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A wholesaler is an intermediary that buys products from manufacturers or other wholesalers and sells them to consumers.

A) True
B) False

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A perpetual inventory system continually updates accounting records for merchandising transactions.

A) True
B) False

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All of the following statements related to U.S. GAAP and IFRS are true except:


A) Accounting for basic inventory transactions is the same under the two systems.
B) The closing process for merchandisers is the same under both systems.
C) U.S. GAAP offers little guidance about the presentation order of expenses.
D) Neither system requires separate disclosure of items when their size, nature, or frequency are important.
E) Neither system defines operating income.

F) None of the above
G) A) and B)

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Under a periodic inventory system, purchases, purchases returns and allowances, purchase discounts, and transportation in transactions are recorded in the Merchandise Inventory account.

A) True
B) False

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On May 1, Anders Company, Inc. purchased merchandise in the amount of $5,800 from Shilling, with credit terms of 2/10, n/30. Anders uses the perpetual inventory system. The journal entry or entries that Anders will make on May 1 is:


A)  Sales 5,800 Accounts receivable 5,800\begin{array} { | l | r | r | } \hline \text { Sales } & 5,800 & \\\hline \text { Accounts receivable } & & 5,800 \\\hline\end{array}
B)  Merchandise Inventory 5,800 Accounts payable 5,800\begin{array} { | l | r | r | } \hline \text { Merchandise Inventory } & 5,800 & \\\hline \text { Accounts payable } & & 5,800 \\\hline\end{array}
C)  Accounts payable 5,800 Sales 5,800\begin{array} { | l | r | r | } \hline \text { Accounts payable } & 5,800 & \\\hline \text { Sales } & & 5,800 \\\hline\end{array}
D)  Merchandise inventory 5,800 Cash 5,800\begin{array} { | l | r | r | } \hline \text { Merchandise inventory } & 5,800 & \\\hline \text { Cash } & & 5,800 \\\hline\end{array}
E)  Purchases 5,800 Accounts Payable 5,800\begin{array} { | l | r | r | } \hline \text { Purchases } & 5,800 & \\\hline \text { Accounts Payable } & & 5,800 \\\hline\end{array}

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

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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 8, it paid the full amount due. The amount of the cash paid on July 8 equals:


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

F) A) and B)
G) A) and E)

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On September 12, Vander Company, Inc. 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. On September 14, Jepson returns some of the merchandise. The selling price of the merchandise is $500 and the cost of the merchandise returned is $350. Jepson pays the invoice on September 18, and takes the appropriate discount. The journal entry that Vander makes on September 18 is: A)  Cash 5,800 Accounts receivable 5,800\begin{array} { | l | r | r | } \hline \text { Cash } & 5,800 & \\\hline \text { Accounts receivable } & & 5,800 \\\hline\end{array} B)  Cash 4,000 Accounts receivable 4,000\begin{array} { | l | r | r | } \hline \text { Cash } & 4,000 & \\\hline \text { Accounts receivable } & & 4,000 \\\hline\end{array} C)  Cash 5,194 Sales discounts 106 Accounts receivable 5,300\begin{array} { | l | r | r | } \hline \text { Cash } & 5,194 & \\\hline \text { Sales discounts } & 106 & \\\hline \text { Accounts receivable } & & 5,300 \\\hline\end{array} D)  Cash 5,684 Accounts receivable 5,684\begin{array} { | l | r | r | } \hline \text { Cash } & 5,684 & \\\hline \text { Accounts receivable } & & 5,684 \\\hline \end{array} E)  Cash 5,684 Sales discounts 116 Accounts receivable 5,800\begin{array} { | l | r | r | } \hline \text { Cash } & 5,684 & \\\hline \text { Sales discounts } & 116 & \\\hline \text { Accounts receivable } & & 5,800 \\\hline\end{array}

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Identify and explain the key components of a merchandiser's net income.

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The basic components of income begin wit...

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The Merchandise Inventory account balance at the beginning of the current period is equal to the amount of ending Merchandise Inventory from the previous period.

A) True
B) False

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What are the steps of the operating cycle for a merchandiser with credit sales?

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The steps are: (1) cash purcha...

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Expenses to promote sales by displaying and advertising merchandise, making sales, and delivering goods to customers are known as:


A) General and administrative expenses.
B) Cost of goods sold.
C) Selling expenses.
D) Purchasing expenses.
E) Non-operating activities.

F) A) and E)
G) All of the above

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On May 1, Shilling Company, Inc. sold merchandise in the amount of $5,800 to Anders, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Shilling uses the perpetual inventory system. The journal entry or entries that Shilling will make on May 1 is:


A)  Sales 5,800 Accounts receivable 5,800\begin{array} { | l | r | r | } \hline \text { Sales } & 5,800 & \\\hline \text { Accounts receivable } & & 5,800 \\\hline \end{array}
B)  Sales 5,800 Accounts receivable 5,800 Cost of goods sold 4,000 Merchandise Inventory 4,000\begin{array} { | l | r | r | } \hline \text { Sales } & 5,800 & \\\hline \text { Accounts receivable } & & 5,800 \\\hline \text { Cost of goods sold } & 4,000 & \\\hline \text { Merchandise Inventory } & & 4,000 \\\hline\end{array}
C)  Accounts receivable 5,800 Sales 5,800\begin{array} { | c | r | r | } \hline \text { Accounts receivable } & 5,800 & \\\hline \text { Sales } & & 5,800 \\\hline\end{array}
D)  Accounts receivable 5,800 Sales 5,800 Cost of goods sold 4,000 Merchandise inventory 4,000\begin{array} { | l | r | r | } \hline \text { Accounts receivable } & 5,800 & \\\hline \text { Sales } & & 5,800 \\\hline \text { Cost of goods sold } & 4,000 & \\\hline \text { Merchandise inventory } & & 4,000 \\\hline\end{array}
E)  Accounts receivable 4,000 Sales 4,000\begin{array} { | l | r | r | } \hline \text { Accounts receivable } & 4,000 & \\\hline \text { Sales } & & 4,000 \\\hline\end{array}

F) A) and B)
G) None of the above

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On March 12, Klein Company, Inc. 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. The journal entry or entries that Klein will make on March 12 is:


A)  Sales 7,800 Accounts receivable 7,800\begin{array} { | l | r | r | } \hline \text { Sales } & 7,800 & \\\hline \text { Accounts receivable } & & 7,800 \\\hline \end{array}
B)  Sales 7,800 Accounts receivable 7,800 Cost of goods sold 4,500 Merchandise Inventory 4,500\begin{array} { | l | r | r | } \hline \text { Sales } & 7,800 & \\\hline \text { Accounts receivable } & & 7,800 \\\hline \text { Cost of goods sold } & 4,500 & \\\hline \text { Merchandise Inventory } & & 4,500 \\\hline\end{array}
C)  Accounts receivable 7,800 Sales 7,800\begin{array} { | l | r | r | } \hline \text { Accounts receivable } & 7,800 & \\\hline \text { Sales } & & 7,800 \\\hline\end{array}
D)  Accounts receivable 7,800 Sales 7,800 Cost of goods sold 4,500 Merchandise inventory 4,500\begin{array} { | l | r | r | } \hline \text { Accounts receivable } & 7,800 & \\\hline \text { Sales } & & 7,800 \\\hline \text { Cost of goods sold } & 4,500 & \\\hline \text { Merchandise inventory } & & 4,500 \\\hline \end{array}
E)  Accounts receivable 4,500 Sales 4,500\begin{array} { | l | r | r | } \hline \text { Accounts receivable } & 4,500 & \\\hline \text { Sales } & & 4,500 \\\hline\end{array}

F) All of the above
G) B) and C)

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

A) True
B) False

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What is the acid-test ratio? How does it measure a company's liquidity?

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The acid-test ratio is a measure of a me...

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Sales Discounts and Sales Returns and Allowances are contra revenue accounts that are debited to close the accounts during the closing process.

A) True
B) False

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A credit memorandum from a seller informs a buyer of the seller's credit to its Accounts Payable account arising from a sales return or allowance.

A) True
B) False

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Describe the difference between wholesalers and retailers.

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A wholesaler is an intermediary that buy...

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Cost of goods sold represents the cost of buying and preparing merchandise for sale.

A) True
B) False

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

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Cost of Goods Sold =...

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