FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 3: Accounting for Merchandising Businesses

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 71

Multiple Choice

Review LaterAdd Note

Review Later

The following data are from the income statement of Rathbun Company: $\begin{array}{ll}\text { Sales } & \$ 800 \\\text { Cost of Goods Sold } & (500) \\\text { Other Expenses } & (200) \\\text { Net Income }&\$100\end{array}$ The company's gross margin percentage is:

A) 12.5%.
B) 37.5%.
C) 62.5%.
D) 60.0%.

E) B) and C)
F) A) and D)

Correct Answer

verified

Show Answer

Question 72

Multiple Choice

Review LaterAdd Note

Review Later

Net income percentage is equal to

A) Net Income divided by Net Sales.
B) Net Income divided by Total Assets.
C) Total Equity divided by Net Sales.
D) Net Sales divided by Retained Earnings.

E) A) and B)
F) B) and D)

Correct Answer

verified

Show Answer

Question 73

Essay

Review LaterAdd Note

Explain the major difference between a merchandising business and a service business.

For a company that uses a perpetual inventory system, a physical count of the inventory can reveal the amount of inventory shrinkage the company has experienced.

Gross margin is equal to

Armstrong Company maintains perpetual inventory records. The company's inventory account had a $6,500 balance as of December 31, 2014. On that date, a physical count of inventory showed only $6,100 of merchandise in stock. The write-down to recognize the missing inventory will

When does a product cost become an expense?

Schumacher Company uses the perpetual inventory system, and it engaged in the following transactions during 2014: 1) Started the business by issuing common stock for $7,500 cash 2) Paid cash to purchase $5,000 of inventory 3) Sold inventory that cost $3,000 for $7,250 cash 4) Incurred and paid operating expenses, $250 Schumacher Company engaged in the following transactions during 2015: 1) Paid cash to purchase $5,800 of inventory 2) Sold inventory that cost $7,000 for $15,150 cash 3) Incurred and paid operating expenses, $500 The balance in the Merchandise Inventory account at December 31, 2015 is:

The term "gain" represents profit resulting from transactions that are not likely to regularly recur.

Under a periodic system, shipping costs paid for goods received from a supplier increases the amount of

A company using the perpetual inventory method paid cash for transportation-in. Which of the following choices reflects the effects of this event on the financial statements?

The term "FOB destination" means

A retail company sells goods primarily to

Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter amounts. Assume use of a perpetual inventory system. $\text { Increase } = \mathrm { I } \quad \text { Decrease } = \mathrm { D } \quad \text { No Effect } = \mathrm { N }$ Youkilis Company discovered that a recent shipment of merchandise it had purchased was not of good quality. The seller agreed to grant Youkilis an allowance of $500. Youkilis had not yet paid the amount owed for the merchandise. Show how the transaction would affect Youkilis's financial statements. $\begin{array} {| l| l| l| l| l| l| l| }\text { Assets}&\text { Liabilities }&\text {Equity}&\text { Revenues}&\text { Expenses }&\text { Net Income }&\text { Cash }\\\hline &&&&&\end{array}$

Gain on Sale of Land is reported in the operating activities section of the statement of cash flows.

Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter amounts. Assume use of a perpetual inventory system. $\text { Increase } = \mathrm { I } \quad \text { Decrease } = \mathrm { D } \quad \text { No Effect } = \mathrm { N }$ Youkilis Co. sold merchandise to a customer for $2,400 cash. The merchandise had originally cost Youkilis $1,800. Show how the transaction would affect Youkilis's financial statements. $\begin{array} {| l| l| l| l| l| l| l| }\text { Assets}&\text { Liabilities }&\text {Equity}&\text { Revenues}&\text { Expenses }&\text { Net Income }&\text { Cash }\\\hline &&&&&\end{array}$

Merchandising businesses

The Gross Margin line appears on a single-step income statement but not on a multistep income statement.

The purpose of common size financial statements is to:

What is the relationship between gross margin and net income?