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Exam 4: Accounting for Merchandising Operations

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Question 31

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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) True
B) False

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Question 32

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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.

A) True
B) False

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Question 33

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The profit margin ratio is the same as the gross profit ratio.

Cost of goods sold:

Purchase allowances refer to a price reduction (allowance)granted to a buyer of defective or unacceptable merchandise.

Mega Skateboard Supplier had net sales of $2.8 million,its cost of goods sold was $1.6 million,and its net income was $0.9 million.Its gross margin ratio equals:

A company that uses the net method of recording purchases and a perpetual inventory system purchased $1,800 of merchandise on July 5 with terms 2/10,n/30.On July 7,it returned $200 worth of merchandise.On July 28,it paid the full amount due.The correct journal entry to record the payment on July 28 is:

A company purchases merchandise with a catalog price of $20,000.The company receives a 35% trade discount from the seller.The seller also offers credit terms of 2/10,n/30.Assuming no returns were made and that payment was made within the discount period,what is the net cost of the merchandise?

A company purchased $1,800 of merchandise on July 5 with terms 2/10,n/30.On July 7,it returned $200 worth of merchandise.On July 8,it paid the full amount due.The amount of the cash paid on July 8 equals:

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: $\quad$ 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.

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:

Gross profit is also called gross margin.

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 purchase on August 7 is:

A debit to Sales Returns and Allowances and a credit to Accounts Receivable:

A company has sales of $375,000 and its gross profit is $157,500.Its cost of goods sold equals:

From the adjusted trial balance given below for the Grayson Company,prepare a multiple-step income statement in good form.Salaries expense and building depreciation expense should be equally divided between selling activities and the general and administrative activities.

A wholesaler buys products from manufacturers or other wholesalers and sells them to consumers.

Jasper Company is a wholesaler that buys merchandise in large quantities.Its supplier's catalog indicates a list price of $500 per unit on merchandise Jasper intends to purchase,and offers a 30% trade discount for large quantity purchases.The cost of shipping for the merchandise is $7 per unit.Jasper's total purchase price per unit will be:

The acid-test ratio:

Under a perpetual inventory system,when a credit customer returns non-defective merchandise to the seller,the seller debits Sales Returns and Allowances and credits Accounts Receivable and also debits Merchandise Inventory and credits Cost of Goods Sold.