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Exam 4: Accounting for Merchandising Operations

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Question 1

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Assets tied up in inventory are referred to as non productive assets.

A) True
B) False

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Question 2

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Under the perpetual inventory system, the cost of merchandise purchased is recorded in the Purchases account.

A) True
B) False

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Question 3

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The profit margin ratio is gross margin divided by total assets.

A company had cash sales of $49,527, credit sales of $38,540, sales returns and allowances of $7,100 and sales discounts of $4,375. The company's net sales for this period equal:

Which of the following accounts would be closed out with a debit?

Quick assets include cash, inventory and current receivables.

A company has the following accounts. What is the acid test ratio? $\begin{array}{lrlr}\text { Cash } & \$ 6,754 & \text { Dividends } & \$ 2,000 \\\text { Accounts receivable } & 13,733 & \text { Consulting fees earned } & 13,718 \\\text { Office supplies } & 2,625 & \text { Rent expense } & 3,673 \\\text { Land } & 37,153 & \text { Salaries expense } & 6,642\\\text { Office equipment } & 14,535 & \text { Telephone expense } & 560 \\\text { Accounts payable } & 6,463 & \text { Miscellaneous expense } & 280 \\\text { Common stock } & 54,490 & \text { Retained Earnings } & 13,847\end{array}$

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

Successful use of a just-in-time inventory system can narrow the gap between the acid-test and the current ratio.

A company has sales of $2,530,000, sales discounts of $200,000, sales returns and allowances of $323,000, shipping charges of $115,000, sales commissions of $234,000, net income totaled $863,500, and cost of goods sold of $1,012,000. What is the gross profit/margin for the period?

A company has sales of $1,500,000, sales discounts of $102,000, sales returns and allowances of $123,000, shipping charges of $15,000, sales commissions of $34,000,net income totaled $263,500, and cost of goods sold of $420,000. What is the net sales amount for the period?

ABC Corporation had total quick assets $5,888,000, current assets $11,700,000 and current liabilities $8,000,000. Its acid-test ratio equals:

Cost of goods sold:

Steve's Skateboards uses the periodic inventory system and had the following sales transactions during April: Prepare the journal entries that Steve's Skateboards must make to record these transactions.

Describe the recording process (including costs) for purchasing merchandise inventory using a perpetual inventory system.

A company's net sales were $676,600, its cost of good sold was $236,810 and its net income was $33,750. Its gross margin ratio equals:

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

A ___________ inventory system updates the accounting record for inventory only at the end of a period.

A single-step income statement includes cost of goods sold as another expense and shows only one subtotal for total expenses.

Purchase discounts are the same as trade discounts.