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Products that a company owns and intends to sell are called _____________________.

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Merchandis...

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Describe the difference(s) between accounting for sales under the periodic and the perpetual inventory accounting systems.

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Under a periodic system, the cost of ite...

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On March 12, Klein Company, Inc. sold merchandise in the amount of $9,800 to Babson Company, with credit terms of 1/10, n/30. The cost of the items sold is $5,500. Klein uses the gross method of accounting for sales and a perpetual inventory system. The journal entry or entries that Klein will make on March 12 is:


A) On March 12, Klein Company, Inc. sold merchandise in the amount of $9,800 to Babson Company, with credit terms of 1/10, n/30. The cost of the items sold is $5,500. Klein uses the gross method of accounting for sales and a perpetual inventory system. The journal entry or entries that Klein will make on March 12 is: A) B) C) D) E)
B) On March 12, Klein Company, Inc. sold merchandise in the amount of $9,800 to Babson Company, with credit terms of 1/10, n/30. The cost of the items sold is $5,500. Klein uses the gross method of accounting for sales and a perpetual inventory system. The journal entry or entries that Klein will make on March 12 is: A) B) C) D) E)
C) On March 12, Klein Company, Inc. sold merchandise in the amount of $9,800 to Babson Company, with credit terms of 1/10, n/30. The cost of the items sold is $5,500. Klein uses the gross method of accounting for sales and a perpetual inventory system. The journal entry or entries that Klein will make on March 12 is: A) B) C) D) E)
D) On March 12, Klein Company, Inc. sold merchandise in the amount of $9,800 to Babson Company, with credit terms of 1/10, n/30. The cost of the items sold is $5,500. Klein uses the gross method of accounting for sales and a perpetual inventory system. The journal entry or entries that Klein will make on March 12 is: A) B) C) D) E)
E) On March 12, Klein Company, Inc. sold merchandise in the amount of $9,800 to Babson Company, with credit terms of 1/10, n/30. The cost of the items sold is $5,500. Klein uses the gross method of accounting for sales and a perpetual inventory system. The journal entry or entries that Klein will make on March 12 is: A) B) C) D) E)

F) B) and E)
G) A) and E)

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Describe why the use of the perpetual inventory system has dramatically increased and the benefits the system provides.

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Tracking merchandise activities are nece...

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Using the following year-end information for Calvin's Clothing, Inc., calculate the current ratio and acid-test ratio for the business: Using the following year-end information for Calvin's Clothing, Inc., calculate the current ratio and acid-test ratio for the business: A) 1.80 and 1 B) 1.97 and 1.52 C) 2.73 and 1.52 D) 3.50 and 0.90 E) 1.80 and 0.90


A) 1.80 and 1
B) 1.97 and 1.52
C) 2.73 and 1.52
D) 3.50 and 0.90
E) 1.80 and 0.90

F) B) and E)
G) A) and B)

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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 14, it paid the full amount due. The amount of the cash paid on July 14 equals:


A) $200.
B) $1,564.
C) $1,568.
D) $1,600.
E) $1,800.

F) A) and B)
G) C) and E)

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


A) Is less than the current ratio.
B) Equals 1.
C) Is higher than 1.
D) Is substantially lower than 1.
E) Is higher than the current ratio.

F) None of the above
G) A) and B)

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From the adjusted trial balance for Brookstone Art Supplies, Inc. given below, prepare a multiple-step income statement in good form. From the adjusted trial balance for Brookstone Art Supplies, Inc. given below, prepare a multiple-step income statement in good form.

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A company had net sales of $545,000 and cost of goods sold of $345,000. Its gross margin equals $890,000.

A) True
B) False

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Following is the adjusted trial balance for Mercer Grocery, Inc. for the current year. Mercer uses a periodic inventory system. A physical count of the inventory indicates that $60,000 of merchandise is on hand. Prepare the December 31 closing entries. Following is the adjusted trial balance for Mercer Grocery, Inc. for the current year. Mercer uses a periodic inventory system. A physical count of the inventory indicates that $60,000 of merchandise is on hand. Prepare the December 31 closing entries.

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

A) True
B) False

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A company that uses the gross method of recording purchases and a perpetual inventory system 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. The correct journal entry to record the merchandise return on July 7 is:


A) Debit Accounts Payable $196; credit Merchandise Inventory $196.
B) Debit Merchandise Inventory $200; credit Accounts Payable $200.
C) Debit Merchandise Inventory $200; credit Sales Returns $200.
D) Debit Accounts Payable $200; credit Merchandise Inventory $200.
E) Debit Accounts Payable $1,800; credit Purchase Returns $200; credit Merchandise Inventory $1,600.

F) C) and D)
G) C) and E)

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A company's current ratio is 1.2 and its quick ratio is 0.25. This company is probably an excellent credit risk because the ratios reveal no indication of liquidity problems.

A) True
B) False

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On March 12, Klein Company, Inc. sold merchandise in the amount of $9,800 to Babson Company, with credit terms of 1/10, n/30. The cost of the items sold is $5,500. Klein uses the gross method of accounting for sales and a perpetual inventory system. Babson pays the invoice on March 30, which is after the discount period. The journal entry that Klein makes on March 30 is:


A) On March 12, Klein Company, Inc. sold merchandise in the amount of $9,800 to Babson Company, with credit terms of 1/10, n/30. The cost of the items sold is $5,500. Klein uses the gross method of accounting for sales and a perpetual inventory system. Babson pays the invoice on March 30, which is after the discount period. The journal entry that Klein makes on March 30 is: A) B) C) D) E)
B) On March 12, Klein Company, Inc. sold merchandise in the amount of $9,800 to Babson Company, with credit terms of 1/10, n/30. The cost of the items sold is $5,500. Klein uses the gross method of accounting for sales and a perpetual inventory system. Babson pays the invoice on March 30, which is after the discount period. The journal entry that Klein makes on March 30 is: A) B) C) D) E)
C) On March 12, Klein Company, Inc. sold merchandise in the amount of $9,800 to Babson Company, with credit terms of 1/10, n/30. The cost of the items sold is $5,500. Klein uses the gross method of accounting for sales and a perpetual inventory system. Babson pays the invoice on March 30, which is after the discount period. The journal entry that Klein makes on March 30 is: A) B) C) D) E)
D) On March 12, Klein Company, Inc. sold merchandise in the amount of $9,800 to Babson Company, with credit terms of 1/10, n/30. The cost of the items sold is $5,500. Klein uses the gross method of accounting for sales and a perpetual inventory system. Babson pays the invoice on March 30, which is after the discount period. The journal entry that Klein makes on March 30 is: A) B) C) D) E)
E) On March 12, Klein Company, Inc. sold merchandise in the amount of $9,800 to Babson Company, with credit terms of 1/10, n/30. The cost of the items sold is $5,500. Klein uses the gross method of accounting for sales and a perpetual inventory system. Babson pays the invoice on March 30, which is after the discount period. The journal entry that Klein makes on March 30 is: A) B) C) D) E)

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

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Match the following terms with the appropriate definitions.

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Gross profit is also called gross margin.

A) True
B) False

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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.

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shipping p...

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Fill in the blanks (a) through (g) for the Corman Company, Inc. for each of the income statements for 2016 and 2017. Fill in the blanks (a) through (g) for the Corman Company, Inc. for each of the income statements for 2016 and 2017.

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Under the net method of recording purchases, the Discounts Lost account is used when the purchaser fails to take a discount offered by the seller.

A) True
B) False

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Cushman Company, Inc. 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:


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

F) B) and C)
G) C) and E)

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