Question 1

Cash sales shorten the operating cycle for a merchandiser; credit sales lengthen operating cycles.

Accepted Answer

A) True 
 B)False

Question 2

Merchandise inventory is reported in the long-term assets section of the balance sheet.

Accepted Answer

A) True 
 B)False

Question 3

Cushman Company had $800,000 in net sales, $350,000 in gross profit, and $200,000 in operating expenses. Cost of goods sold equals:

Accepted Answer

A)  $150,000.
B)  $450,000.
C)  $200,000.
D)  $350,000.
E)  $800,000.

Question 4

What is inventory shrinkage? How do managers account for shrinkage?

Accepted Answer

Inventory shrinkage is the loss of merch...

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

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:

Accepted Answer

A)  18.9%
B)  34.7%
C)  35.2%
D)  27.8%
E)  24.5%

Question 7

Match between columns
                        Premises: A widely used income statement format that lists cost of goods sold as another expense and shows only one subtotal for total expenses.
A measure of a company’s ability fo pay ifs current liabilities that excludes less liquid current assets such as inventory and prepaid expenses.
The expenses that support a company's overall operations and include costs related to accounting, human resource management and financial management.
The point of transfer from seller to buyer that fakes place when the goods arrive at the buyer's place of business.
The expenses of promoting sales by displaying and advertising merchandise, making sales, and delivering goods to customers
An income statement format that shows detailed computations of net sales and other costs and expenses, and reports subtotals for various classe of items.
Products a company owns and intends fo sell
The point of transfer from seller fo buyer that fakes place when goods depart the sellers place of business
Inventory losses that can occur as a result of theft or deterioration and require an adjusting entry to account for those losses.
A given percent deducted from a list price often granted fo customers purchasing large quantities of merchandise

Accepted Answer

The Answer of Selling expenses and Inventory shrinkage and Merchandise is...

Question 8

A company purchased $1,800 of merchandise on July 5 with terms 2/10, n/30. On July 7, it returned $200 worth of merchandise. On July 28, it paid the full amount due. Assuming the company uses a perpetual inventory system, and records purchases using the gross method, the correct journal entry to record the payment on July 28 is:

Accepted Answer

A)  Debit Accounts Payable $1,800; credit Cash $1,800.
B)  Debit Cash $1,600; credit Accounts Payable $1,600.
C)  Debit Merchandise Inventory $1,600; credit Cash $1,600.
D)  Debit Accounts Payable $1,600; credit Cash $1,600.
E)  Debit Accounts Payable $1,600; credit Merchandise Inventory $32; credit Cash $1,568.

Question 9

Expenses related to accounting, human resource management, and financial management are known as selling expenses.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

The acid-test ratio is defined as current assets divided by current liabilities.

Accepted Answer

A) True 
 B)False

Question 12

A service company earns net income by buying and selling merchandise.

Accepted Answer

A) True 
 B)False

Question 13

Describe the difference between wholesalers and retailers.

Accepted Answer

A wholesaler is an intermediary that buy...

Question 14

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. Gross profit equals:

Accepted Answer

A)  $770,000.
B)  $408,000.
C)  $115,000.
D)  $402,000.
E)  $390,000.

Question 15

Cost of goods sold:

Accepted Answer

A)  Is another term for revenue.
B)  Is another term for merchandise sales.
C)  Is also called gross margin.
D)  Is a term only used by service firms.
E)  Is the term used for the expense of buying and preparing merchandise for sale.

Question 16

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.

Accepted Answer

A) True 
 B)False

Question 17

Multiple-step income statements:

Accepted Answer

A)  Are only used in perpetual inventory systems.
B)  Are required by the FASB and IASB.
C)  Are required for the periodic inventory system.
D)  Contain more detail than a simple listing of revenues and expenses.
E)  List cost of goods sold as an operating expense.

Question 18

Sales Discounts is added to the Sales account when computing a company's net sales.

Accepted Answer

A) True 
 B)False

Question 19

The net method initially records the invoice at its net amount (net of any cash discount).

Accepted Answer

A) True 
 B)False

Question 20

In a perpetual inventory system, the Merchandise Inventory account must be closed at the end of the accounting period.

Accepted Answer

A) True 
 B)False

Exam 5: Accounting for Merchandising Operations

In a perpetual inventory system, the Merchandise Inventory account must be closed at the end of the accounting period.

Correct Answer
verified

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

Correct Answer
verified

Describe the difference between wholesalers and retailers.

Correct Answer
verified
A wholesaler is an intermediary that buy...
View Answer

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. Gross profit equals:

Correct Answer
verified

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:

Correct Answer
verified

Multiple-step income statements:

Correct Answer
verified

Cash sales shorten the operating cycle for a merchandiser; credit sales lengthen operating cycles.

Correct Answer
verified

Expenses related to accounting, human resource management, and financial management are known as selling expenses.

Correct Answer
verified

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

Correct Answer
verified

A service company earns net income by buying and selling merchandise.

Correct Answer
verified

The net method initially records the invoice at its net amount (net of any cash discount).

Correct Answer
verified

Merchandise inventory is reported in the long-term assets section of the balance sheet.

Correct Answer
verified

Sales Discounts is added to the Sales account when computing a company's net sales.

Correct Answer
verified

Correct Answer
verified

Cost of goods sold:

Correct Answer
verified

Match the following definitions with correct terms

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.

Correct Answer
verified

What is inventory shrinkage? How do managers account for shrinkage?

Correct Answer
verified
Inventory shrinkage is the loss of merch...
View Answer

Cushman Company had $800,000 in net sales, $350,000 in gross profit, and $200,000 in operating expenses. Cost of goods sold equals:

Correct Answer
verified

The acid-test ratio is defined as current assets divided by current liabilities.

Correct Answer
verified

Exam 5: Accounting for Merchandising Operations

In a perpetual inventory system, the Merchandise Inventory account must be closed at the end of the accounting period.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Describe the difference between wholesalers and retailers.

Correct AnswerverifiedA wholesaler is an intermediary that buy...View AnswerShow Answer

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. Gross profit equals:

Correct AnswerverifiedShow Answer

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:

Correct AnswerverifiedShow Answer

Multiple-step income statements:

Correct AnswerverifiedShow Answer

Cash sales shorten the operating cycle for a merchandiser; credit sales lengthen operating cycles.

Correct AnswerverifiedShow Answer

Expenses related to accounting, human resource management, and financial management are known as selling expenses.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A service company earns net income by buying and selling merchandise.

Correct AnswerverifiedShow Answer

The net method initially records the invoice at its net amount (net of any cash discount).

Correct AnswerverifiedShow Answer

Merchandise inventory is reported in the long-term assets section of the balance sheet.

Correct AnswerverifiedShow Answer

Sales Discounts is added to the Sales account when computing a company's net sales.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Cost of goods sold:

Correct AnswerverifiedShow Answer

Match the following definitions with correct terms

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.

Correct AnswerverifiedShow Answer

What is inventory shrinkage? How do managers account for shrinkage?

Correct AnswerverifiedInventory shrinkage is the loss of merch...View AnswerShow Answer

Cushman Company had $800,000 in net sales, $350,000 in gross profit, and $200,000 in operating expenses. Cost of goods sold equals:

Correct AnswerverifiedShow Answer

The acid-test ratio is defined as current assets divided by current liabilities.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A wholesaler is an intermediary that buy...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Inventory shrinkage is the loss of merch...
View Answer

Correct Answer
verified

Correct Answer
verified