Question 1

Prepare journal entries to record the following merchandising transactions of Margin Company,which applies the perpetual inventory system and the gross method of recording invoices.Margin Company offers all of its credit customers credit terms of 2/10,n/30.
 $$\begin{array} { | l | l | } 
\hline \text { May } 3 & \begin{array} { l } 
\text { Sold merchandise to Sting Company for } \$ 5,600 , \mathrm {~F} O \mathrm {~B} \text { shipping point, } \
\text { invoice dated May 4. The merchandise had cost } \$ 3,000 .
\end{array} \
\hline \text { May } 8 & \begin{array} { l } 
\text { Sold merchandise to Skeet Company for } \$ 3,300 , \mathrm { FOB } \text { shipping point, } \
\text { invoice dated May } 8 \text {. The merchandise had a cost of } \$ 1,500 .
\end{array} \
\hline \text { May 13 } & \text { Received the balance due from Sting Company within the discount period. } \
\hline \text { May } 14 & \begin{array} { l } 
\text { Issued a credit } \$ 300 \text { credit memorandum to Skeet Company for an } \
\text { allowance on defective merchandise. }
\end{array} \
\hline \text { May } 17 & \begin{array} { l } 
\text { Received the balance due from Skeet Company within the discount } \
\text { period. }
\end{array} \
\hline
\end{array}$$

Accepted Answer

The answer of Prepare journal entries to record the following...

Question 2

The periodic inventory system requires updating the inventory account only at the end of the period to reflect the quantity and cost of goods available for sale and the cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 3

Quick assets are defined as:

Accepted Answer

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.F) A) and D)
G) A) and C)

Question 4

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.
-Johnson uses the periodic inventory system and the net method of accounting for purchases.The journal entry that Johnson will make on September 12 is:

Accepted Answer

A)     Purchases 5,800 Accounts payable 5,800\begin{array} { | l | r | r | } \hline 	ext { Purchases } & 5,800 & \\hline 	ext { Accounts payable } & & 5,800 \\hline\end{array} Purchases  Accounts payable ​5,800​5,800​​ 
B)     Purchases 5,684 Accounts payable 5,684\begin{array} { | l | r | r | } \hline 	ext { Purchases } & 5,684 & \\hline 	ext { Accounts payable } & & 5,684 \\hline\end{array} Purchases  Accounts payable ​5,684​5,684​​ 
C)     Merchandise inventory 5,684 Accounts payable 5,684\begin{array} { | l | r | r | } \hline 	ext { Merchandise inventory } & 5,684 & \\hline 	ext { Accounts payable } & & 5,684 \\hline\end{array} Merchandise inventory  Accounts payable ​5,684​5,684​​ 
D)     Merchandise inventory 5,800 Accounts payable 5,800\begin{array} { | l | r | r | } \hline 	ext { Merchandise inventory } & 5,800 & \\hline 	ext { Accounts payable } & & 5,800 \\hline\end{array} Merchandise inventory  Accounts payable ​5,800​5,800​​ 
E)     Accounts payable 4,000 Merchandise inventory 4,000\begin{array} { | l | r | r | } \hline 	ext { Accounts payable } & 4,000 & \\hline 	ext { Merchandise inventory } & & 4,000 \\hline\end{array} Accounts payable  Merchandise inventory ​4,000​4,000​​F) A) and E)
G) C) and D) B

Question 5

Cost of goods sold is an expense,and is reported on the income statement.

Accepted Answer

A) True 
 B)False  True

Question 6

Purchase discounts are the same as trade discounts.

Accepted Answer

A) True 
 B)False

Question 7

Non-operating activities that include interest,dividend,and rent revenues,and gains from asset disposals are called ________.

Accepted Answer

other reve...

Question 8

Cushman Company had $800,000 in sales,sales discounts of $12,000,sales returns and allowances of $18,000,cost of goods sold of $380,000,and $275,000 in operating expenses.
-Net income equals:

Accepted Answer

A)   $770,000.
B)   $402,000.
C)   $390,000.
D)   $115,000.
E)   $408,000.F) A) and B)
G) B) and E)

Question 9

Match the following definitions with the appropriate terms.
-A widely used income statement format that lists cost of goods sold as another expense and shows only one subtotal for total expenses.

Accepted Answer

A)  Single-step income statement
B)  Acid-test ratio
C)  Multiple-step income statement
D)  Inventory shrinkage
E)  FOB shipping pointF) Selling expensesG) General and administrative expensesH) Merchandise inventoryI) Trade discountJ) FOB destinationK) D) and G)
L) A) and E)

Question 10

Under the net method,when a company uses a perpetual inventory system,an invoice for $2,000 with terms of 2/10,n/30 should be recorded with a debit to Merchandise Inventory and a credit to Accounts Payable of $2,000.

Accepted Answer

A) True 
 B)False

Question 11

From the adjusted trial balance for Fabricated Products Company given below,prepare the necessary closing entries.

Accepted Answer

The answer of From the adjusted trial balance for Fabricated...

Question 12

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 non-defective merchandise,which is restored to inventory.The selling price of the returned merchandise is $500 and the cost of the merchandise returned is $350.The entry or entries that Ryan must make on September 14 is (are) :

Accepted Answer

A)     Bales returns and allowances 490 Accounts receivable 490 Mercharidise inventory 350 Cost of goods sold 350\begin{array} { | l | r | r | } \hline 	ext { Bales returns and allowances } & 490 & \\hline 	ext { Accounts receivable } & & 490 \\hline 	ext { Mercharidise inventory } & 350 & \\hline 	ext { Cost of goods sold } & & 350 \\hline\end{array} Bales returns and allowances  Accounts receivable  Mercharidise inventory  Cost of goods sold ​490350​490350​​ 
B)     Sales returns and allowances  50d  Accounts receivable 50q\begin{array} { | l | r | r | } \hline 	ext { Sales returns and allowances } & 	ext { 50d } & \\hline 	ext { Accounts receivable } & & 50 \mathrm { q } \\hline\end{array} Sales returns and allowances  Accounts receivable ​ 50d ​50q​​ 
C)     Sales returns and allowances 490 Accounts receivable 490\begin{array} { | l | r | r | } \hline 	ext { Sales returns and allowances } & 490 & \\hline 	ext { Accounts receivable } & & 490 \\hline\end{array} Sales returns and allowances  Accounts receivable ​490​490​​ 
D)     Bales returns and allowances 490 Accounts receivable 490 Merchandise inventory 343 Cost of goods sold 343\begin{array} { | l | r | r | } \hline 	ext { Bales returns and allowances } & 490 & \\hline 	ext { Accounts receivable } & & 490 \\hline 	ext { Merchandise inventory } & 343 & \\hline 	ext { Cost of goods sold } & & 343 \\hline\end{array} Bales returns and allowances  Accounts receivable  Merchandise inventory  Cost of goods sold ​490343​490343​​ 
E)     Sales returns and allowances 350 Accounts receivable 350\begin{array} { | l | 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) None of the above
G) A) and B)

Question 13

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 purchase on July 5 is:

Accepted Answer

A)   Debit Merchandise Inventory $1,600; credit Cash $1,600.
B)   Debit Merchandise Inventory $1,800; credit Accounts Payable $1,800.
C)   Debit Merchandise Inventory $1,800; credit Sales Returns $200; credit Cash $1,600.
D)   Debit Accounts Payable $1,800; credit Merchandise Inventory $1,800.
E)   Debit Accounts Payable $1,800; credit Purchase Returns $200; credit Merchandise Inventory $1,600.F) A) and D)
G) All of the above

Question 14

Sellers always offer a discount to buyers for prompt payment toward purchases made on credit.

Accepted Answer

A) True 
 B)False  False

Question 15

In the current year,Borden Corporation had sales of $2,000,000 and cost of goods sold of $1,200,000.Borden expects returns in the following year to equal 8% of sales.The unadjusted balance in Inventory Returns Estimated is a debit of $6,000,and the unadjusted balance in Sales Refund Payable is a credit of $10,000.The adjusting entry or entries to record the expected sales returns is (are) :

Accepted Answer

A)     Accounts Receivable 2,000,000 Sales 2,000,000\begin{array} { | l | l | l | } \hline 	ext { Accounts Receivable } & 2,000,000 & \\hline 	ext { Sales } & & 2,000,000 \\hline\end{array} Accounts Receivable  Sales ​2,000,000​2,000,000​​ 
B)     Sales returns and allowances 150,000 Sales 150,000 Cost of Goods Sold 90,000 Inventory Returns Estimated 90,000\begin{array} { | l | r | r | } \hline 	ext { Sales returns and allowances } & 150,000 & \\hline 	ext { Sales } & & 150,000 \\hline 	ext { Cost of Goods Sold } & 90,000 & \\hline 	ext { Inventory Returns Estimated } & & 90,000 \\hline\end{array} Sales returns and allowances  Sales  Cost of Goods Sold  Inventory Returns Estimated ​150,00090,000​150,00090,000​​ 
C)     Sales 2,000,000 Sales Refund Payable 160,000 Accounts receivable 1,840,000\begin{array} { | l | l | l | } \hline 	ext { Sales } & 2,000,000 & \\hline 	ext { Sales Refund Payable } & & 160,000 \\hline 	ext { Accounts receivable } & & 1,840,000 \\hline\end{array} Sales  Sales Refund Payable  Accounts receivable ​2,000,000​160,0001,840,000​​ 
D)     Sales Refund Payble 150,0000 Accounts receivable 150,000\begin{array} { | l | l | l | } \hline 	ext { Sales Refund Payble } & 150,0000 & \\hline 	ext { Accounts receivable } & & 150,000 \\hline\end{array} Sales Refund Payble  Accounts receivable ​150,0000​150,000​​ 
E)     Sales Returns and Allowarnes 150,000 Sales Refund Payble 150,000 Inventory Returns Estimated 90,000 Cost of goods sold 90,000\begin{array} { | l | r | r | } \hline 	ext { Sales Returns and Allowarnes } & 150,000 & \\hline 	ext { Sales Refund Payble } & & 150,000 \\hline 	ext { Inventory Returns Estimated } & 90,000 & \\hline 	ext { Cost of goods sold } & & 90,000 \\hline\end{array} Sales Returns and Allowarnes  Sales Refund Payble  Inventory Returns Estimated  Cost of goods sold ​150,00090,000​150,00090,000​​F) A) and B)
G) B) and E)

Question 16

A buyer failed to take advantage of the vendor's credit terms of 2/15,n/45,but instead paid the invoice in full at the end of 45 days.By not taking advantage of the cash discount,the equivalent annual interest lost on the amount of the purchase is:

Accepted Answer

A)   12.2%
B)   16.2%
C)   18.9%
D)   24.3%
E)   24.5%F) D) and E)
G) A) and B)

Question 17

Explain the difference between the single-step and multiple-step income statements.

Accepted Answer

A single-step income statement format in...

Question 18

Each sale of merchandise has two parts: the revenue side and the cost side.

Accepted Answer

A) True 
 B)False

Question 19

What is gross margin ratio? How is it used as an indicator of profitability?

Accepted Answer

The gross margin ratio computes the rela...

Question 20

A period's beginning inventory is equal to the prior period's ________.

Accepted Answer

The answer of A period's beginning inventory is equal to...

Exam 4: Accounting for Merchandising Operations

Correct Answer
verified

The periodic inventory system requires updating the inventory account only at the end of the period to reflect the quantity and cost of goods available for sale and the cost of goods sold.

Correct Answer
verified

Quick assets are defined as:

Correct Answer
verified

Correct Answer
verified
B

Cost of goods sold is an expense,and is reported on the income statement.

Correct Answer
verified
True

Purchase discounts are the same as trade discounts.

Correct Answer
verified

Non-operating activities that include interest,dividend,and rent revenues,and gains from asset disposals are called ________.

Correct Answer
verified
other reve...
View Answer

Cushman Company had $800,000 in sales,sales discounts of $12,000,sales returns and allowances of $18,000,cost of goods sold of $380,000,and $275,000 in operating expenses. -Net income equals:

Correct Answer
verified

Match the following definitions with the appropriate terms. -A widely used income statement format that lists cost of goods sold as another expense and shows only one subtotal for total expenses.

Correct Answer
verified

Under the net method,when a company uses a perpetual inventory system,an invoice for $2,000 with terms of 2/10,n/30 should be recorded with a debit to Merchandise Inventory and a credit to Accounts Payable of $2,000.

Correct Answer
verified

From the adjusted trial balance for Fabricated Products Company given below,prepare the necessary closing entries.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Sellers always offer a discount to buyers for prompt payment toward purchases made on credit.

Correct Answer
verified
False

Correct Answer
verified

A buyer failed to take advantage of the vendor's credit terms of 2/15,n/45,but instead paid the invoice in full at the end of 45 days.By not taking advantage of the cash discount,the equivalent annual interest lost on the amount of the purchase is:

Correct Answer
verified

Explain the difference between the single-step and multiple-step income statements.

Correct Answer
verified
A single-step income statement format in...
View Answer

Each sale of merchandise has two parts: the revenue side and the cost side.

Correct Answer
verified

What is gross margin ratio? How is it used as an indicator of profitability?

Correct Answer
verified
The gross margin ratio computes the rela...
View Answer

A period's beginning inventory is equal to the prior period's ________.

Correct Answer
verified

Exam 4: Accounting for Merchandising Operations

Correct AnswerverifiedShow Answer

The periodic inventory system requires updating the inventory account only at the end of the period to reflect the quantity and cost of goods available for sale and the cost of goods sold.

Correct AnswerverifiedShow Answer

Quick assets are defined as:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedB

Cost of goods sold is an expense,and is reported on the income statement.

Correct AnswerverifiedTrue

Purchase discounts are the same as trade discounts.

Correct AnswerverifiedShow Answer

Non-operating activities that include interest,dividend,and rent revenues,and gains from asset disposals are called ________.

Correct Answerverifiedother reve...View AnswerShow Answer

Cushman Company had $800,000 in sales,sales discounts of $12,000,sales returns and allowances of $18,000,cost of goods sold of $380,000,and $275,000 in operating expenses. -Net income equals:

Correct AnswerverifiedShow Answer

Match the following definitions with the appropriate terms. -A widely used income statement format that lists cost of goods sold as another expense and shows only one subtotal for total expenses.

Correct AnswerverifiedShow Answer

Under the net method,when a company uses a perpetual inventory system,an invoice for $2,000 with terms of 2/10,n/30 should be recorded with a debit to Merchandise Inventory and a credit to Accounts Payable of $2,000.

Correct AnswerverifiedShow Answer

From the adjusted trial balance for Fabricated Products Company given below,prepare the necessary closing entries.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Sellers always offer a discount to buyers for prompt payment toward purchases made on credit.

Correct AnswerverifiedFalse

Correct AnswerverifiedShow Answer

A buyer failed to take advantage of the vendor's credit terms of 2/15,n/45,but instead paid the invoice in full at the end of 45 days.By not taking advantage of the cash discount,the equivalent annual interest lost on the amount of the purchase is:

Correct AnswerverifiedShow Answer

Explain the difference between the single-step and multiple-step income statements.

Correct AnswerverifiedA single-step income statement format in...View AnswerShow Answer

Each sale of merchandise has two parts: the revenue side and the cost side.

Correct AnswerverifiedShow Answer

What is gross margin ratio? How is it used as an indicator of profitability?

Correct AnswerverifiedThe gross margin ratio computes the rela...View AnswerShow Answer

A period's beginning inventory is equal to the prior period's ________.

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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B

Correct Answer
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True

Correct Answer
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Correct Answer
verified
other reve...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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False

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A single-step income statement format in...
View Answer

Correct Answer
verified

Correct Answer
verified
The gross margin ratio computes the rela...
View Answer

Correct Answer
verified