Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

The net method of recording purchases refers to recording:

Accepted Answer

A)   Specified amounts and timing of payments that a buyer agrees to in return for being granted credit.
B)   Purchases at the invoice price less any cash discounts.
C)   Inventory at the lower of cost or market.
D)   Purchases at the full invoice price, without deducting any cash discounts.
E)   Inventory at its selling price.F) B) and C)
G) A) and C)

Question 3

When a company has no reportable non-operating activities, its income from operations is simply labeled net income.

Accepted Answer

A) True 
 B)False

Question 4

The following statements are true regarding the operating cycle of a merchandising company except:

Accepted Answer

A)   The operating cycle is shortened by credit sales.
B)   The operating cycle ends with the collection of cash from the sale of merchandise.
C)   The operating cycle begins with the purchase of merchandise.
D)   The operating cycle can vary in length among different merchandising companies.
E)   The operating cycle sometimes involves accounts receivable.F) D) and E)
G) A) and B)

Question 5

The acid-test ratio is defined as current assets divided by current liabilities.

Accepted Answer

A) True 
 B)False

Question 6

The liquidity of a company can be measured using the current ratio and the ________, which only includes the most liquid current assets in its calculation.

Accepted Answer

The answer of The liquidity of a company can be...

Question 7

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

Accepted Answer

A)   $532,500.
B)   $157,500.
C)   $(217,000) .
D)   $217,500.
E)   $375,000.F) D) and E)
G) A) and B)

Question 8

Discuss the period-end adjusting entries that are required in the new revenue recognition standards for estimating sales discounts and sales returns and allowances.

Accepted Answer

Sellers are required to estimate both ex...

Question 9

Harley's Antique Shop had net sales of $772,000. The gross profit was $415,000. Calculate Harley's cost of goods sold.

Accepted Answer

Cost of Goods Sold =...

Question 10

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. 
-On March 15, Babson returns some of the merchandise. The selling price of the merchandise is $600 and the cost of the merchandise returned is $350. Babson pays the invoice on March 20, and takes the appropriate discount. The amount that Klein receives from Babson on March 20 is:

Accepted Answer

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

Question 11

A company that uses the net method of recording purchases and 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 full amount due. The correct journal entry to record the payment on July 28 is:

Accepted Answer

A)   Debit Accounts Payable $1,600; credit Merchandise Inventory $32; credit Cash $1,568.
B)   Debit Cash $1,600; credit Accounts Payable $1,600.
C)   Debit Merchandise Inventory $1,600; credit Cash $1,600.
D)   Debit Accounts Payable $1,568; debit Discounts Lost $32; credit Cash $1,600.
E)   Debit Accounts Payable $1,800; credit Cash $1,800.F) C) and D)
G) A) and E)

Question 12

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. On September 14, Jepson 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 Vander must make on September 14 is:

Accepted Answer

A)     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​​ 
B)     Accounts receivable 500 Sales returns and allowances 500\begin{array} { | l | r | r | } \hline 	ext { Accounts receivable } & 500 & \\hline 	ext { Sales returns and allowances } & & 500 \\hline\end{array} Accounts receivable  Sales returns and allowances ​500​500​​ 
C)     Sales returns and allowances 500 Accounts receivable 500 Merchandise inventory 350 Cost of goods sold 350\begin{array} { | l | r | r | } \hline 	ext { Sales returns and allowances } & 500 & \\hline 	ext { Accounts receivable } & & 500 \\hline 	ext { Merchandise inventory } & 350 & \\hline 	ext { Cost of goods sold } & & 350 \\hline\end{array} Sales returns and allowances  Accounts receivable  Merchandise inventory  Cost of goods sold ​500350​500350​​ 
D)     Sales returns and allowances 500 Accounts receivable 500\begin{array} { | l | r | r | } \hline 	ext { Sales returns and allowances } & 500 & \\hline 	ext { Accounts receivable } & & 500 \\hline\end{array} Sales returns and allowances  Accounts receivable ​500​500​​ 
E)     Accounts receivable 500 Sales returns and allowances 500 Cost of goods sold 350 Merchandise inventory 350\begin{array} { | l | r | r | } \hline 	ext { Accounts receivable } & 500 & \\hline 	ext { Sales returns and allowances } & & 500 \\hline 	ext { Cost of goods sold } & 350 & \\hline 	ext { Merchandise inventory } & & 350 \\hline\end{array} Accounts receivable  Sales returns and allowances  Cost of goods sold  Merchandise inventory ​500350​500350​​F) B) and C)
G) A) and B)

Question 13

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

Accepted Answer

other reve...

Question 14

Fragment Company is a wholesaler that sells merchandise in large quantities. Its catalog indicates a list price of $300 per unit on a particular product and a 40% trade discount is offered for quantity purchases of 50 units or more. The cost of shipping the merchandise is $7 per unit under terms FOB shipping point. If a customer purchases 100 units of this product, what is the amount of sales revenue that Fragment will record from this sale?

Accepted Answer

A)   $30,000
B)   $29,300
C)   $18,700
D)   $30,700
E)   $18,000F) C) and D)
G) B) and E)

Question 15

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(ies)  that Klein must make on March 15 is (are) :

Accepted Answer

A)     Accounts receivable 600 Sales returns and allowances 600\begin{array} { | l | r | r | } \hline 	ext { Accounts receivable } & 600 & \\hline 	ext { Sales returns and allowances } & & 600 \\hline\end{array} Accounts receivable  Sales returns and allowances ​600​600​​ 
B)     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​​ 
C)     Sales returns and allowances 588 Accounts receivable 588 Merchandise inventory 350 Cost of goods sold 350\begin{array} { | l | r | r | } \hline 	ext { Sales returns and allowances } & 588 & \\hline 	ext { Accounts receivable } & & 588 \\hline 	ext { Merchandise inventory } & 350 & \\hline 	ext { Cost of goods sold } & & 350 \\hline\end{array} Sales returns and allowances  Accounts receivable  Merchandise inventory  Cost of goods sold ​588350​588350​​ 
D)     Accounts receivable 600 Sales returns and allowances 600 Cost of Goods Sold 350 Merchandise inventory 350\begin{array} { | l | r | r | } \hline 	ext { Accounts receivable } & 600 & \\hline 	ext { Sales returns and allowances } & & 600 \\hline 	ext { Cost of Goods Sold } & 350 & \\hline 	ext { Merchandise inventory } & & 350 \\hline\end{array} Accounts receivable  Sales returns and allowances  Cost of Goods Sold  Merchandise inventory ​600350​600350​​ 
E)     Sales returns and allowances 588 Accounts receivable 588 Merchandise inventory 343 Cost of goods sold 343\begin{array} { | l | r | r | } \hline 	ext { Sales returns and allowances } & 588 & \\hline 	ext { Accounts receivable } & & 588 \\hline 	ext { Merchandise inventory } & 343 & \\hline 	ext { Cost of goods sold } & & 343 \\hline\end{array} Sales returns and allowances  Accounts receivable  Merchandise inventory  Cost of goods sold ​588343​588343​​F) A) and C)
G) B) and E)

Question 16

Quick assets are defined as:

Accepted Answer

A)   Cash, noncurrent receivables, and prepaid expenses.
B)   Accounts receivable, inventory, and prepaid expenses.
C)   Cash, inventory, and current receivables.
D)   Cash, short-term investments, and current receivables.
E)   Cash, short-term investments, and inventory.F) A) and B)
G) B) and C)

Question 17

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 payment on July 28 is:

Accepted Answer

A)   Debit Accounts Payable $1,800; credit Cash $1,800.
B)   Debit Cash $1,600; credit Accounts Payable $1,600.
C)   Debit Merchandise Inventory $1,600; credit Cash $1,600.
D)   Debit Accounts Payable $1,600; credit Cash $1,600.
E)   Debit Accounts Payable $1,600; credit Merchandise Inventory $32; credit Cash $1,568.F) A) and E)
G) A) and D)

Question 18

A trade discount is:

Accepted Answer

A)   A reduction in price for prompt payment.
B)   Also called a rebate.
C)   A reduction in selling price below the list price.
D)   A term used by a seller to describe a cash discount granted to customers for prompt payment.
E)   A term used by a purchaser to describe a cash discount given to customers for prompt payment.F) A) and D)
G) C) and D)

Question 19

An income statement that includes cost of goods sold as another expense and shows only one subtotal for total expenses is a:

Accepted Answer

A)   Combined income statement.
B)   Simplified income statement.
C)   Balanced income statement.
D)   Single-step income statement.
E)   Multiple-step income statement.F) A) and B)
G) B) and D)

Question 20

Purchase allowances refer to merchandise a buyer acquires but then returns to the seller.

Accepted Answer

A) True 
 B)False

Exam 5: Accounting for Merchandising Operations

An income statement that includes cost of goods sold as another expense and shows only one subtotal for total expenses is a:

Correct Answer
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Correct Answer
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Quick assets are defined as:

Correct Answer
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Purchase allowances refer to merchandise a buyer acquires but then returns to the seller.

Correct Answer
verified

The net method of recording purchases refers to recording:

Correct Answer
verified

The acid-test ratio is defined as current assets divided by current liabilities.

Correct Answer
verified

Discuss the period-end adjusting entries that are required in the new revenue recognition standards for estimating sales discounts and sales returns and allowances.

Correct Answer
verified
Sellers are required to estimate both ex...
View Answer

A trade discount is:

Correct Answer
verified

The liquidity of a company can be measured using the current ratio and the ________, which only includes the most liquid current assets in its calculation.

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

Correct Answer
verified
other reve...
View Answer

The following statements are true regarding the operating cycle of a merchandising company except:

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
verified

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

Correct Answer
verified

Harley's Antique Shop had net sales of $772,000. The gross profit was $415,000. Calculate Harley's cost of goods sold.

Correct Answer
verified
Cost of Goods Sold =...
View Answer

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

Correct Answer
verified

When a company has no reportable non-operating activities, its income from operations is simply labeled net income.

Correct Answer
verified

Correct Answer
verified

Exam 5: Accounting for Merchandising Operations

An income statement that includes cost of goods sold as another expense and shows only one subtotal for total expenses is a:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Quick assets are defined as:

Correct AnswerverifiedShow Answer

Purchase allowances refer to merchandise a buyer acquires but then returns to the seller.

Correct AnswerverifiedShow Answer

The net method of recording purchases refers to recording:

Correct AnswerverifiedShow Answer

The acid-test ratio is defined as current assets divided by current liabilities.

Correct AnswerverifiedShow Answer

Discuss the period-end adjusting entries that are required in the new revenue recognition standards for estimating sales discounts and sales returns and allowances.

Correct AnswerverifiedSellers are required to estimate both ex...View AnswerShow Answer

A trade discount is:

Correct AnswerverifiedShow Answer

The liquidity of a company can be measured using the current ratio and the ________, which only includes the most liquid current assets in its calculation.

Correct AnswerverifiedShow Answer

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

The following statements are true regarding the operating cycle of a merchandising company except:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Harley's Antique Shop had net sales of $772,000. The gross profit was $415,000. Calculate Harley's cost of goods sold.

Correct AnswerverifiedCost of Goods Sold =...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

When a company has no reportable non-operating activities, its income from operations is simply labeled net income.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Sellers are required to estimate both ex...
View Answer

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other reve...
View Answer

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Cost of Goods Sold =...
View Answer

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