Question 1

Cost of goods sold is also called cost of sales.

Accepted Answer

A) True 
 B)False

Question 2

Generally accepted accounting principles require companies to use a specific format for the financial statements.

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

On July 22, a company purchased merchandise inventory at a cost of $5,250 with credit terms 2/10, net 30. If the company pays for the purchase on August 1, what would be the appropriate journal entry?

Accepted Answer

A)    Merchandise Inventory 5,250 Accounts Payable 5,250\begin{array} { | c | c | c | } \hline 	ext { Merchandise Inventory } & 5,250 & \\hline 	ext { Accounts Payable } & & 5,250 \\hline\end{array} Merchandise Inventory  Accounts Payable ​5,250​5,250​​ 
B)    Accounts Payable 5,250 Merchandise Inventory 5,250\begin{array} { | c | c | c | } \hline 	ext { Accounts Payable } & 5,250 & \\hline 	ext { Merchandise Inventory } & & 5,250 \\hline\end{array} Accounts Payable  Merchandise Inventory ​5,250​5,250​​ 
C)     Purchase Discount 5,145 Accounts Payable 5,145\begin{array} { | c | c | c | } \hline 	ext { Purchase Discount } & 5,145 & \\hline 	ext { Accounts Payable } & & 5,145 \\hline\end{array} Purchase Discount  Accounts Payable ​5,145​5,145​​ 
D)    Accounts Payable 5,145 Cash 5,145\begin{array} { | c | c | c | } \hline 	ext { Accounts Payable } & 5,145 & \\hline 	ext { Cash } & & 5,145 \\hline\end{array} Accounts Payable  Cash ​5,145​5,145​​ 
E)    Accounts Payable 5,250 Merchandise Inventory 105 Cash 5,145\begin{array} { | l | r | r | } \hline 	ext { Accounts Payable } & 5,250 & \\hline 	ext { Merchandise Inventory } & & 105 \\hline 	ext { Cash } & & 5,145 \\hline\end{array} Accounts Payable  Merchandise Inventory  Cash ​5,250​1055,145​​F) A) and B)
G) A) and C)

Question 5

The current period's ending inventory is:

Accepted Answer

A)   The next period's beginning inventory
B)   The current period's cost of goods sold
C)   The prior period's beginning inventory
D)   The current period's net purchases
E)   The current period's beginning inventoryF) B) and C)
G) A) and E)

Question 6

Multiple-step income statements:

Accepted Answer

A)   Are required by the FASB
B)   Contain more detail than a simple listing of revenues and expenses
C)   Are required for the perpetual inventory system
D)   List cost of goods sold as an operating expense
E)   Can only be used in perpetual inventory systemsF) A) and C)
G) D) and E)

Question 7

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

Accepted Answer

Inventory shrinkage is the los...

Question 8

A company purchased $8,750 worth of merchandise, with terms of 2/10, n/30. The invoice was paid within the cash discount period. Accordingly, the company received a cash discount of _______________.

Accepted Answer

The answer of A company purchased $8,750 worth of merchandise,...

Question 9

A company had sales of $375,000 and its gross profit was $157,500. Its cost of goods sold equal:

Accepted Answer

A)   $(217,000) 
B)   $375,000
C)   $157,500
D)   $217,500
E)   $532,500F) All of the above
G) B) and D)

Question 10

Each sales transaction of a seller that uses a perpetual system involves recognizing both revenue and cost of merchandise sold.

Accepted Answer

A) True 
 B)False

Question 11

A retailer is an intermediary that buys products from manufacturers and sells them to wholesalers.

Accepted Answer

A) True 
 B)False

Question 12

Cost of goods sold is reported on both the income statement and the balance sheet.

Accepted Answer

A) True 
 B)False

Question 13

The quick assets are defined as:

Accepted Answer

A)   Cash, short-term investments and inventory
B)   Cash, short-term investments and current receivables
C)   Cash, inventory and current receivables
D)   Cash, noncurrent receivables and prepaid expenses
E)   Accounts receivable, inventory and prepaid expensesF) C) and D)
G) A) and D)

Question 14

Operating expenses are classified into two categories: selling expenses and cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 15

The acid-test ratio:

Accepted Answer

A)   Is also called the quick ratio
B)   Measures profitability
C)   Measures inventory turnover
D)   Is generally greater than the current ratio
E)   Is not used by merchandise companiesF) B) and D)
G) A) and D)

Question 16

A multiple-step income statement format shows detailed computations of net sales and other costs and expenses and reports subtotals for various classes of items.

Accepted Answer

A) True 
 B)False

Question 17

A ___________ is an intermediary that buys products from manufacturers and sells to retailers.

Accepted Answer

The answer of A ___________ is an intermediary that buys...

Question 18

A company purchased $6,000 of merchandise on credit with terms 4/15, n/30. How much will be debited to Accounts Payable if the company pays $800 cash on this account within ten days?

Accepted Answer

A)   $833.33
B)   $800
C)   Nothing will debited to Accounts Payable, the account should be credited in this situation
D)   $5,760
E)   $5,333.33F) B) and D)
G) A) and E)

Question 19

From the adjusted trial balance for the Worker Products Company, prepare a multiple-step income statement in good form.

Accepted Answer

The answer of From the adjusted trial balance for the...

Question 20

A company's current assets were $17,980, its quick assets were $11,420 and its current liabilities were $12,190. Its quick ratio equals:

Accepted Answer

A)   0.94
B)   1.07
C)   1.48
D)   1.57
E)   2.40F) A) and B)
G) A) and C)

Exam 4: Accounting for Merchandising Operations

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

Correct AnswerverifiedInventory shrinkage is the los...View AnswerShow Answer

A multiple-step income statement format shows detailed computations of net sales and other costs and expenses and reports subtotals for various classes of items.

Correct AnswerverifiedShow Answer

A company purchased $8,750 worth of merchandise, with terms of 2/10, n/30. The invoice was paid within the cash discount period. Accordingly, the company received a cash discount of _______________.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

From the adjusted trial balance for the Worker Products Company, prepare a multiple-step income statement in good form.

Correct AnswerverifiedShow Answer

The acid-test ratio:

Correct AnswerverifiedShow Answer

The current period's ending inventory is:

Correct AnswerverifiedShow Answer

A company's current assets were $17,980, its quick assets were $11,420 and its current liabilities were $12,190. Its quick ratio equals:

Correct AnswerverifiedShow Answer

A company purchased $6,000 of merchandise on credit with terms 4/15, n/30. How much will be debited to Accounts Payable if the company pays $800 cash on this account within ten days?

Correct AnswerverifiedShow Answer

A retailer is an intermediary that buys products from manufacturers and sells them to wholesalers.

Correct AnswerverifiedShow Answer

Each sales transaction of a seller that uses a perpetual system involves recognizing both revenue and cost of merchandise sold.

Correct AnswerverifiedShow Answer

Generally accepted accounting principles require companies to use a specific format for the financial statements.

Correct AnswerverifiedShow Answer

Cost of goods sold is reported on both the income statement and the balance sheet.

Correct AnswerverifiedShow Answer

Operating expenses are classified into two categories: selling expenses and cost of goods sold.

Correct AnswerverifiedShow Answer

A ___________ is an intermediary that buys products from manufacturers and sells to retailers.

Correct AnswerverifiedShow Answer

Cost of goods sold is also called cost of sales.

Correct AnswerverifiedShow Answer

A company had sales of $375,000 and its gross profit was $157,500. Its cost of goods sold equal:

Correct AnswerverifiedShow Answer

Multiple-step income statements:

Correct AnswerverifiedShow Answer

The quick assets are defined as:

Correct AnswerverifiedShow Answer

On July 22, a company purchased merchandise inventory at a cost of $5,250 with credit terms 2/10, net 30. If the company pays for the purchase on August 1, what would be the appropriate journal entry?

Correct AnswerverifiedShow Answer

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