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Exam 4: Reporting and Analyzing Merchandising Operations

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Question 21

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A company that uses a perpetual inventory system 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 amount due. The amount of the discount lost by failing to pay within the discount period equals:

A) $32.
B) $36.
C) $4.
D) $40.
E) $200.

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

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Question 22

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On March 12, Masterson Company, Inc. sold merchandise in the amount of $7,800 to Forsythe Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,500. Masterson uses the perpetual inventory system. On March 15, Forsythe returns some of the merchandise. The selling price of the merchandise is $600 and the cost of the merchandise returned is $350. Forsythe pays the invoice on March 20, and takes the appropriate discount. The amount that Masterson receives from Forsythe on March 20 is:

A) $7,800.
B) $7,644.
C) $7,044.
D) $7,056.
E) $7,200.

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

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Question 23

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Each sales transaction for a seller that uses a perpetual inventory system involves recognizing both revenue and cost of merchandise sold.

Reductions in the selling price of defective or unacceptable merchandise that a customer is willing to keep are referred to as _____________________________.

Using the following year-end information for Bauman, LLC, calculate the current ratio and acid-test ratio:

The unadjusted Merchandise Inventory balance under a periodic inventory system is:

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

Cost of Goods Sold is credited during the closing process.

Merchandise consists of products that a company acquires to resell to customers.

From the adjusted trial balance given below for the Grayson Company, Inc., prepare a multiple-step income statement in good form. Salaries expense and building depreciation expense should be equally divided between selling activities and the general and administrative activities.

A company has net sales of $825,000 and cost of goods sold of $547,000. Its net income is $98,500. The company's gross margin and operating expenses, respectively, are:

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

Beginning inventory plus the net cost of purchases is the _____________________.

A company's net sales were $676,600, its cost of goods sold was $236,810 and its net income was $33,750. Its gross margin ratio equals:

On May 1, Shilling Company, Inc. sold merchandise in the amount of $5,800 to Anders, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Shilling uses the gross method of recording sales and a perpetual inventory system. The journal entry or entries that Shilling will make on May 1 is:

Expenses related to accounting, human resource management, and financial management are classified as selling expenses in a multiple-step income statement.

The gross margin ratio is also called the gross profit ratio.

Describe the difference between accounting for purchases under the periodic and perpetual inventory accounting systems.

Merchandise that customers return to the seller after a sale is referred to as ___________________.

A debit memorandum is: