Question 1

Prepare journal entries to record the following merchandise transactions of Martinez Excavation Equipment, which applies the perpetual inventory system and the gross method of recording invoices.
 \(\begin{array}{|l|l|}
\hline \text { May 1 } & \begin{array}{l}
\text { Purchased merchandise from Kona Company for } \$ 12,700 \text { under credit } \
\text { terms of } 2 / 15, \mathrm{n} / 45, \mathrm{FOB} \text { destination, and invoice dated May } 1 .
\end{array} \
\hline 3 & \begin{array}{l}
\text { Sold merchandise to Walton for } \$ 8,000 \text { under credit terms of } 1 / 10, \mathrm{n} / 30, \
\text { FOB destination, invoice date May } 3 . \text { The merchandise had cost } \$ 5,000 .
\end{array} \
\hline 5 & \begin{array}{l}
\text { Returned } \$ 2,000 \text { of the merchandise purchased on May } 1 \text { to Kona } \
\text { Company. }
\end{array} \
\hline 6 & \begin{array}{l}
\text { Walton returned merchandise from the May } 3 \text { sale that had cost Martinez } \
\$ 625 \text { and had been sold for } \$ 1,000 . \text { The merchandise was restored to } \
\text { inventory. }
\end{array} \
\hline 13 & \text { Received the balance due from Walton less the return. } \
\hline 14 & \text { Paid the amount due Kona Company. } \
\hline
\end{array}\)

Accepted Answer

The answer of Prepare journal entries to record the following...

Question 2

Match the following terms with the appropriate definition.
A. Debit memorandum
B. Credit period
C. Credit terms
D. Credit memorandum
E. Discount period
F. Gross profit
G. Periodic inventory system
H. Perpetual inventory system
I. Sales discount
J. Purchase discount

Accepted Answer

1. H; 2. G; 3. E; 4....

Question 3

Quick assets include cash and cash equivalents, inventory, and current receivables.

Accepted Answer

A) True 
 B)False

Question 4

At its fiscal year-end of June 30, Kendall Wholesale's general ledger shows the following selected account balances. Kendall Wholesale uses the perpetual inventory system.
 $$\begin{array} { l l } 
\text { Merchandise Inventory } & \$ 60,000 \
\text { Sales } & 940,000 \
\text { Sales discounts } & 16,000 \
\text { Sales returns and allowanees } & 8,000 \
\text { Cost of goods sold } & 456,000
\end{array}$$ A physical count of its June 30 year-end inventory discloses that the cost of the merchandise inventory still available is $58,160. Prepare the entry to record any inventory shrinkage.

Accepted Answer

None...

Question 5

The Merchandise Inventory account balance at the beginning of the current period is equal to the amount of ending Merchandise Inventory from the previous period.

Accepted Answer

A) True 
 B)False

Question 6

Liquidity problems are likely to exist when a company's acid-test ratio:

Accepted Answer

A)   Is substantially lower than 1.
B)   Is less than the current ratio.
C)   Equals 1.
D)   Is higher than the current ratio.
E)   Is higher than 1.F) B) and E)
G) None of the above

Question 7

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:

Accepted Answer

A)   175%.
B)   32%.
C)   43%.
D)   57%.
E)   56%.F) D) and E)
G) A) and B)

Question 8

Under the net method of recording purchases, the Discounts Lost account is used when the purchaser fails to take a discount offered by the seller.

Accepted Answer

A) True 
 B)False

Question 9

On May 1, Anders Company purchased merchandise in the amount of $5,800 from Shilling, with credit terms of 2/10, n/30. Anders uses the perpetual inventory system and the gross method table. The journal entry or entries that Anders will make on May 1 is:

Accepted Answer

A)     Merchandite Inventory 5,800 Cash 5,800\begin{array} { | l | r | r | } \hline 	ext { Merchandite Inventory } & 5,800 & \\hline 	ext { Cash } & & 5,800 \\hline\end{array} Merchandite Inventory  Cash ​5,800​5,800​​ 
B)     Merchandite Inventory 5,800 Accounts payable 5,800\begin{array} { | l | r | r | } \hline 	ext { Merchandite Inventory } & 5,800 & \\hline 	ext { Accounts payable } & & 5,800 \\hline\end{array} Merchandite Inventory  Accounts payable ​5,800​5,800​​ 
C)     Purchases 5,800 Accounts payable 5,800\begin{array} { | l | r | r | } \hline 	ext { Purchases } & 5,800 & \\hline 	ext { Accounts payable } & & 5,800 \\hline\end{array} Purchases  Accounts payable ​5,800​5,800​​ 
D)     Accounts payable 5,800 Sales 5,800\begin{array} { | l | r | r | } \hline 	ext { Accounts payable } & 5,800 & \\hline 	ext { Sales } & & 5,800 \\hline\end{array} Accounts payable  Sales ​5,800​5,800​​ 
E)     Sales 5,800 Accounts receivable 5,800\begin{array} { | l | r | r | } \hline 	ext { Sales } & 5,800 & \\hline 	ext { Accounts receivable } & & 5,800 \\hline\end{array} Sales  Accounts receivable ​5,800​5,800​​F) C) and D)
G) B) and E)

Question 10

A periodic inventory system requires updating of the inventory account only at the beginning of an accounting period.

Accepted Answer

A) True 
 B)False

Question 11

Sales less sales discounts less sales returns and allowances equals:

Accepted Answer

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

Question 12

Vincent Company purchased merchandise from Liu Company with an invoice price of $300,000 and credit terms of 2/10, n/30. Liu Company's cost for the merchandise was $200,000. Vincent Company paid within the discount period. Assume that both buyer and seller use a perpetual inventory system and the gross method of recording invoices.
1. Prepare entries that Vincent should record for (a) the purchase and (b) the cash payment.
2. Prepare entries that Liu should record for (a) the sale and (b) the cash collection.
3. Assume that the buyer borrowed enough cash to pay the balance on the last day of the discount period at an annual interest rate of 9% and paid it back on the last day of the credit period. Compute how much the buyer saved by following this strategy. (Assume a 365-day year and round dollar amounts to the nearest cent.)

Accepted Answer

None...

Question 13

Beginning inventory plus the net cost of purchases is the ________.

Accepted Answer

merchandis...

Question 14

On July 1, Ferguson Company sold merchandise in the amount of $5,800 to Tracey Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Ferguson uses the perpetual inventory system and the gross method table. On July 5, Tracey returns some of the merchandise. The selling price of the merchandise is $500 and the cost of the merchandise returned is $350. The entry or entries that Ferguson must make on July 5 is:

Accepted Answer

A)     Sales returns and allowances 350 Accounts receivable 350\begin{array} { | l | r | r | } \hline 	ext { Sales returns and allowances } & 350 & \\hline 	ext { Accounts receivable } & & 350 \\hline\end{array} Sales returns and allowances  Accounts receivable ​350​350​​ 
B)     Accounts receivable 500 Sales returns and allowances 500\begin{array} { | l | r | r | } \hline 	ext { Accounts receivable } & 500 & \\hline 	ext { Sales returns and allowances } & & 500 \\hline\end{array} Accounts receivable  Sales returns and allowances ​500​500​​ 
C)     Accounts receivable 500 Sales returns and allowances 500 Cost of goods sold 350 Merchandise inventory 350\begin{array} { | l | r | r | } \hline 	ext { Accounts receivable } & 500 & \\hline 	ext { Sales returns and allowances } & & 500 \\hline 	ext { Cost of goods sold } & 350 & \\hline 	ext { Merchandise inventory } & & 350 \\hline\end{array} Accounts receivable  Sales returns and allowances  Cost of goods sold  Merchandise inventory ​500350​500350​​ 
D)     Sales returns and allowances 500 Accounts receivable 500 Merchandise inventory 350 Cost of goods sold 350\begin{array} { | l | r | r | } \hline 	ext { Sales returns and allowances } & 500 & \\hline 	ext { Accounts receivable } & & 500 \\hline 	ext { Merchandise inventory } & 350 & \\hline 	ext { Cost of goods sold } & & 350 \\hline\end{array} Sales returns and allowances  Accounts receivable  Merchandise inventory  Cost of goods sold ​500350​500350​​ 
E)     Sales returns and allowances 500 Accounts receivable 500\begin{array} { | l | r | r | } \hline 	ext { Sales returns and allowances } & 500 & \\hline 	ext { Accounts receivable } & & 500 \\hline\end{array} Sales returns and allowances  Accounts receivable ​500​500​​F) A) and D)
G) A) and C)

Question 15

If goods are shipped FOB destination, the seller does not record revenue from the sale until the goods arrive at their destination because the transaction is not complete until that point.

Accepted Answer

A) True 
 B)False

Question 16

The gross margin ratio equals net sales less ________ divided by net sales.

Accepted Answer

The answer of The gross margin ratio equals net sales...

Question 17

FOB ________ means the buyer accepts ownership when the goods depart the seller's place of business. The buyer is responsible for paying shipping costs and bears the risk of damage or loss when goods are in transit.

Accepted Answer

shipping p...

Question 18

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:

Accepted Answer

A)   $350
B)   $507
C)   $343
D)   $357
E)   $493F) A) and B)
G) A) and E)

Question 19

Sales of $350,000 and net sales of $323,000 could reflect sales discounts of $27,000.

Accepted Answer

A) True 
 B)False

Question 20

On September 12, Ryan Company sold merchandise in the amount of $5,800 to Johnson Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,000.
- Ryan uses the periodic inventory system and the net method of accounting for sales. On September 14, Johnson returns some of the non-defective merchandise, which is restored to inventory. The selling price of the returned merchandise is $500 and the cost of the merchandise returned is $350. The entry or entries that Ryan must make on September 14 is (are) :

Accepted Answer

A)     Sales returns and allowances 500 Accounts receivable 500\begin{array} { | l | r | r | } \hline 	ext { Sales returns and allowances } & 500 & \\hline 	ext { Accounts receivable } & & 500 \\hline\end{array} Sales returns and allowances  Accounts receivable ​500​500​​ 
B)     Sales returns and allowances 490 Accounts receivable 490 Merchandise inventory 350 Cost of goods sold 350\begin{array} { | l | r | r | } \hline 	ext { Sales returns and allowances } & 490 & \\hline 	ext { Accounts receivable } & & 490 \\hline 	ext { Merchandise inventory } & 350 & \\hline 	ext { Cost of goods sold } & & 350 \\hline\end{array} Sales returns and allowances  Accounts receivable  Merchandise inventory  Cost of goods sold ​490350​490350​​ 
C)     Sales returns and allowances 350 Accounts receivable 350\begin{array} { | l | r | r | } \hline 	ext { Sales returns and allowances } & 350 & \\hline 	ext { Accounts receivable } & & 350 \\hline\end{array} Sales returns and allowances  Accounts receivable ​350​350​​ 
D)     Sales returns and allowances 490 Accounts receivable 490\begin{array} { | l | r | r | } \hline 	ext { Sales returns and allowances } & 490 & \\hline 	ext { Accounts receivable } & & 490 \\hline\end{array} Sales returns and allowances  Accounts receivable ​490​490​​ 
E)     Sales returns and allowances 490 Accounts receivable 490 Merchandise inventory 343 Cost of goods sold 343\begin{array} { | l | r | r | } \hline 	ext { Sales returns and allowances } & 490 & \\hline 	ext { Accounts receivable } & & 490 \\hline 	ext { Merchandise inventory } & 343 & \\hline 	ext { Cost of goods sold } & & 343 \\hline\end{array} Sales returns and allowances  Accounts receivable  Merchandise inventory  Cost of goods sold ​490343​490343​​F) B) and D)
G) B) and E)

Exam 5: Accounting for Merchandising Operations

Sales of $350,000 and net sales of $323,000 could reflect sales discounts of $27,000.

Correct Answer
verified

Match the following terms with the appropriate definition. A. Debit memorandum B. Credit period C. Credit terms D. Credit memorandum E. Discount period F. Gross profit G. Periodic inventory system H. Perpetual inventory system I. Sales discount J. Purchase discount

Correct Answer
verified
1. H; 2. G; 3. E; 4....
View Answer

Correct Answer
verified

Liquidity problems are likely to exist when a company's acid-test ratio:

Correct Answer
verified

If goods are shipped FOB destination, the seller does not record revenue from the sale until the goods arrive at their destination because the transaction is not complete until that point.

Correct Answer
verified

Under the net method of recording purchases, the Discounts Lost account is used when the purchaser fails to take a discount offered by the seller.

Correct Answer
verified

Beginning inventory plus the net cost of purchases is the ________.

Correct Answer
verified
merchandis...
View Answer

A periodic inventory system requires updating of the inventory account only at the beginning of an accounting period.

Correct Answer
verified

Correct Answer
verified

On May 1, Anders Company purchased merchandise in the amount of $5,800 from Shilling, with credit terms of 2/10, n/30. Anders uses the perpetual inventory system and the gross method table. The journal entry or entries that Anders will make on May 1 is:

Correct Answer
verified

The gross margin ratio equals net sales less ________ divided by net sales.

Correct Answer
verified

The Merchandise Inventory account balance at the beginning of the current period is equal to the amount of ending Merchandise Inventory from the previous period.

Correct Answer
verified

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:

Correct Answer
verified

Sales less sales discounts less sales returns and allowances equals:

Correct Answer
verified

Quick assets include cash and cash equivalents, inventory, and current receivables.

Correct Answer
verified

FOB ________ means the buyer accepts ownership when the goods depart the seller's place of business. The buyer is responsible for paying shipping costs and bears the risk of damage or loss when goods are in transit.

Correct Answer
verified
shipping p...
View Answer

Correct Answer
verified
None...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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None...
View Answer

Exam 5: Accounting for Merchandising Operations

Sales of $350,000 and net sales of $323,000 could reflect sales discounts of $27,000.

Correct AnswerverifiedShow Answer

Match the following terms with the appropriate definition. A. Debit memorandum B. Credit period C. Credit terms D. Credit memorandum E. Discount period F. Gross profit G. Periodic inventory system H. Perpetual inventory system I. Sales discount J. Purchase discount

Correct Answerverified1. H; 2. G; 3. E; 4....View AnswerShow Answer

Correct AnswerverifiedShow Answer

Liquidity problems are likely to exist when a company's acid-test ratio:

Correct AnswerverifiedShow Answer

If goods are shipped FOB destination, the seller does not record revenue from the sale until the goods arrive at their destination because the transaction is not complete until that point.

Correct AnswerverifiedShow Answer

Under the net method of recording purchases, the Discounts Lost account is used when the purchaser fails to take a discount offered by the seller.

Correct AnswerverifiedShow Answer

Beginning inventory plus the net cost of purchases is the ________.

Correct Answerverifiedmerchandis...View AnswerShow Answer

A periodic inventory system requires updating of the inventory account only at the beginning of an accounting period.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

On May 1, Anders Company purchased merchandise in the amount of $5,800 from Shilling, with credit terms of 2/10, n/30. Anders uses the perpetual inventory system and the gross method table. The journal entry or entries that Anders will make on May 1 is:

Correct AnswerverifiedShow Answer

The gross margin ratio equals net sales less ________ divided by net sales.

Correct AnswerverifiedShow Answer

The Merchandise Inventory account balance at the beginning of the current period is equal to the amount of ending Merchandise Inventory from the previous period.

Correct AnswerverifiedShow Answer

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:

Correct AnswerverifiedShow Answer

Sales less sales discounts less sales returns and allowances equals:

Correct AnswerverifiedShow Answer

Quick assets include cash and cash equivalents, inventory, and current receivables.

Correct AnswerverifiedShow Answer

FOB ________ means the buyer accepts ownership when the goods depart the seller's place of business. The buyer is responsible for paying shipping costs and bears the risk of damage or loss when goods are in transit.

Correct Answerverifiedshipping p...View AnswerShow Answer

Correct AnswerverifiedNone...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedNone...View AnswerShow Answer

Correct Answer
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Correct Answer
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1. H; 2. G; 3. E; 4....
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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merchandis...
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
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Correct Answer
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shipping p...
View Answer

Correct Answer
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None...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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None...
View Answer