Question 1

When preparing an unadjusted trial balance using a periodic inventory system,the amount shown for Merchandise Inventory is:

Accepted Answer

A)   The ending inventory amount.
B)   The beginning inventory amount.
C)   Equal to the cost of goods sold.
D)   Equal to the cost of goods purchased.
E)   Equal to the gross profit.F) A) and C)
G) B) and E)

Question 2

Austin's Pub Supply uses the periodic inventory system and the gross method of accounting for sales.The company had the following sales transactions during August:
  
Prepare the journal entries that Austin's Pub Supply must make to record these transactions.

Accepted Answer

\[\begin{array} { l l r l }
\text { Aug...

Question 3

An expense resulting from failing to take advantage of cash discounts when using the net method of recording purchases is called:

Accepted Answer

A)   Sales discounts.
B)   Trade discounts.
C)   Purchases discounts.
D)   Discounts lost.
E)   Discounts earned.F) A) and C)
G) A) and B)

Question 4

Using the following year-end information for Calvin's Clothing,calculate the current ratio and acid-test ratio for the business:
  Cash $52,000 Short-term investments 12,000 Accounts receivable 54,000 Inventory 325,000 Prepaid expenses 17,500 Accounts payable 106,500 Other current payables 25,000\begin{array}{lr}	ext { Cash } & \$  52,000 \	ext { Short-term investments } &  12,000 \	ext { Accounts receivable } & 54,000\	ext { Inventory } & 325,000 \	ext { Prepaid expenses } & 17,500 \	ext { Accounts payable } & 106,500 \	ext { Other current payables } & 25,000\end{array} Cash  Short-term investments  Accounts receivable  Inventory  Prepaid expenses  Accounts payable  Other current payables ​$52,00012,00054,000325,00017,500106,50025,000​

Accepted Answer

A)   1.80 and 1
B)   1.97 and 1.52
C)   2.73 and 1.52
D)   3.50 and 0.90
E)   1.80 and 0.90 F) A) and B)
G) B) and C)

Question 5

A company has net sales of $752,000 and cost of goods sold of $543,000.Its net income is $17,530.The company's gross margin and operating expenses,respectively,are:

Accepted Answer

A)   $209,000 and $191,470
B)   $191,470 and $209,000
C)   $525,470 and $227,000
D)   $227,000 and $525,470
E)   $734,000 and $191,470F) B) and C)
G) B) and D)

Question 6

The credit terms 2/10,n/30 are interpreted as:

Accepted Answer

A)   2% cash discount if the amount is paid within 10 days, or the balance due in 30 days.
B)   10% cash discount if the amount is paid within 2 days, or the balance due in 30 days.
C)   30% discount if paid within 2 days.
D)   30% discount if paid within 10 days.
E)   2% discount if paid within 30 days.F) B) and E)
G) A) and E)

Question 7

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

Accepted Answer

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

Question 8

Purchase returns refer to merchandise a buyer acquires but then returns to the seller.

Accepted Answer

A) True 
 B)False

Question 9

Merchandise inventory refers to products that a company owns and intends to sell to customers.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

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

Question 11

A company reported the following year-end information:
 $$\begin{array} { | l | r | } 
\hline \text { Cash } & \$ 52,000 \
\hline \text { Short-term investments } & 12,000 \
\hline \text { Accounts receivable } & 54,000 \
\hline \text { Inventory } & 325,000 \
\hline \text { Prepaid expenses } & 17,500 \
\hline \text { Accounts payable } & 106,500 \
\hline \text { Other current payables } & 25,000 \
\hline
\end{array}$$ 
Required:
1.Explain the purpose of the acid-test ratio.
2.Calculate the acid-test ratio for this company.
3.What does the acid-test ratio reveal about this company?

Accepted Answer

1.The acid-test ratio measures the abili...

Question 12

Distinguish between selling expenses and general and administrative expenses.

Accepted Answer

Selling expenses include the expenses of...

Question 13

FOB shipping point means that the buyer accepts ownership when the goods arrive at the buyer's place of business.

Accepted Answer

A) True 
 B)False

Question 14

A common rule of thumb is that a company's acid-test ratio should have a value near or higher than 1 to conclude that a company is unlikely to face near-term liquidity problems.

Accepted Answer

A) True 
 B)False

Question 15

Zenith Company's Merchandise Inventory account at year-end has a balance of $91,820,but a physical count reveals that only $90,450 of inventory exists.The adjusting entry to record this $1,370 of inventory shrinkage is:

Accepted Answer

A)     Merchandise inventory 1,370 Inventory shrinkage expense 1,370\begin{array} { | l | r | r | } \hline 	ext { Merchandise inventory } & 1,370 & \\hline 	ext { Inventory shrinkage expense } & & 1,370 \\hline\end{array} Merchandise inventory  Inventory shrinkage expense ​1,370​1,370​​ 
B)     Purchases discounts 1,370 Cost of poods sold 1,370\begin{array} { | l | r | r | } \hline 	ext { Purchases discounts } & 1,370 & \\hline 	ext { Cost of poods sold } & & 1,370 \\hline\end{array} Purchases discounts  Cost of poods sold ​1,370​1,370​​ 
C)     Cost of goods sold 1,370 Merchandise inventory 1,370\begin{array} { | l | r | r | } \hline 	ext { Cost of goods sold } & 1,370 & \\hline 	ext { Merchandise inventory } & & 1,370 \\hline\end{array} Cost of goods sold  Merchandise inventory ​1,370​1,370​​ 
D)     Inventory shrinkage expense 1,370 Cost of goods sold 1,370\begin{array} { | l | r | r | } \hline 	ext { Inventory shrinkage expense } & 1,370 & \\hline 	ext { Cost of goods sold } & & 1,370 \\hline\end{array} Inventory shrinkage expense  Cost of goods sold ​1,370​1,370​​ 
E)     Cost of goods sold 90,450 Merchandise inventory 90,450\begin{array} { | l | r | l | } \hline 	ext { Cost of goods sold } & 90,450 & \\hline 	ext { Merchandise inventory } & & 90,450 \\hline\end{array} Cost of goods sold  Merchandise inventory ​90,450​90,450​​F) A) and B)
G) None of the above

Question 16

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

Accepted Answer

The answer of The ________ inventory system continually updates accounting...

Question 17

Reductions in the selling price of merchandise sold to customers,often involving damaged or defective merchandise that a customer is willing to purchase with a decrease in the selling price is referred to as ________.

Accepted Answer

The answer of Reductions in the selling price of merchandise...

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

Describe the difference(s)between the periodic and the perpetual inventory accounting systems.

Accepted Answer

Under a perpetual system each purchase,p...

Question 20

Sales less sales discounts less sales returns and allowances equals:

Accepted Answer

A)   Net purchases.
B)   Cost of goods sold.
C)   Net sales.
D)   Gross profit.
E)   Net income.F) A) and B)
G) All of the above

Exam 4: Accounting for Merchandising Operations

Purchase returns refer to merchandise a buyer acquires but then returns to the seller.

Correct Answer
verified

FOB shipping point means that the buyer accepts ownership when the goods arrive at the buyer's place of business.

Correct Answer
verified

Zenith Company's Merchandise Inventory account at year-end has a balance of $91,820,but a physical count reveals that only $90,450 of inventory exists.The adjusting entry to record this $1,370 of inventory shrinkage is:

Correct Answer
verified

Sales less sales discounts less sales returns and allowances equals:

Correct Answer
verified

Austin's Pub Supply uses the periodic inventory system and the gross method of accounting for sales.The company had the following sales transactions during August: Prepare the journal entries that Austin's Pub Supply must make to record these transactions.

Correct Answer
verified
\[\begin{array} { l l r l }
\text { Aug...
View Answer

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

Correct Answer
verified

A common rule of thumb is that a company's acid-test ratio should have a value near or higher than 1 to conclude that a company is unlikely to face near-term liquidity problems.

Correct Answer
verified

Reductions in the selling price of merchandise sold to customers,often involving damaged or defective merchandise that a customer is willing to purchase with a decrease in the selling price is referred to as ________.

Correct Answer
verified

When preparing an unadjusted trial balance using a periodic inventory system,the amount shown for Merchandise Inventory is:

Correct Answer
verified

Merchandise inventory refers to products that a company owns and intends to sell to customers.

Correct Answer
verified

Correct Answer
verified
1.The acid-test ratio measures the abili...
View Answer

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

Correct Answer
verified

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

Correct Answer
verified

An expense resulting from failing to take advantage of cash discounts when using the net method of recording purchases is called:

Correct Answer
verified

The credit terms 2/10,n/30 are interpreted as:

Correct Answer
verified

Distinguish between selling expenses and general and administrative expenses.

Correct Answer
verified
Selling expenses include the expenses of...
View Answer

A company has net sales of $752,000 and cost of goods sold of $543,000.Its net income is $17,530.The company's gross margin and operating expenses,respectively,are:

Correct Answer
verified

Describe the difference(s)between the periodic and the perpetual inventory accounting systems.

Correct Answer
verified
Under a perpetual system each purchase,p...
View Answer

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

Correct Answer
verified

Correct Answer
verified

Exam 4: Accounting for Merchandising Operations

Purchase returns refer to merchandise a buyer acquires but then returns to the seller.

Correct AnswerverifiedShow Answer

FOB shipping point means that the buyer accepts ownership when the goods arrive at the buyer's place of business.

Correct AnswerverifiedShow Answer

Zenith Company's Merchandise Inventory account at year-end has a balance of $91,820,but a physical count reveals that only $90,450 of inventory exists.The adjusting entry to record this $1,370 of inventory shrinkage is:

Correct AnswerverifiedShow Answer

Sales less sales discounts less sales returns and allowances equals:

Correct AnswerverifiedShow Answer

Austin's Pub Supply uses the periodic inventory system and the gross method of accounting for sales.The company had the following sales transactions during August: Prepare the journal entries that Austin's Pub Supply must make to record these transactions.

Correct Answerverified\[\begin{array} { l l r l } \text { Aug...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

A common rule of thumb is that a company's acid-test ratio should have a value near or higher than 1 to conclude that a company is unlikely to face near-term liquidity problems.

Correct AnswerverifiedShow Answer

Reductions in the selling price of merchandise sold to customers,often involving damaged or defective merchandise that a customer is willing to purchase with a decrease in the selling price is referred to as ________.

Correct AnswerverifiedShow Answer

When preparing an unadjusted trial balance using a periodic inventory system,the amount shown for Merchandise Inventory is:

Correct AnswerverifiedShow Answer

Merchandise inventory refers to products that a company owns and intends to sell to customers.

Correct AnswerverifiedShow Answer

Correct Answerverified1.The acid-test ratio measures the abili...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

An expense resulting from failing to take advantage of cash discounts when using the net method of recording purchases is called:

Correct AnswerverifiedShow Answer

The credit terms 2/10,n/30 are interpreted as:

Correct AnswerverifiedShow Answer

Distinguish between selling expenses and general and administrative expenses.

Correct AnswerverifiedSelling expenses include the expenses of...View AnswerShow Answer

A company has net sales of $752,000 and cost of goods sold of $543,000.Its net income is $17,530.The company's gross margin and operating expenses,respectively,are:

Correct AnswerverifiedShow Answer

Describe the difference(s)between the periodic and the perpetual inventory accounting systems.

Correct AnswerverifiedUnder a perpetual system each purchase,p...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

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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\[\begin{array} { l l r l }
\text { Aug...
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
verified
1.The acid-test ratio measures the abili...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Selling expenses include the expenses of...
View Answer

Correct Answer
verified

Correct Answer
verified
Under a perpetual system each purchase,p...
View Answer

Correct Answer
verified

Correct Answer
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