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Exam 4: Accounting for Merchandising Operations

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Question 1

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A period's beginning inventory is equal to the prior period's ________.

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ending inventory

Question 2

Multiple Choice

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Using the following year-end information for Calvin's Clothing,calculate the current ratio and acid-test ratio for the business:

A) 1.80 and 1.00
B) 1.97 and 1.52
C) 2.73 and 1.52
D) 3.50 and 0.90
E) 1.80 and 0.90

F) D) and E)
G) A) and E)

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Question 3

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Offering sales discounts on credit sales can benefit a seller by decreasing the delay in receiving cash and reducing future collections efforts.

On September 12,Vander Company sold merchandise in the amount of $5,800 to Jepson Company,with credit terms of 2/10,n/30.The cost of the items sold is $4,000. -Jepson uses the periodic inventory system and the gross method of accounting for purchases.Jepson pays the invoice on September 18,and takes the appropriate discount.The journal entry that Jepson makes on September 18 is:

KLM Corporation's quick assets are $5,888,000,its current assets are $11,700,000 and its current liabilities are $8,000,000.Its acid-test ratio equals:

When purchases are recorded at net amounts,any discounts lost as a result of late payments are reported as an expense.

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

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.

An income statement that includes cost of goods sold as another expense and shows only one subtotal for total expenses is a:

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.

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

Which of the following statements regarding inventory shrinkage is not true?

The periodic inventory system requires updating the inventory account only at the end of the period.

Prepare journal entries to record the following merchandising transactions of Margin Company,which applies the perpetual inventory system and the gross method of recording invoices.Margin Company offers all of its credit customers credit terms of 2/10,n/30.

The following information refers to Percy's Records and its competitors in the music store business. Required: Comment on the relative liquidity positions of these companies.

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:

Distinguish between selling expenses and general and administrative expenses.

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.The journal entry that Anders will make on May 1 is:

Cushman Company had $800,000 in sales,sales discounts of $12,000,sales returns and allowances of $18,000,cost of goods sold of $380,000,and $275,000 in operating expenses. -Net income equals:

Sales discounts has a normal debit balance because it decreases Sales,which has a normal credit balance.