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Exam 4: Accounting for Merchandising Operations

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Question 41

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A seller usually prepares a ____________________ to confirm a buyer's return or allowance, that informs the buyer of the seller's credit to the buyer's Account Receivable on the seller's books.

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Question 42

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A company's gross profit was $83,750 and its net sales were $347,800. Its gross margin ratio equals:

A) 4.2%
B) 24.1%
C) 75.9%
D) $83,750
E) $264,050

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

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Question 43

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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%. ($340,500 - $257,000)/$340,500 = 24.5%

A company had expenses other than cost of goods sold of $250,000. Determine sales and gross profit given cost of goods sold was $100,000 and net income was $150,000.

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

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

The adjusting entry to reflect inventory shrinkage is a debit to Income Summary and a credit to Inventory Shrinkage Expense.

A company that uses the perpetual inventory system purchased $8,500 worth of inventory on September 25. Terms of the purchase were 2/10, n/30. The invoice was paid in full on October 4. Prepare the journal entries to record these merchandise transactions.

Which of the following statements are true regarding the closing process of a merchandiser?

Describe the recording process (including costs) for sales of merchandise inventory using a perpetual inventory system.

A _______________________ is a document the buyer issues to inform the seller of a debit made to the seller's account in the buyer's records.

The __________________ inventory system continually updates accounting records for merchandise transactions for the amounts of inventory available for sale and inventory sold.

The acid-test ratio is also called the quick ratio.

Roller Blade Company uses the perpetual inventory system and had the following transactions during October: Prepare journal entries to record each of the preceding transactions.

Explain the cost flows and operating activities of a merchandising company.

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. $20/$1,000 = 2% discount

A merchandising company:

FOB _________________ means the buyer accepts ownership when the goods depart the seller's place of business. The buyer is responsible for paying shipping costs and bears the risk of damage or loss when goods are in transit.

On July 22, a company purchased merchandise inventory at a cost of $5,250 with credit terms 2/10, net 60. If the company borrows money at 12% to pay for the purchase on the last day of the discount period and pays the loan off on the last day of the credit period, what would be the net savings for the company?

Takita Company had net sales of $500,000 and cost of goods sold of $350,000. Calculate Takita's gross profit.