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Exam 5: Accounting for Merchandising Operations

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Question 51

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Cost of goods sold is also called cost of sales.

A) True
B) False

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Question 52

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

A) True
B) False

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Question 53

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A buyer issues a ________ to inform the seller of a debit made to the seller's account payable in the buyer's records.

Which of the following accounts is used in the periodic inventory system but not used in the perpetual inventory system?

A company that uses the perpetual inventory system and the gross method of accounting for purchases purchased $8,500 of merchandise on March 25 with credit terms of 2/10, n/30. The invoice was paid in full on April 4. Prepare the journal entries to record the transactions on March 25 and April 4.

Reductions in the selling price of merchandise sold to customers, often involving damaged or defective merchandise that a customer is willing to purchase with a decrease in the selling price is referred to as__________

Purchase returns refer to merchandise a buyer acquires but then returns to the seller.

Credit terms for a purchase include the amounts and timing of payments from a buyer to a seller.

A perpetual inventory system continually updates accounting records for merchandising transactions.

The ________ inventory system continually updates accounting records for merchandise transactions for the amounts of inventory available for sale and inventory sold.

Martin Corporation allows customers to return merchandise within 60 days of purchase. At year-end, Martin estimates that sales of $20,000, with a cost of $14,000 will be returned in the upcoming year. The unadjusted balance in Inventory Returns Estimated is a debit of $4,000, and the unadjusted balance in Sales Refund Payable is a credit of $2,500. Prepare the adjusting entries necessary to record the revenue side and cost side estimates for returns and allowances.

A company records the following journal entry: debit Cash $1,470, debit Sales Discounts $30, and credit Accounts Receivable $1,500. This means that a customer has taken what percentage cash discount for early payment?

Which of the following accounts would be closed at the end of the accounting period with a debit?

A company had net sales of $752,000 and cost of goods sold of $543,000. Its net income was $17,530. The company's gross margin ratio equals:

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.

The year-end adjusted trial balance of Gordon Produce for the current year, is shown below: GORDON PRODUCE Adjusted Trial Balance December 31 $\begin{array} { r | r | r } & \text { Debit } & \text { Credit } \\\hline \text { Cash } & \$ 1,500 & \\\hline \text { Store supplies } & 500 & \\\hline \text { Store equipment } & 18,000 & \\\hline \text { Merchandise inventory } & 11,000 & \\\hline & & \$ 3,000 \\\hline \text { Accum. depr.-store equipment } & & 6,000 \\\hline \text { Accounts payable } & & 50,000 \\\hline \text { J. Gordon, Capital } & & \\\hline \text { J. Gordon, Withdrawals } & 22,000 & \\\hline \text { Sales } & & 60,500 \\\hline \text { Cost of goods sold } & 48,000 & \\\hline \text { Depreciation expense -Store equipment } & 1,000 & \\\hline \text { Store supplies expense } & 1,500 & \\\hline \text { Salariss expense } & 14,000 &\end{array}$ $\begin{array} { r | r | r } \hline \text { Salaries expense } & 14,000 & \\\hline \text { Rent expense } & 2,000 & \\\hline & \$ 119,500 & \$ 119,500 \\\hline\end{array}$ Prepare closing entries at December 31 for the current year.

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. The journal entry or entries that Ryan will make on September 12 is (are) :

On March 12, Klein Company sold merchandise in the amount of $7,800 to Babson Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,500. Klein uses the perpetual inventory system and the gross method of accounting for sales. - On March 15, Babson returns some of the merchandise, which is not defective. The selling price of the returned merchandise is $600 and the cost of the merchandise returned is $350. The entry or entries that Klein must make on March 15 is:

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

A company has net sales of $825,000 and cost of goods sold of $547,000. Its net income is $98,500. The company's gross margin and operating expenses, respectively, are: