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Exam 5: Accounting for Merchandising Operations

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Question 81

Multiple Choice

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A company purchased $4,000 worth of merchandise. Transportation costs were an additional $350. The company later returned $275 worth of merchandise and paid the invoice within the 2% cash discount period. The total amount paid for this merchandise is:

A) $3,725.00.
B) $3,925.00.
C) $3,995.00.
D) $4,000.50.
E) $4,075.00.

F) D) and E)
G) A) and D)

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Question 82

Multiple Choice

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On October 1, Courtland Company sold merchandise in the amount of $5,800 to Carter Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Courtland uses the periodic inventory system. On October 4, Carter returns some of the merchandise. The selling price of the merchandise is $500 and the cost of the merchandise returned is $350. Carter pays the invoice on October 8, and takes the appropriate discount. The journal entry that Courtland makes on October 8 is:

A) Choice A
B) Choice B
C) Choice C
D) Choice D
E) Choice E

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

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Question 83

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Fill in the blanks (a) through (g) for the Hendricks Company for each of the income statements for 2009, 2010, and 2011.

Sales returns:

A company's current ratio is 1.2 and its quick ratio is 0.25. This company is probably an excellent credit risk because the ratios reveal no indication of liquidity problems.

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%.

From the adjusted trial balance given below for the Mirror Company, prepare an income statement. Salaries expense and depreciation expense on the building are equally divided between selling activities and the general and administrative activities.

Under the ___________ system, each purchase, purchase return and allowance, purchase discount, and transportation-in transaction is recorded in a separate temporary account.

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.

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

Beginning inventory plus net purchases is:

Under both the periodic and perpetual inventory systems, the temporary account Purchases Returns and Allowances is used to accumulate the cost of all returns and allowances for a period.

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 wholesaler is an intermediary that buys products from manufacturers or other wholesalers and sells them to consumers.

All of the following statements regarding inventory shrinkage are except:

The gross margin ratio:

A company's quick assets are $147,000 and its current liabilities are $143,000. This company's acid-test ratio is 1.03.

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:

Purchase discounts are the same as trade discounts.

On October 1, Courtland Company sold merchandise in the amount of $5,800 to Carter Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Courtland uses the periodic inventory system. Carter pays the invoice on October 8, and takes the appropriate discount. The journal entry that Courtland makes on October 8 is: