis...

Question 7

A company's quick assets are $147,000 and its current liabilities are $143,000. This company's acid-test ratio is 1.03.
$147,000/$143,000 = 1.03

Accepted Answer

A) True 
 B)False

Question 8

How do closing entries for a merchandising company that uses the perpetual inventory system differ from the closing entries for a service company?

Accepted Answer

Merchandising companies have some accoun...

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

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 interest rate for borrowing money from the bank?

Accepted Answer

A)   12%
B)   13.5%
C)   11.5%
D)   16%
E)   Can't be determined from the information givenF) B) and E)
G) A) and C)

Question 11

A company had a gross profit of $300,000 based on sales of $400,000, which means its cost of goods sold is equal to $700,000.

Accepted Answer

A) True 
 B)False

Question 12

If a company sells merchandise with credit terms 2/10 n/60, the credit period is 10 days and the discount period is 60 days.

Accepted Answer

A) True 
 B)False

Question 13

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:

Accepted Answer

A)    Sales returns and allowances 500 Accounts receivable 500 Merchandise inventory 350 Cost of goods sold 350\begin{array} { | c | r | r | } \hline 	ext { Sales returns and allowances } & 500 & \\hline 	ext { Accounts receivable } & & 500 \\hline 	ext { Merchandise inventory } & 350 & \\hline 	ext { Cost of goods sold } & & 350 \\hline\end{array} Sales returns and allowances  Accounts receivable  Merchandise inventory  Cost of goods sold ​500350​500350​​ 
B)    Sales returns and allowances 500 Accounts receivable 500\begin{array} { | c | r | r | } \hline 	ext { Sales returns and allowances } & 500 & \\hline 	ext { Accounts receivable } & & 500 \\hline\end{array} Sales returns and allowances  Accounts receivable ​500​500​​ 
C)    Accounts receivable 500 Sales returns and allowances 500\begin{array} { | c | r | r | } \hline 	ext { Accounts receivable } & 500 & \\hline 	ext { Sales returns and allowances } & & 500 \\hline\end{array} Accounts receivable  Sales returns and allowances ​500​500​​ 
D)    Accounts receivable 500 Sales returns and allowances 500 Cost of goods sold 350 Merchandise inventory 350\begin{array}{|l|r|r|}\hline 	ext { Accounts receivable } & 500 & \\hline 	ext { Sales returns and allowances } & & 500 \\hline 	ext { Cost of goods sold } & 350 & \\hline 	ext { Merchandise inventory } & & 350 \\hline\end{array} Accounts receivable  Sales returns and allowances  Cost of goods sold  Merchandise inventory ​500350​500350​​ 
E)    Sales returns and allowances 350 Accounts receivable 350\begin{array} { | c | r | r | } \hline 	ext { Sales returns and allowances } & 350 & \\hline 	ext { Accounts receivable } & & 350 \\hline\end{array} Sales returns and allowances  Accounts receivable ​350​350​​F) B) and E)
G) B) and D)

Question 14

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

Accepted Answer

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 notF) D) and E)
G) A) and E)

Question 15

The gross margin ratio:

Accepted Answer

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 1F) All of the above
G) A) and D)

Question 16

When a credit customer returns merchandise a seller that uses the perpetual system would debit Sales Returns and Allowances and credit Accounts Receivable and also debit Merchandise Inventory and credit Cost of Goods Sold.

Accepted Answer

A) True 
 B)False

Question 17

A perpetual inventory system is able to directly measure and monitor inventory shrinkage.

Accepted Answer

A) True 
 B)False

Question 18

A common rule of thumb is that a company's acid-test ratio should be at least 2 or a company may face financial problems in the near future.

Accepted Answer

A) True 
 B)False

Question 19

With credit terms of 2/10, n/30 the seller is offering the purchaser a 2% cash discount if the amount is paid within 10 days of the invoice date. Otherwise, the full amount is due in 30 days.

Accepted Answer

A) True 
 B)False

Question 20

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 is the amount of quick assets that Total Company has on the balance sheet?

Accepted Answer

A)   $8,750,000
B)   $416,667
C)   $3,750,000
D)   $1,250,000
E)   $2,500,000F) D) and E)
G) A) and C)

Exam 4: Accounting for Merchandising Operations

A _____________________ income statement format shows detailed computations of net sales and other costs and expenses and reports subtotals for various classes of items.

Correct Answer
verified

The credit terms 2/10, n/30 are interpreted as:

Correct Answer
verified

Beginning inventory plus net cost of purchases is:

Correct Answer
verified

Inventory shrinkage can be computed by comparing the ___________ of inventory with recorded quantities and amounts.

Correct Answer
verified
Physical c...
View Answer

With credit terms of 2/10, n/30 the seller is offering the purchaser a 2% cash discount if the amount is paid within 10 days of the invoice date. Otherwise, the full amount is due in 30 days.

Correct Answer
verified

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

Correct Answer
verified

When a credit customer returns merchandise a seller that uses the perpetual system would debit Sales Returns and Allowances and credit Accounts Receivable and also debit Merchandise Inventory and credit Cost of Goods Sold.

Correct Answer
verified

Correct Answer
verified

If a company sells merchandise with credit terms 2/10 n/60, the credit period is 10 days and the discount period is 60 days.

Correct Answer
verified

A perpetual inventory system is able to directly measure and monitor inventory shrinkage.

Correct Answer
verified

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 is the amount of quick assets that Total Company has on the balance sheet?

Correct Answer
verified

________________________ refers to products that a company owns and intends to sell.

Correct Answer
verified
Merchandis...
View Answer

A company's quick assets are $147,000 and its current liabilities are $143,000. This company's acid-test ratio is 1.03. $147,000/$143,000 = 1.03

Correct Answer
verified

A company had a gross profit of $300,000 based on sales of $400,000, which means its cost of goods sold is equal to $700,000.

Correct Answer
verified

Correct Answer
verified

A common rule of thumb is that a company's acid-test ratio should be at least 2 or a company may face financial problems in the near future.

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

How do closing entries for a merchandising company that uses the perpetual inventory system differ from the closing entries for a service company?

Correct Answer
verified
Merchandising companies have some accoun...
View Answer

The gross margin ratio:

Correct Answer
verified

Exam 4: Accounting for Merchandising Operations

A _____________________ income statement format shows detailed computations of net sales and other costs and expenses and reports subtotals for various classes of items.

Correct AnswerverifiedShow Answer

The credit terms 2/10, n/30 are interpreted as:

Correct AnswerverifiedShow Answer

Beginning inventory plus net cost of purchases is:

Correct AnswerverifiedShow Answer

Inventory shrinkage can be computed by comparing the ___________ of inventory with recorded quantities and amounts.

Correct AnswerverifiedPhysical c...View AnswerShow Answer

With credit terms of 2/10, n/30 the seller is offering the purchaser a 2% cash discount if the amount is paid within 10 days of the invoice date. Otherwise, the full amount is due in 30 days.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When a credit customer returns merchandise a seller that uses the perpetual system would debit Sales Returns and Allowances and credit Accounts Receivable and also debit Merchandise Inventory and credit Cost of Goods Sold.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If a company sells merchandise with credit terms 2/10 n/60, the credit period is 10 days and the discount period is 60 days.

Correct AnswerverifiedShow Answer

A perpetual inventory system is able to directly measure and monitor inventory shrinkage.

Correct AnswerverifiedShow Answer

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 is the amount of quick assets that Total Company has on the balance sheet?

Correct AnswerverifiedShow Answer

________________________ refers to products that a company owns and intends to sell.

Correct AnswerverifiedMerchandis...View AnswerShow Answer

A company's quick assets are $147,000 and its current liabilities are $143,000. This company's acid-test ratio is 1.03. $147,000/$143,000 = 1.03

Correct AnswerverifiedShow Answer

A company had a gross profit of $300,000 based on sales of $400,000, which means its cost of goods sold is equal to $700,000.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A common rule of thumb is that a company's acid-test ratio should be at least 2 or a company may face financial problems in the near future.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

How do closing entries for a merchandising company that uses the perpetual inventory system differ from the closing entries for a service company?

Correct AnswerverifiedMerchandising companies have some accoun...View AnswerShow Answer

The gross margin ratio:

Correct AnswerverifiedShow Answer

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Physical c...
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Merchandis...
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Merchandising companies have some accoun...
View Answer

Correct Answer
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