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Exam 4: Accounting for Merchandising Operations

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Question 61

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Describe the key attributes of inventory for a merchandising company.

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Merchandise inventory is a cur...

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Question 62

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Quick assets are defined as:

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

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

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Question 63

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

A company has net sales of $1,832,000,sales commissions of $194,000,net income of $366,400,and the gross profit ratio of 60%.What is the amount of cost of goods sold?

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

Maia's Bike Shop uses the perpetual inventory system and had the following transactions during the month of May: $\begin{array}{|l|l|}\hline\text { May 3 } & \begin{array}{l}\text { Sold merchandise to a customer on credit for } \$ 600, \text { terms } 2 / 10, \mathrm{n} / 30 . \text { The cost } \\\text { of the merchandise sold was } \$ 350 .\end{array} \\\hline \text { May 4 } & \begin{array}{l}\text { Sold merchandise to a customer for cash of } \$ 425 . \text { The cost of the merchandise } \\\text { was } \$ 250 .\end{array} \\\hline \text { May 6 } & \begin{array}{l}\text { Sold merchandise to a customer on credit for } \$ 1,300, \text { terms } 2 / 10, \mathrm{n} / 30 . \text { The } \\\text { cost of the merchandise sold was } \$ 750 .\end{array} \\\hline \text { May 8 } & \begin{array}{l}\text { The customer from May 3 returned merchandise with a selling price of } \$ 100 . \\\text { The cost of the merchandise returned was } \$ 55 .\end{array} \\\hline \text { May 15 } & \begin{array}{l}\text { The customer from May 6 paid the full amount due, less any appropriate } \\\text { discounts earned. }\end{array} \\\hline \text { May 31 } & \begin{array}{l}\text { The customer from May 3 paid the full amount due, less any appropriate } \\\text { discounts earned. }\end{array}\\\hline\end{array}$ Prepare the required journal entries that Maia's Bike Shop must make to record these transactions.

The operating cycle for a merchandiser that sells only for cash moves from:

A buyer did not take advantage of a supplier's credit terms of 2/10,n/30,but instead paid the invoice in full at the end of 30 days.By not taking the discount,the buyer lost the equivalent of 18% annual interest on the amount of the purchase.

The Merchandise Inventory account balance at the end of one period is equal to the amount of beginning merchandise inventory for the next period.

If a company sells merchandise with credit terms 2/10,n/60,the credit period is 10 days and the discount period is 60 days.

A company purchased $1,800 of merchandise on December 5.On December 7,it returned $200 worth of merchandise.On December 8,it paid the balance in full,taking a 2% discount.The amount of the cash paid on December 8 is:

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

The gross margin ratio:

A company has sales of $2,530,000,sales discounts of $200,000,sales returns and allowances of $323,000,shipping charges of $115,000,sales commissions of $234,000,net income of $863,500,and cost of goods sold of $1,012,000.What is the gross profit/margin ratio?

Cost of goods sold represents the value of merchandise sold to customers.

Maia's Bike Shop uses the periodic inventory system and had the following transactions during the month of May: Prepare the required journal entries that Maia's Bike Shop must make to record these transactions.

On October 1,Robertson Company sold merchandise in the amount of $5,800 to Alberts,with credit terms of 2/10,n/30.The cost of the items sold is $4,000.Robertson uses the perpetual inventory system.On October 4,Alberts returns some of the merchandise.The selling price of the merchandise is $500 and the cost of the merchandise returned is $350.The entry or entries that Robertson must make on October 4 is:

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

A company purchased $8,750 worth of merchandise,with terms of 2/10,n/30.The invoice was paid within the cash discount period.Accordingly,the company received a cash discount of _______________.

Alpha Company had cash sales of $94,275,credit sales of $83,450,sales returns and allowances of $1,700,and sales discounts of $3,475.Alpha's net sales for this period equal: