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Exam 4: Accounting for Merchandising Operations

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Question 21

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________ are the amounts and timing of payment from a buyer to a seller.

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Question 22

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A company had net sales of $752,000 and cost of goods sold of $543,000.Its net income was $17,530.The company's gross margin ratio equals:

A) 18.9%
B) 24.5%
C) 27.8%
D) 34.7%
E) 35.2%

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

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Question 23

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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:

At its fiscal year-end of June 30,Kendall Wholesale's general ledger shows the following selected account balances.Kendall Wholesale uses the perpetual inventory system. $\begin{array} { l r } \text { Merchandise Inventory } & \$ 60,000 \\\text { Sales } & 940,000 \\\text { Sales discounts } & 16,000 \\\text { Sales returns and allowances } & 8,000 \\& 456,000 \\\text { Cost of goods sold } &\end{array}$ A physical count of its June 30 year-end inventory discloses that the cost of the merchandise inventory still available is $58,160.Prepare the entry to record any inventory shrinkage.

Expenses that support the overall operations of a business and include the expenses relating to accounting,human resource management,and financial management are called:

Sales Discounts is added to the Sales account when computing a company's net sales.

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.

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. -The journal entry or entries that Klein will make on March 12 is:

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

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

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 amount of the cash paid on August 26 equals:

If goods are shipped FOB destination,the seller does not record revenue from the sale until the goods arrive at their destination because the transaction is not complete until that point.

A perpetual inventory system is able to directly measure and monitor inventory shrinkage and there is no need for a physical count of inventory.

Craig's Snowboards uses the perpetual inventory system and the gross method of accounting for sales,and had the following sales transactions during June: $\begin{array}{|l|l|}\hline \text {June 2 } & \begin{array}{l}\text { Sold merchandise to General Sports Store on credit for } \$ 4,800 \text {, terms } 1 / 15, \\\text { n }/ 60 . \text { The items sold had a cost of } \$ 2,700 .\end{array} \\\hline & \text { General Sports Store returned merchandise that had a selling price of } \\\text { June 4 } & \$ 200 . \text { The cost of the merchandise returned was } \$ 110 . \\\hline \text { June 13 } & \begin{array}{l}\text { General Sports Store paid for the merchandise sold on June } 2 \text { less the } \\\text { return, taking any appropriate discount earned. }\end{array} \\\hline\end{array}$ Prepare the journal entries that Craig's Snowboards must make to record these transactions.

A company reported the following information for the month of July: $\begin{array} { | l | r | } \hline \text { Net Sales } & \$ 57,500 \\\hline \text { Cost of goods sold } & 33,200 \\\hline\end{array}$ Required: Calculate this company's gross margin ratio.

Stevenson Corporation reports unadjusted first-year sales of $400,000 and cost of goods sold of $240,000.The company expects future returns and allowances equal to 3% of sales and 3% of cost of sales.Prepare the adjusting entries necessary to record the revenue side and cost side estimates for returns and allowances.

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

Sales discounts has a normal debit balance because it decreases Sales,which has a normal credit balance.

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

A company purchased $4,000 worth of merchandise.Transportation costs were an additional $350.The company returned $275 worth of merchandise and then paid the invoice within the 2% cash discount period.The total cost of this merchandise is: