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Exam 5: Accounting for Merchandising Operations

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Question 1

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

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Question 2

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Peg had net sales of $28,496 million, its cost of goods sold was $19,092 million, and its net income was $997 million. Its gross margin ratio equals:

A) 3.5%.
B) 5.2%.
C) 33%.
D) 67%.
E) 149.3%.

F) C) and D)
G) A) and B)

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Question 3

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A company that uses the perpetual inventory system purchased $8,500 on September 25. Terms of the purchase were 2/10, n/30. The invoice was paid in full on October 4. Prepare the journal entries to record these merchandise transactions.

Distinguish between selling expenses and general and administrative expenses.

________________________ refers to products that a company owns and intends to sell.

Because sellers assume that their customers will pay within the discount period, the seller usually records the discount at the time of the sale.

All of the following statements related to U.S. GAAP and IFRS are true except:

A merchandiser's classified balance sheet reports merchandise inventory as a current asset.

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

All of the following statements regarding inventory shrinkage are true except:

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

Benson Company had cash sales of $94,275, credit sales of $83,450, sales returns and allowances of $1,700, and sales discounts of $3,475. Benson's net sales for this period equal:

On October 1, Courtland Company sold merchandise in the amount of $5,800 to Carter Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Courtland uses the periodic inventory system. Carter pays the invoice on October 8, and takes the appropriate discount. The journal entry that Courtland makes on October 8 is:

List the steps of the operating cycle for a merchandiser with credit sales.

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

The year-end adjusted trial balance of ABC Supply for the current year, is shown below: Prepare Closing entries at December 31 for the current year.

Fill in the blanks (a) through (g) for the Hendricks Company for each of the income statements for 2009, 2010, and 2011.

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.

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.

Describe how tracking inventory activities were necessary for Heritage Link Brands.