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Exam 4: Accounting for Merchandising Operations

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Question 121

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In a perpetual inventory system,the Merchandise Inventory account must be closed at the end of the accounting period.

A) True
B) False

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Question 122

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

A) True
B) False

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Question 123

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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) :

Under a perpetual inventory system,when a credit customer returns non-defective merchandise to the seller,the seller debits Sales Returns and Allowances and credits Accounts Receivable and also debits Merchandise Inventory and credits Cost of Goods Sold.

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

Expenses related to accounting,human resource management,and financial management are known as selling expenses.

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:

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.

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 net method of accounting for sales.On March 15,Babson returns some of the merchandise,which is not defective.The selling price of the returned merchandise is $600 and the cost of the merchandise returned is $350.The entry or entries that Klein must make on March 15 is (are) :

A company purchased $10,000 of merchandise on June 15 with terms of 3/10,n/45.On June 20,it returned $800 of that merchandise.On June 24,it paid the balance owed for the merchandise taking any discount it was entitled to.The cash paid on June 24 equals:

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

A company reported the following information for the month of July: Required: Calculate this company's gross profit.

Farmen Company had net sales of $600,000 and cost of goods sold of $450,000.Calculate Farmen's gross profit.

On February 3,Smart Company sold merchandise in the amount of $5,800 to Truman Company,with credit terms of 2/10,n/30.The cost of the items sold is $4,000.Smart uses the perpetual inventory system and the gross method.Truman pays the invoice on February 8,and takes the appropriate discount.The journal entry that Smart makes on February 8 is:

A buyer of $7,000 in merchandise inventory failed to take advantage of the vendor's credit terms of 2/15,n/45,and instead paid the invoice in full at the end of 45 days.By not taking advantage of the cash discount,the buyer lost the discount of:

The seller might offer a(n)________to a buyer that is not satisfied with the goods received.

Beginning inventory plus net purchases equals merchandise available for sale.

Calculate the gross margin ratio for each of the following separate cases A through C:

Products that a company owns and intends to sell are called ________.

An expense resulting from failing to take advantage of cash discounts when using the net method of recording purchases is called: