Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

On September 12, Ryan Company sold merchandise in the amount of $5,800 to Johnson Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,000.
- Ryan uses the periodic inventory system and the net method of accounting for sales. Johnson pays the invoice on September 18, and takes the appropriate discount. The journal entry that Ryan makes on September 18 is:

Accepted Answer

A)     Cash 5,684 Sales discounts 116 Accounts receivable 5,800\begin{array} { | l | r | r | } \hline 	ext { Cash } & 5,684 & \\hline 	ext { Sales discounts } & 116 & \\hline 	ext { Accounts receivable } & & 5,800 \\hline\end{array} Cash  Sales discounts  Accounts receivable ​5,684116​5,800​​ 
B)     Cash 5,684 Accounts receivable 5,684\begin{array} { | l | r | r | } \hline 	ext { Cash } & 5,684 & \\hline 	ext { Accounts receivable } & & 5,684 \\hline\end{array} Cash  Accounts receivable ​5,684​5,684​​ 
C)     Cash 5,800 Accounts receivable 5,800\begin{array} { | l | r | r | } \hline 	ext { Cash } & 5,800 & \\hline 	ext { Accounts receivable } & & 5,800 \\hline\end{array} Cash  Accounts receivable ​5,800​5,800​​ 
D)     Cash 4,000 Accounts receivable 4,000\begin{array} { | l | r | r | } \hline 	ext { Cash } & 4,000 & \\hline 	ext { Accounts receivable } & & 4,000 \\hline\end{array} Cash  Accounts receivable ​4,000​4,000​​ 
E)     Cash 3,920 Sales discounts 80 Accounts receivable 4,000\begin{array} { | l | r | r | } \hline 	ext { Cash } & 3,920 & \\hline 	ext { Sales discounts } & 80 & \\hline 	ext { Accounts receivable } & & 4,000 \\hline\end{array} Cash  Sales discounts  Accounts receivable ​3,92080​4,000​​F) A) and C)
G) A) and B)

Question 3

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. The amount of the cash paid on July 28 equals:

Accepted Answer

A)   $1,600.
B)   $1,800.
C)   $1,568.
D)   $1,564.
E)   $200.F) A) and C)
G) A) and E)

Question 4

A company's net sales are $775,420, its costs of goods sold are $413,890, and its net income is $117,220. Its gross margin ratio equals:

Accepted Answer

A)   40.5%.
B)   46.6%.
C)   31.5%.
D)   53.4%.
E)   28.3%.F) A) and C)
G) C) and D)

Question 5

Delivery expense is reported as part of general and administrative expense in the seller's income statement.

Accepted Answer

A) True 
 B)False

Question 6

A merchandiser:

Accepted Answer

A)   Earns net income by buying and selling merchandise.
B)   Earns profit from fares only.
C)   Earns profit from commissions only.
D)   Receives fees only in exchange for services.
E)   Buys products from consumers.F) All of the above
G) B) and C)

Question 7

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 table. Truman pays the invoice on February 8, and takes the appropriate discount. The journal entry that Smart makes on February 8 is:

Accepted Answer

A)     Cash 5,684 Sales discounts 116 Accounts receivable 5,800\begin{array} { | l | r | r | } \hline 	ext { Cash } & 5,684 & \\hline 	ext { Sales discounts } & 116 & \\hline 	ext { Accounts receivable } & & 5,800 \\hline\end{array} Cash  Sales discounts  Accounts receivable ​5,684116​5,800​​ 
B)     Cash 5,684 Accounts receivable 5,684\begin{array} { | l | r | r | } \hline 	ext { Cash } & 5,684 & \\hline 	ext { Accounts receivable } & & 5,684 \\hline\end{array} Cash  Accounts receivable ​5,684​5,684​​ 
C)     Cash 5,800 Accounts receivable 5,800\begin{array} { | l | r | r | } \hline 	ext { Cash } & 5,800 & \\hline 	ext { Accounts receivable } & & 5,800 \\hline\end{array} Cash  Accounts receivable ​5,800​5,800​​ 
D)     Cash 4,000 Accounts receivable 4,000\begin{array} { | l | r | r | } \hline 	ext { Cash } & 4,000 & \\hline 	ext { Accounts receivable } & & 4,000 \\hline\end{array} Cash  Accounts receivable ​4,000​4,000​​ 
E)     Cash 3,920 Sales discounts 80 Accounts receivable 4,000\begin{array} { | l | r | r | } \hline 	ext { Cash } & 3,920 & \\hline 	ext { Sales discounts } & 80 & \\hline 	ext { Accounts receivable } & & 4,000 \\hline\end{array} Cash  Sales discounts  Accounts receivable ​3,92080​4,000​​F) A) and E)
G) D) and E)

Question 8

What is gross margin ratio? How is it used as an indicator of profitability?

Accepted Answer

The gross margin ratio computes the rela...

Question 9

Sabor Company uses a perpetual inventory system and the gross method of accounting for purchases. Sabor purchased $17,800 of merchandise on April 7 with credit terms of 1/10, n/30. Merchandise with a cost of $1,800 was damaged and returned to the seller on April 10. On April 16 the company paid the amount due. Prepare the journal entries to record the transactions on all three dates.

Accepted Answer

None...

Question 10

Under the ________ inventory accounting system, each purchase, purchase return and allowance, purchase discount, and transportation-in transaction is recorded in a separate temporary account.

Accepted Answer

The answer of Under the ________ inventory accounting system, each...

Question 11

On September 12, Ryan Company sold merchandise in the amount of $5,800 to Johnson Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,000.
- Johnson uses the periodic inventory system and the net method of accounting for purchases. The journal entry that Johnson will make on September 12 is:

Accepted Answer

A)     Merchandite inventory 5,800 Accounts payable 5,800\begin{array} { | l | r | r | } \hline 	ext { Merchandite inventory } & 5,800 & \\hline 	ext { Accounts payable } & & 5,800 \\hline\end{array} Merchandite inventory  Accounts payable ​5,800​5,800​​ 
B)     Purchases 5,800 Accounts payable 5,800\begin{array} { | l | r | r | } \hline 	ext { Purchases } & 5,800 & \\hline 	ext { Accounts payable } & & 5,800 \\hline\end{array} Purchases  Accounts payable ​5,800​5,800​​ 
C)     Merchandite inventory 5,684 Accounts payable 5,684\begin{array} { | l | r | r | } \hline 	ext { Merchandite inventory } & 5,684 & \\hline 	ext { Accounts payable } & & 5,684 \\hline\end{array} Merchandite inventory  Accounts payable ​5,684​5,684​​ 
D)     Purchases 5,684 Accounts payable 5,684\begin{array} { | l | r | r | } \hline 	ext { Purchases } & 5,684 & \\hline 	ext { Accounts payable } & & 5,684 \\hline\end{array} Purchases  Accounts payable ​5,684​5,684​​ 
E)     Accounts payable 4,000 Merchandite inventory 4,000\begin{array} { | l | l | l | } \hline 	ext { Accounts payable } & 4,000 & \\hline 	ext { Merchandite inventory } & & 4,000 \\hline\end{array} Accounts payable  Merchandite inventory ​4,000​4,000​​F) D) and E)
G) A) and B)

Question 12

New revenue recognition rules require that sellers report sales net of expected sales discounts.

Accepted Answer

A) True 
 B)False

Question 13

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 16, it paid the full amount due. The amount of the cash paid on August 16 equals:

Accepted Answer

A)   $8,152.50.
B)   $8,167.50.
C)   $9,750.00.
D)   $8,250.00.
E)   $9,652.50.F) D) and E)
G) A) and C)

Question 14

Sales returns:

Accepted Answer

A)   Refer to reductions in the selling price of merchandise sold to customers.
B)   Represent trade discounts.
C)   Are not recorded under the perpetual inventory system until the end of each accounting period.
D)   Refer to merchandise that customers return to the seller after the sale.
E)   Represent cash discounts.F) C) and D)
G) A) and B)

Question 15

________ expenses are those costs that support a company's overall operations and include expenses related to accounting, human resource management, and financial management.

Accepted Answer

General an...

Question 16

Beginning inventory plus net purchases is:

Accepted Answer

A)   Ending inventory.
B)   Cost of goods sold.
C)   Shown on the balance sheet.
D)   Merchandise (goods)  available for sale.
E)   Sales.F) A) and B)
G) A) and C)

Question 17

Johnnycake Restaurant uses a periodic inventory system and the gross method of accounting for purchases. Prepare general journal entries to record the following transactions for Johnnycake:
 $$\begin{array} { | c | l | } 
\hline \text { Aug. 10 } & \text { Johnncake purchased merchandise on credit from Foster Foods for } \
& \begin{array} { l } 
\text { \$9,000, terms 2/10, n/30, FOB destination. Transportation costs of } \$ 350 \
\text { were paid by Foster. }
\end{array} \
\hline 12 & \text { Johnrycake returned \$600 of merchandise from the August 10 purchase. } \
\hline 19 & \text { Johnnycake paid Foster for the August } 10 \text { purchase. } \
\hline
\end{array}$$

Accepted Answer

\[\begin{array} { | r | l | r | r | }
\...

Question 18

Morgan, Inc. uses a perpetual inventory system and the net method of recording purchases. On May 12, a merchandise purchase of $15,000 was made on credit, 2/10, n/30. The journal entry to record this purchase is:

Accepted Answer

A)     Merchandite Inventory 15,000 Accounts Payable 15,000\begin{array} { | l | r | r | } \hline 	ext { Merchandite Inventory } & 15,000 & \\hline 	ext { Accounts Payable } & & 15,000 \\hline\end{array} Merchandite Inventory  Accounts Payable ​15,000​15,000​​ 
B)     Accounts Payable 15,000 Merchandite Inventory 15,000\begin{array} { | l | r | r | } \hline 	ext { Accounts Payable } & 15,000 & \\hline 	ext { Merchandite Inventory } & & 15,000 \\hline\end{array} Accounts Payable  Merchandite Inventory ​15,000​15,000​​ 
C)     Merchandite Inventory 14.700 Accounts Payable 14.700\begin{array} { | l | l | l | } \hline 	ext { Merchandite Inventory } & 14.700 & \\hline 	ext { Accounts Payable } & & 14.700 \\hline\end{array} Merchandite Inventory  Accounts Payable ​14.700​14.700​​ 
D)     Purchases 14.700 Accounts Payable 14.700\begin{array} { | l | r | r | } \hline 	ext { Purchases } & 14.700 & \\hline 	ext { Accounts Payable } & & 14.700 \\hline\end{array} Purchases  Accounts Payable ​14.700​14.700​​ 
E)     Purchases 15,000 Accounts Payable 15,000\begin{array} { | l | r | r | } \hline 	ext { Purchases } & 15,000 & \\hline 	ext { Accounts Payable } & & 15,000 \\hline\end{array} Purchases  Accounts Payable ​15,000​15,000​​F) A) and E)
G) A) and B)

Question 19

The amount recorded for merchandise inventory includes all of the following except:

Accepted Answer

A)   Purchase discounts.
B)   Returns and allowances.
C)   Freight costs paid by the buyer.
D)   Trade discounts.
E)   Freight costs paid by the seller.F) A) and D)
G) A) and E)

Question 20

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:

Accepted Answer

A)   $3,995.00.
B)   $4,075.00.
C)   $4,000.50.
D)   $3,725.00.
E)   $3,925.00.F) A) and B)
G) B) and E)

Exam 5: Accounting for Merchandising Operations

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

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:

Correct Answer
verified

New revenue recognition rules require that sellers report sales net of expected sales discounts.

Correct Answer
verified

Delivery expense is reported as part of general and administrative expense in the seller's income statement.

Correct Answer
verified

Correct Answer
verified
\[\begin{array} { | r | l | r | r | }
\...
View Answer

Under the ________ inventory accounting system, each purchase, purchase return and allowance, purchase discount, and transportation-in transaction is recorded in a separate temporary account.

Correct Answer
verified

________ expenses are those costs that support a company's overall operations and include expenses related to accounting, human resource management, and financial management.

Correct Answer
verified
General an...
View Answer

Correct Answer
verified

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. The amount of the cash paid on July 28 equals:

Correct Answer
verified

Sales returns:

Correct Answer
verified

A merchandiser:

Correct Answer
verified

Beginning inventory plus net purchases is:

Correct Answer
verified

Morgan, Inc. uses a perpetual inventory system and the net method of recording purchases. On May 12, a merchandise purchase of $15,000 was made on credit, 2/10, n/30. The journal entry to record this purchase is:

Correct Answer
verified

Correct Answer
verified
None...
View Answer

What is gross margin ratio? How is it used as an indicator of profitability?

Correct Answer
verified
The gross margin ratio computes the rela...
View Answer

A company's net sales are $775,420, its costs of goods sold are $413,890, and its net income is $117,220. Its gross margin ratio equals:

Correct Answer
verified

The amount recorded for merchandise inventory includes all of the following except:

Correct Answer
verified

Correct Answer
verified

Exam 5: Accounting for Merchandising Operations

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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:

Correct AnswerverifiedShow Answer

New revenue recognition rules require that sellers report sales net of expected sales discounts.

Correct AnswerverifiedShow Answer

Delivery expense is reported as part of general and administrative expense in the seller's income statement.

Correct AnswerverifiedShow Answer

Correct Answerverified\[\begin{array} { | r | l | r | r | } \...View AnswerShow Answer

Under the ________ inventory accounting system, each purchase, purchase return and allowance, purchase discount, and transportation-in transaction is recorded in a separate temporary account.

Correct AnswerverifiedShow Answer

________ expenses are those costs that support a company's overall operations and include expenses related to accounting, human resource management, and financial management.

Correct AnswerverifiedGeneral an...View AnswerShow Answer

Correct AnswerverifiedShow Answer

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. The amount of the cash paid on July 28 equals:

Correct AnswerverifiedShow Answer

Sales returns:

Correct AnswerverifiedShow Answer

A merchandiser:

Correct AnswerverifiedShow Answer

Beginning inventory plus net purchases is:

Correct AnswerverifiedShow Answer

Morgan, Inc. uses a perpetual inventory system and the net method of recording purchases. On May 12, a merchandise purchase of $15,000 was made on credit, 2/10, n/30. The journal entry to record this purchase is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedNone...View AnswerShow Answer

What is gross margin ratio? How is it used as an indicator of profitability?

Correct AnswerverifiedThe gross margin ratio computes the rela...View AnswerShow Answer

A company's net sales are $775,420, its costs of goods sold are $413,890, and its net income is $117,220. Its gross margin ratio equals:

Correct AnswerverifiedShow Answer

The amount recorded for merchandise inventory includes all of the following except:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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General an...
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None...
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The gross margin ratio computes the rela...
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Correct Answer
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