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Exam 6: Merchandising Operations and the Multistep Income Statement

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Question 21

Multiple Choice

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Your company makes a bank deposit of $857 in its chequing account.Which of the following describes how this transaction should be accounted for?

A) You add $857 to your recorded cash balance and the bank deducts $857 from your chequing account balance.
B) You deduct $857 from your recorded cash balance and the bank deducts $857 from your chequing account balance.
C) You add $857 to your recorded cash balance and the bank adds $857 to your chequing account balance.
D) You deduct $857 from your recorded cash balance and the bank adds $857 to your chequing account balance.

E) B) and C)
F) All of the above

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Question 22

Multiple Choice

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A company starts the period with 100 computers in inventory,purchases 30 more,returns 4 of them to suppliers,and has 83 in inventory at the end of the period.Which of the following statements is true?

A) Net purchases total 26 computers.
B) Net sales total 51 computers.
C) Net sales total 26 computers.
D) Net purchases total 51 computers.

E) All of the above
F) C) and D)

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Question 23

Multiple Choice

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Merchandise was sold on credit for $3,000,terms 1/10,n/30.The correct entry to record the cash collection should be:

NSF cheques are recorded as accounts payable. BT: Knowledge

A rising gross profit percentage indicates management's inability to control production and inventory costs. BT: Comprehension

Purrfect Pets sells 6,000 bags of dog food this month for $10 each; 2,600 of these bags were sold to customers who took advantage of an 3% early payment discount.Twenty bags were returned by customers who had paid cash; their dogs did not like the dog food.Purrfect Pets had paid $5 a bag for this dog food and received a 2% purchase discount for early payment.Purrfect Pets also paid a trucking company $1,660 for shipping the 6,000 bags. Calculate the gross profit and the gross profit margin for Purrfect Pets,assuming dog food is the company's only product and that returned product was unopened so it was put back in inventory.

A periodic inventory system does not track the cost of goods sold during the accounting period. BT: Knowledge

Intel makes microchips from raw materials acquired from suppliers.Intel is a:

"Shrinkage" is another term for inventory loss due to theft,error,or fraud. BT: Knowledge

In a perpetual inventory system,only one journal entry is required when goods are sold from inventory. BT: Knowledge

In a retail business that uses a perpetual inventory system,scanning a bar code:

Contra-revenue accounts:

The Sales Returns and Allowances account balance should be deducted from the Sales account balance when computing net sales. BT: Knowledge

Match the term and the definition.There are more definitions than terms. _____ outstanding cheque _____ sales returns and allowances _____ discount period _____ net sales _____ purchase returns and allowances _____ NSF cheque _____ maximum credit period _____ credit card discount _____ gross profit margin A.When a company accepts goods back from customers. B.When companies reduce price for a sale and then raise it back again. C.Net income divided by gross profit. D.A reduction in price that is given to purchasers who use credit cards. E.All the cost of goods bought by a company minus purchase returns and discounts. F.Gross profit divided by total assets. G.If companies take this long to pay suppliers they must pay a late penalty. H.A reduction in sales revenue that occurs when companies accept credit cards. I.The longest amount of time a company has to pay a supplier the undiscounted amount owed. J.When a cheque has been written but has not yet been recorded by the cheque writer's bank. K.Sales revenue minus all sales discounts,credit card discounts,and sales returns and allowances. L.The length of time a company has to pay a supplier and still receive an early payment discount. M.Gross profit divided by net sales revenue. N.When a cheque has been written on an account that does not have enough money to cover it. O.When companies send goods back to suppliers. P.Sales revenue minus all expenses.

Customers are the biggest source of shrinkage in the retail industry. BT: Knowledge

The Tuck Shop began the current month with inventory costing $10,000,then purchased inventory at a cost of $35,000.The perpetual inventory system indicates that inventory costing $30,000 was sold during the month for $40,000.If an inventory count shows that inventory costing $14,500 is actually on hand at month-end,what amount of shrinkage occurred during the month?

A company sells $10,000 of goods.The gross profit percentage is 32%.Net income would be $3,200. BT: Application

In order to calculate shrinkage:

Internal controls include the policies and procedures a company implements to protect against theft of assets,to promote efficiency,and to ensure compliance with laws and regulations. BT: Knowledge

Perpetual inventory systems often use technology such as bar codes,optical scanners,and computers. BT: Knowledge