Question 1

The gross margin ratio is defined as gross margin divided by net sales.

Accepted Answer

A) True 
 B)False

Question 2

Describe why tracking inventory activities are necessary for a merchandising company.

Accepted Answer

Tracking merchandise activities are nece...

Question 3

Each sale of merchandise has two parts: the revenue side and the cost side.

Accepted Answer

A) True 
 B)False

Question 4

Sales returns:

Accepted Answer

A)  Refer to reductions in the selling price of merchandise sold to customers.
B)  Represent trade discounts.
C)  Are not recorded under the perpetual inventory system until the end of each accounting period.
D)  Refer to merchandise that customers return to the seller after the sale.
E)  Represent cash discounts.F) A) and B)
G) A) and C)

Question 5

Under a periodic inventory system, purchases, purchases returns and allowances, purchase discounts, and transportation in transactions are recorded in the Merchandise Inventory account.

Accepted Answer

A) True 
 B)False

Question 6

The Merchandise Inventory account balance at the beginning of the current period is equal to the amount of ending Merchandise Inventory from the previous period.

Accepted Answer

A) True 
 B)False

Question 7

The acid-test ratio:

Accepted Answer

A)  Measures return on assets.
B)  Is also called the quick ratio.
C)  Is generally greater than the current ratio.
D)  Measures profitability.
E)  Measures inventory turnover.F) A) and B)
G) C) and D)

Question 8

Mega Skateboard Supplier had net sales of $2.8 million, its cost of goods sold was $1.6 million, and its net income was $0.9 million. Its gross margin ratio equals:

Accepted Answer

A)  175%.
B)  32%.
C)  43%.
D)  57%.
E)  56%.F) D) and E)
G) A) and D)

Question 9

The profit margin ratio is the same as the gross profit ratio.

Accepted Answer

A) True 
 B)False

Question 10

Sellers always offer a discount to buyers for prompt payment toward purchases made on credit.

Accepted Answer

A) True 
 B)False

Question 11

A perpetual inventory system is able to directly measure and monitor inventory shrinkage and there is no need for a physical count of inventory.

Accepted Answer

A) True 
 B)False

Question 12

A buyer using a perpetual inventory system records the costs of shipping merchandise it purchases in a Delivery Expense account.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A)  Neither system defines operating income.
B)  U.S. GAAP offers little guidance about the presentation order of expenses.
C)  Accounting for basic inventory transactions is the same under the two systems.
D)  Neither system requires separate disclosure of items when their size, nature, or frequency are important.
E)  The closing process for merchandisers is the same under both systems.F) A) and C)
G) B) and D)

Question 15

A journal entry with a debit to cash of $980, a debit to Sales Discounts of $20, and a credit to Accounts Receivable of $1,000 means that a customer has taken a 10% cash discount for early payment.

Accepted Answer

A) True 
 B)False

Question 16

Explain the way in which costs flow through the merchandise inventory account to a merchandiser's income statement.

Accepted Answer

Beginning inventory plus the net cost of...

Question 17

Juniper Company uses a perpetual inventory system and the gross method of accounting for purchases. The company purchased $9,750 of merchandise on August 7 with terms 1/10, n/30. On August 11, it returned $1,500 worth of merchandise. On August 16, it paid the full amount due. The correct journal entry to record the payment on August 16 is:

Accepted Answer

A)  Debit Accounts Payable $8,250; credit Merchandise Inventory $82.50; credit Cash $8,167.50.
B)  Debit Cash $8,250; credit Accounts Payable $8,250.
C)  Debit Accounts Payable $9,750; credit Merchandise Inventory $97.50; credit Cash $9,652.50.
D)  Debit Accounts Payable $8,167.50; credit Cash $8,167.50.
E)  Debit Merchandise Inventory $8,250; credit Cash $8,250.F) B) and E)
G) A) and B)

Question 18

Describe the recording process (including costs)for the types of transactions involved in purchasing merchandise inventory when a perpetual inventory system is used.

Accepted Answer

The cost of merchandise purchased for re...

Question 19

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

Accepted Answer

A)  Inventory shrinkage refers to the loss of inventory.
B)  Inventory shrinkage can be caused by theft or deterioration.
C)  Inventory shrinkage is recognized by debiting an operating expense.
D)  Inventory shrinkage is determined by comparing a physical count of inventory with recorded inventory amounts.
E)  Inventory shrinkage is recognized by debiting Cost of Goods Sold.F) C) and D)
G) A) and E)

Question 20

The amount recorded for merchandise inventory includes all of the following except:

Accepted Answer

A)  Purchase discounts.
B)  Returns and allowances.
C)  Freight costs paid by the buyer.
D)  Trade discounts.
E)  Freight costs paid by the seller.F) None of the above
G) A) and D)

Exam 5: Accounting for Merchandising Operations

Sellers always offer a discount to buyers for prompt payment toward purchases made on credit.

Correct Answer
verified

Each sale of merchandise has two parts: the revenue side and the cost side.

Correct Answer
verified

The gross margin ratio is defined as gross margin divided by net sales.

Correct Answer
verified

Under a periodic inventory system, purchases, purchases returns and allowances, purchase discounts, and transportation in transactions are recorded in the Merchandise Inventory account.

Correct Answer
verified

Explain the way in which costs flow through the merchandise inventory account to a merchandiser's income statement.

Correct Answer
verified
Beginning inventory plus the net cost of...
View Answer

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

Correct Answer
verified

Mega Skateboard Supplier had net sales of $2.8 million, its cost of goods sold was $1.6 million, and its net income was $0.9 million. Its gross margin ratio equals:

Correct Answer
verified

Correct Answer
verified

Describe why tracking inventory activities are necessary for a merchandising company.

Correct Answer
verified
Tracking merchandise activities are nece...
View Answer

A journal entry with a debit to cash of $980, a debit to Sales Discounts of $20, and a credit to Accounts Receivable of $1,000 means that a customer has taken a 10% cash discount for early payment.

Correct Answer
verified

Describe the recording process (including costs)for the types of transactions involved in purchasing merchandise inventory when a perpetual inventory system is used.

Correct Answer
verified
The cost of merchandise purchased for re...
View Answer

The acid-test ratio:

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

A perpetual inventory system is able to directly measure and monitor inventory shrinkage and there is no need for a physical count of inventory.

Correct Answer
verified

The amount recorded for merchandise inventory includes all of the following except:

Correct Answer
verified

The profit margin ratio is the same as the gross profit ratio.

Correct Answer
verified

Sales returns:

Correct Answer
verified

A buyer using a perpetual inventory system records the costs of shipping merchandise it purchases in a Delivery Expense account.

Correct Answer
verified

The Merchandise Inventory account balance at the beginning of the current period is equal to the amount of ending Merchandise Inventory from the previous period.

Correct Answer
verified

Exam 5: Accounting for Merchandising Operations

Sellers always offer a discount to buyers for prompt payment toward purchases made on credit.

Correct AnswerverifiedShow Answer

Each sale of merchandise has two parts: the revenue side and the cost side.

Correct AnswerverifiedShow Answer

The gross margin ratio is defined as gross margin divided by net sales.

Correct AnswerverifiedShow Answer

Under a periodic inventory system, purchases, purchases returns and allowances, purchase discounts, and transportation in transactions are recorded in the Merchandise Inventory account.

Correct AnswerverifiedShow Answer

Explain the way in which costs flow through the merchandise inventory account to a merchandiser's income statement.

Correct AnswerverifiedBeginning inventory plus the net cost of...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Mega Skateboard Supplier had net sales of $2.8 million, its cost of goods sold was $1.6 million, and its net income was $0.9 million. Its gross margin ratio equals:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Describe why tracking inventory activities are necessary for a merchandising company.

Correct AnswerverifiedTracking merchandise activities are nece...View AnswerShow Answer

A journal entry with a debit to cash of $980, a debit to Sales Discounts of $20, and a credit to Accounts Receivable of $1,000 means that a customer has taken a 10% cash discount for early payment.

Correct AnswerverifiedShow Answer

Describe the recording process (including costs)for the types of transactions involved in purchasing merchandise inventory when a perpetual inventory system is used.

Correct AnswerverifiedThe cost of merchandise purchased for re...View AnswerShow Answer

The acid-test ratio:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A perpetual inventory system is able to directly measure and monitor inventory shrinkage and there is no need for a physical count of inventory.

Correct AnswerverifiedShow Answer

The amount recorded for merchandise inventory includes all of the following except:

Correct AnswerverifiedShow Answer

The profit margin ratio is the same as the gross profit ratio.

Correct AnswerverifiedShow Answer

Sales returns:

Correct AnswerverifiedShow Answer

A buyer using a perpetual inventory system records the costs of shipping merchandise it purchases in a Delivery Expense account.

Correct AnswerverifiedShow Answer

The Merchandise Inventory account balance at the beginning of the current period is equal to the amount of ending Merchandise Inventory from the previous period.

Correct AnswerverifiedShow Answer

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Beginning inventory plus the net cost of...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Tracking merchandise activities are nece...
View Answer

Correct Answer
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Correct Answer
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The cost of merchandise purchased for re...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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