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Exam 4: Accounting for Merchandising Operations

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Question 31

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A merchandising company's operating cycle begins with the sale of merchandise and ends with the collection of cash from the sale.

A) True
B) False

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Question 32

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Calculate the gross margin ratio for each of the following separate cases A through D: $\begin{array}{|l|r|r|r|r|}\hline &{\text { A }} &{\text { B }} &{\text { C }} &{\text { D }} \\\hline \text { Net sales } & \$ 135,000 & \$ 623,500 & \$ 37,800 & \$ 259,600 \\\hline \text { Cost of goods sold } & 83,600 & 249,200 & 13,230 & 127,204 \\\hline\end{array}$

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Question 33

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Which of the following statements is true regarding the closing process of a merchandiser?

A company has net sales of $1,500,000, sales commissions in the amount of $194,000, net income of $366,400, and the gross profit ratio of 60%. What amount is listed as gross profit on the income statement for the period?

Explain the difference between the single-step and multiple-step income statements.

Expenses that support the overall operations of a business and include the expenses relating to accounting, human resource management, and financial management are called:

What is gross margin ratio? How is it used as an indicator of profitability?

A company had sales of $695,000 and cost of goods sold of $278,000. Its gross profit equals:

The gross margin ratio reflects the relation between sales and cost of goods sold.

Cost of goods sold is reported on both the income statement and the balance sheet.

A perpetual inventory system is able to directly measure and monitor inventory shrinkage.

The acid-test ratio:

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

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

Roller Blade Company uses the perpetual inventory system and had the following transactions during October: Prepare journal entries to record each of the preceding transactions.

______________________ are nonoperating activities that include interest expense, losses from asset disposals, and casualty losses.

Alpha 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. Alpha's net sales for this period equal:

A common rule of thumb is that a company's acid-test ratio should be at least 2 or a company may face financial problems in the near future.

A company purchased $8,750 worth of merchandise, with terms of 2/10, n/30. The invoice was paid within the cash discount period. Accordingly, the company received a cash discount of _______________.

A company uses the perpetual inventory system and recorded the following entry: $\begin{array}{|l|r|r|}\hline \text { Accounts Payable } & 2,500 & \\\hline \text { Merchandise Inventory } & & 50 \\\hline \text { Cash } & & 2,450 \\\hline\end{array}$ This entry reflects a: