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Exam 4: Accounting for Merchandising Operations

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Question 101

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A company has sales of $695,000 and cost of goods sold of $278,000.Its gross profit equals:

A) $(417,000) .
B) $695,000.
C) $278,000.
D) $417,000.
E) $973,000.

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

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Question 102

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The acid-test ratio differs from the current ratio in that:

A) Liabilities are divided by current assets.
B) Prepaid expenses and inventory are excluded from the calculation of the acid-test ratio.
C) The acid-test ratio measures profitability and the current ratio does not.
D) The acid-test ratio excludes short-term investments from the calculation.
E) The acid-test ratio is a measure of liquidity but the current ratio is not.

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

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Question 103

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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 correct journal entry to record the payment on August 16 is:

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

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:

Describe the difference between wholesalers and retailers.

A company's current assets are $23,420,its quick assets are $13,890 and its current liabilities are $12,220.Its acid-test ratio equals:

Merchandise inventory is reported in the long-term assets section of the balance sheet.

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

________ are the amounts and timing of payment from a buyer to a seller.

________ can benefit a seller by decreasing the delay in receiving cash and reducing future collection efforts.

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:

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

Explain the difference between the single-step and multiple-step income statements.

A journal entry with a debit to cash of $980,a debit to Sales Discounts of $20,and a credit to Accounts Receivable of $1,000 means that a customer has taken a 10% cash discount for early payment.

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.On September 14,Johnson returns some of the merchandise.The selling price of the merchandise is $500 and the cost of the merchandise returned is $350.Johnson pays the invoice on September 18,and takes the appropriate discount.The journal entry that Ryan makes on September 18 is:

The gross margin ratio equals net sales less ________ divided by net sales.

Cost of Goods Sold is debited to close the account during the closing process.

The year-end adjusted trial balance of Gordon Produce for the current year,is shown below: Prepare closing entries at December 31 for the current year.

Successful use of a just-in-time inventory system can narrow the gap between the acid-test and the current ratio.