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Exam 5: Accounting for Merchandising Operations

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Question 81

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What is the acid-test ratio? How does it measure a company's liquidity?

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The acid-test ratio is a measure of a me...

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Question 82

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The current period's ending inventory is:

A) The current period's cost of goods sold.
B) The current period's net purchases.
C) The prior period's beginning inventory.
D) The current period's beginning inventory.
E) The next period's beginning inventory.

F) D) and E)
G) A) and C)

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Question 83

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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: $\begin{array}{l}\text { A) }\\\begin{array} { | l | r | r | } \hline \text { Accounts receivable } & 7,800 & \\\hline \text { Sales } & & 7,800 \\\hline \text { Cost of goods sold } & 4,500 & \\\hline \text { Merchandise Inventory } & & 4,500 \\\hline\end{array}\end{array}$ B) $\begin{array}{|l|r|r|}\hline \text { Sales } & 7,800 & \\\hline \text { Accounts receivable } & & 7,800 \\\hline \text { Cost of goods sold } & 4,500 & \\\hline \text { Merchandise Inventory } & & 4,500 \\\hline\end{array}$ C) $\begin{array}{|l|r|r|}\hline \text { Accounts receivable } & 4,500 & \\\hline \text { Sales } & & 4,500 \\\hline\end{array}$ D) $\begin{array}{|l|r|r|}\hline \text { Accounts receivable } & 7,800 & \\\hline \text { Sales } & & 7,800 \\\hline\end{array}$ E) $\begin{array}{|l|r|r|}\hline \text { Sales } & 7,800 & \\\hline \text { Accounts receivable } & & 7,800 \\\hline\end{array}$

Describe the recording process (including costs)for the types of transactions associated with sales of merchandise inventory using a perpetual inventory system.

Cost of Goods Sold is debited to close the account during the closing process.

Quick assets are defined as:

When preparing an unadjusted trial balance using a periodic inventory system, the amount shown for Merchandise Inventory is:

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. Jepson uses the periodic inventory system and the gross method of accounting for purchases. Jepson pays the invoice on September 18, and takes the appropriate discount. The journal entry that Jepson makes on September 18 is: A) $\begin{array}{|l|r|r|}\hline \text { Accounts payable } & 5,800 & \\\hline \text { Purchases discounts } & & 116 \\\hline \text { Cash } & & 5,684 \\\hline\end{array}$ B) $\begin{array}{|l|r|r|}\hline \text { Cash } & 5,684 & \\\hline \text { Accounts receivable } & & 5,684 \\\hline\end{array}$ C) $\begin{array}{|l|r|r|}\hline \text { Cash } & 5,684 & \\\hline \text { Purchases discounts } & 116 & \\\hline \text { Accounts payable } & & 5,800 \\\hline\end{array}$ D) $\begin{array}{|l|r|r|}\hline \text { Accounts payable } & 5,800 & \\\hline \text { Merchandise inventory } & & 116 \\\hline \text { Cash } & & 5,684 \\\hline\end{array}$ E) $\begin{array}{|l|r|r|}\hline \text { Purchases } & 5,684 & \\\hline \text { Cash } & & 5,684 \\\hline\end{array}$

A company has sales of $375,000 and its gross profit is $157,500. Its cost of goods sold equals:

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

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

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. The journal entry or entries that Vander will make on September 12 is: A) $\begin{array}{|l|r|r|}\hline \text { Sales } & 5,800 & \\\hline \text { Accounts receivable } & & 5,800 \\\hline \text { Cost of goods sold } & 4,000 & \\\hline \text { Merchandise Inventory } & & 4,000 \\\hline\end{array}$ B) $\begin{array}{|l|r|r|}\hline \text { Sales } & 5,800 & \\\hline \text { Accounts receivable } & & 5,800 \\\hline\end{array}$ C) $\begin{array}{|l|r|r|}\hline \text { Accounts receivable } & 5,800 & \\\hline \text { Sales } & & 5,800 \\\hline\end{array}$ D) $\begin{array}{|l|r|r|}\hline \text { Accounts receivable } & 4,000 & \\\hline \text { Sales } & & 4,000 \\\hline\end{array}$ E) $\begin{array}{|l|r|r|}\hline \text { Accounts receivable } & 5,800 & \\\hline \text { Sales } & & 5,800 \\\hline \text { Cost of goods sold } & 4,000 & \\\hline \text { Merchandise Inventory } & & 4,000 \\\hline\end{array}$

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 mount due. The amount of the cash paid on August 26 equals:

The adjusting entry to reflect inventory shrinkage is a debit to Income Summary and a credit to Inventory Shrinkage Expense.

When purchases are recorded at net amounts, any discounts lost as a result of late payments are reported as an operating expense.

A debit memorandum is:

A company records the following journal entry: debit Cash $1,470, debit Sales Discounts $30, and credit Accounts Receivable $1,500. This means that a customer has taken what percentage cash discount for early payment?

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

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 12, 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 payment on July 12 is:

A company uses the perpetual inventory system and recorded the following entry: $\begin{array} { | l | r | r | } \hline \text { Accounts Payable } & 2,500 & \\\hline \text { Merchandise Inventory } & & 50 \\\hline \text { Cash } & & 2,450 \\\hline\end{array}$ This entry reflects a: