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Exam 4: Reporting and Analyzing Merchandising Operations

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Question 61

Multiple Choice

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Sales returns:

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

F) C) and D)
G) A) and B)

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Question 62

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Beginning merchandise inventory plus the net cost of purchases is equal to the merchandise available for sale.

A) True
B) False

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Question 63

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Sales Discounts,Sales Returns and Allowances,and Cost of Goods Sold are all closed to the Income Summary account with debits.

A ___________ inventory system updates the accounting record for inventory only at the end of a period.

Each sales transaction of a seller that uses a perpetual system involves recognizing both revenue and cost of merchandise sold.

Liquidity problems are likely to exist when a company's acid-test ratio is:

Beginning inventory plus the net cost of purchases is the _____________________.

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

A company's current assets were $17,980,its quick assets were $11,420,and its current liabilities were $12,190.Its quick ratio equals:

Sellers always offer a discount to buyers for prompt payment toward purchases made on credit.

A company's net sales were $676,600,its cost of goods sold was $236,810,and its net income was $33,750.Its gross margin ratio equals:

Harriet's Toy Shop had net sales of $852,000.The gross profit was $230,000.Calculate Harriet's cost of goods sold.

Generally accepted accounting principles require companies to use a specific format for the financial statements.

What does FOB stand for? Differentiate between FOB shipping point (or FOB factory) and FOB destination?

Describe the difference between wholesalers and retailers.

Eck Company uses the perpetual inventory method.On April 15,Carlton Company purchased merchandise inventory on terms of FOB destination.When the merchandise was delivered,Eck paid $750 cash for the shipping charges.How would the company record this transaction?

Fulton Company uses the periodic inventory method.On April 15,Carlton Company purchased merchandise inventory on terms of FOB destination.When the merchandise was delivered,Fulton paid $750 cash for the shipping charges.How would the company record this transaction?

Under the perpetual inventory system,the cost of merchandise purchased is accumulated in the Merchandise Inventory account.

A company had net sales of $340,500,its cost of goods sold was $257,000,and its net income was $13,750.The company's gross margin ratio equals 24.5%.

A company has sales of $1,500,000,sales discounts of $102,000,sales returns and allowances of $123,000,shipping charges of $15,000,sales commissions of $34,000,net income totaled $263,500,and cost of goods sold of $420,000.What is the net sales amount for the period?