Question 1

Either the gross method or net method may be used to record sales with cash discounts, but the net method requires a period-end adjusting entry to estimate expected future sales discounts taken.

Accepted Answer

A) True 
 B)False

Question 2

Merchandise that customers return to the seller after a sale is referred to as__________ .

Accepted Answer

The answer of Merchandise that customers return to the seller...

Question 3

Each sale of merchandise has two parts: the revenue side and the cost side.

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Cushman Company had $800,000 in net sales, $350,000 in gross profit, and $200,000 in operating expenses. Cost of goods sold equals:

Accepted Answer

A)   $150,000.
B)   $450,000.
C)   $200,000.
D)   $350,000.
E)   $800,000.F) A) and C)
G) A) and E)

Question 6

Cushman Company had $800,000 in sales, sales discounts of $12,000, sales returns and allowances of $18,000, cost of goods sold of $380,000, and $275,000 in operating expenses. 
-Gross profit equals:

Accepted Answer

A)   $770,000.
B)   $408,000.
C)   $115,000.
D)   $402,000.
E)   $390,000.F) None of the above
G) A) and B)

Question 7

All of the following statements regarding inventory shrinkage are true except:

Accepted Answer

A)   Inventory shrinkage refers to the loss of inventory.
B)   Inventory shrinkage can be caused by theft or deterioration.
C)   Inventory shrinkage is recognized by debiting an operating expense.
D)   Inventory shrinkage is determined by comparing a physical count of inventory with recorded inventory amounts.
E)   Inventory shrinkage is recognized by debiting Cost of Goods Sold.F) C) and D)
G) B) and C)

Question 8

Match between columns
                        Premises:  An inventory accounting method that continually updates accounting records for inventory available for sale and inventory sold.
 An inventorv accounting method that updates the accounting records for merchandise transactions only at the end of a period.
 The time period in which reduced payment can be made by the buyer because of a cash discount offered by a seller of goods on credit.
 A notification that informs the seller of a debit made to the seller's account payable in the buyer's records.
 A cash discount granted, from the view of the purchaser intended to encourage buyers to pay amounts owed earlier.
 A notification that informs a buyer of a seller's credit to a buyer's account.
 A cash discount granted from the view of the seller, indicated in the credit terms on the invoice.
 The calculation of net sales less cost of goods sold.
 The description of the amounts and timing of payments from a buyer to a seller for a purchase.
 The amount of time allowed before full payment is due.

Accepted Answer

The Answer of Debit memorandum and Credit period and Credit is...

Question 9

All of the following statements regarding sales returns and allowances are true except:

Accepted Answer

A)   Sales returns and allowances estimates are typically made as period-end adjustments.
B)   When sales returns and allowances adjustments are made to sales, an estimate must also be made for the cost side.
C)   The Inventory Returns Estimated account is a current liability account.
D)   New revenue recognition rules require sellers to report sales net of expected returns and allowances for annual periods.
E)   Sales Refund Payable is a current liability account.F) B) and D)
G) C) and D)

Question 10

The seller is responsible for paying shipping charges and bears the risk of damage or loss in transit if goods are shipped FOB destination.

Accepted Answer

A) True 
 B)False

Question 11

Garza Company had sales of $135,000, sales discounts of $2,000, and sales returns of $3,200. Garza Company's net sales equals:

Accepted Answer

A)   $140,200.
B)   $5,200.
C)   $129,800.
D)   $135,000.
E)   $133,000.F) D) and E)
G) A) and E)

Question 12

Match the following definitions and terms by placing the letter for the terms A through J in the blank space next to the best definition.
A. Trade discount F. Acid-test ratio
B. General and administrative expenses G. Merchandise inventory
C. FOB shipping point H. Selling expenses
D. Single-step income statement I. Multiple-step income statement
E. FOB destination J. Inventory shrinkage

Accepted Answer

1. F; 2. D; 3. E; 4....

Question 13

A company had net sales of $545,000 and cost of goods sold of $345,000. Its gross margin equals
$890,000.

Accepted Answer

A) True 
 B)False

Question 14

On March 12, Klein Company 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 and the gross method of accounting for sales.
- On March 15, Babson returns some of the merchandise. The selling price of the merchandise is $600 and the cost of the merchandise returned is $350. Babson pays the invoice on March 20, and takes the appropriate discount. The journal entry that Klein makes on March 20 is:

Accepted Answer

A)     Cash 7,056 Accounts receivable 7,056\begin{array} { | l | r | r | } \hline 	ext { Cash } & 7,056 & \\hline 	ext { Accounts receivable } & & 7,056 \\hline\end{array} Cash  Accounts receivable ​7,056​7,056​​ 
B)     Cash 7,800 Accounts receivable 7,800\begin{array} { | l | r | r | } \hline 	ext { Cash } & 7,800 & \\hline 	ext { Accounts receivable } & & 7,800 \\hline\end{array} Cash  Accounts receivable ​7,800​7,800​​ 
C)     Cash 7,644 Sales discounts 156 Accounts receivable 7,800\begin{array} { | l | r | r | } \hline 	ext { Cash } & 7,644 & \\hline 	ext { Sales discounts } & 156 & \\hline 	ext { Accounts receivable } & & 7,800 \\hline\end{array} Cash  Sales discounts  Accounts receivable ​7,644156​7,800​​ 
D)     Cash 4,500 Accounts receivable 4,500\begin{array} { | l | r | r | } \hline 	ext { Cash } & 4,500 & \\hline 	ext { Accounts receivable } & & 4,500 \\hline\end{array} Cash  Accounts receivable ​4,500​4,500​​ 
E)     Cash 7,056 Sales discounts 144 Accounts receivable 7,200\begin{array} { | l | r | r | } \hline 	ext { Cash } & 7,056 & \\hline 	ext { Sales discounts } & 144 & \\hline 	ext { Accounts receivable } & & 7,200 \\hline\end{array} Cash  Sales discounts  Accounts receivable ​7,056144​7,200​​F) D) and E)
G) A) and E)

Question 15

What is inventory shrinkage? How do managers account for shrinkage?

Accepted Answer

Inventory shrinkage is the loss of merch...

Question 16

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.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

Gross profit is also called gross margin.

Accepted Answer

A) True 
 B)False

Question 19

A merchandising company's operating cycle begins with the purchase of merchandise and ends with the collection of cash from the sale.

Accepted Answer

A) True 
 B)False

Question 20

Barbara's Boats uses the periodic inventory system and the net method of accounting for purchases. The company had the following transactions during January:
January 6: Purchased $10,000 of inventory. The seller's credit terms are 2/10, n/30. January 31: Due to an oversight, the invoice was not paid within the discount period. Full payment was made on January 31.
Prepare journal entries to record each of the preceding transactions.

Accepted Answer

None...

Exam 5: Accounting for Merchandising Operations

A company had net sales of $545,000 and cost of goods sold of $345,000. Its gross margin equals $890,000.

Correct Answer
verified

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

Correct Answer
verified

Each sale of merchandise has two parts: the revenue side and the cost side.

Correct Answer
verified

Cushman Company had $800,000 in sales, sales discounts of $12,000, sales returns and allowances of $18,000, cost of goods sold of $380,000, and $275,000 in operating expenses. -Gross profit equals:

Correct Answer
verified

Correct Answer
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None...
View Answer

Correct Answer
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1. F; 2. D; 3. E; 4....
View Answer

All of the following statements regarding sales returns and allowances are true except:

Correct Answer
verified

Correct Answer
verified

Either the gross method or net method may be used to record sales with cash discounts, but the net method requires a period-end adjusting entry to estimate expected future sales discounts taken.

Correct Answer
verified

Cushman Company had $800,000 in net sales, $350,000 in gross profit, and $200,000 in operating expenses. Cost of goods sold equals:

Correct Answer
verified

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.

Correct Answer
verified

All of the following statements regarding inventory shrinkage are true except:

Correct Answer
verified

What is inventory shrinkage? How do managers account for shrinkage?

Correct Answer
verified
Inventory shrinkage is the loss of merch...
View Answer

Garza Company had sales of $135,000, sales discounts of $2,000, and sales returns of $3,200. Garza Company's net sales equals:

Correct Answer
verified

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

Correct Answer
verified

A merchandising company's operating cycle begins with the purchase of merchandise and ends with the collection of cash from the sale.

Correct Answer
verified

The seller is responsible for paying shipping charges and bears the risk of damage or loss in transit if goods are shipped FOB destination.

Correct Answer
verified

Match the following definitions with the appropriate term

Merchandise that customers return to the seller after a sale is referred to as__________ .

Correct Answer
verified

Gross profit is also called gross margin.

Correct Answer
verified

Exam 5: Accounting for Merchandising Operations

A company had net sales of $545,000 and cost of goods sold of $345,000. Its gross margin equals $890,000.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Each sale of merchandise has two parts: the revenue side and the cost side.

Correct AnswerverifiedShow Answer

Cushman Company had $800,000 in sales, sales discounts of $12,000, sales returns and allowances of $18,000, cost of goods sold of $380,000, and $275,000 in operating expenses. -Gross profit equals:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedNone...View AnswerShow Answer

Correct Answerverified1. F; 2. D; 3. E; 4....View AnswerShow Answer

All of the following statements regarding sales returns and allowances are true except:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Either the gross method or net method may be used to record sales with cash discounts, but the net method requires a period-end adjusting entry to estimate expected future sales discounts taken.

Correct AnswerverifiedShow Answer

Cushman Company had $800,000 in net sales, $350,000 in gross profit, and $200,000 in operating expenses. Cost of goods sold equals:

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

All of the following statements regarding inventory shrinkage are true except:

Correct AnswerverifiedShow Answer

What is inventory shrinkage? How do managers account for shrinkage?

Correct AnswerverifiedInventory shrinkage is the loss of merch...View AnswerShow Answer

Garza Company had sales of $135,000, sales discounts of $2,000, and sales returns of $3,200. Garza Company's net sales equals:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A merchandising company's operating cycle begins with the purchase of merchandise and ends with the collection of cash from the sale.

Correct AnswerverifiedShow Answer

The seller is responsible for paying shipping charges and bears the risk of damage or loss in transit if goods are shipped FOB destination.

Correct AnswerverifiedShow Answer

Match the following definitions with the appropriate term

Merchandise that customers return to the seller after a sale is referred to as__________ .

Correct AnswerverifiedShow Answer

Gross profit is also called gross margin.

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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None...
View Answer

Correct Answer
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1. F; 2. D; 3. E; 4....
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
Inventory shrinkage is the loss of merch...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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