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Exam 4: Accounting for Merchandising Operations

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Question 81

True/False

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Generally accepted accounting principles require companies to use a specific format for the financial statements.

A) True
B) False

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Question 82

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___________________ refer to reductions in the selling price of merchandise sold to customers, often involving damaged or defective merchandise that a customer is willing to purchase with a decrease in the selling price.

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Question 83

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The credit terms 2/10, n/30 are interpreted as:

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

A company had net sales of $545,000 and cost of goods sold of $345,000, which means its gross margin is equal to $200,000.

_______________________ are nonoperating activities that include interest, dividend and rent revenues, and gains from asset disposals.

A debit memorandum is:

Neutron uses a periodic inventory system. Prepare general journal entries to record the following transactions for Neutron:

The year-end adjusted trial balance of ABC Supply for the current year is shown below: Prepare closing entries at December 31 for the current year.

Beginning merchandise inventory plus the net cost of purchases is equal to the merchandise available for sale.

List the steps of the operating cycle for a merchandiser with credit sales.

A debit to Sales Returns and Allowances and a credit to Accounts Receivable:

If goods are shipped FOB shipping point, the seller does not record revenue from the sale until the goods arrive at their destination because the transaction is not complete until that point.

A merchandising company's ___________ begins with the purchase of merchandise and ends with the collection of cash from merchandise sales.

A company had net sales of $82,000, cost of goods sold of $70,000, and other expenses of $2,000. Its gross margin ratio equals:

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

The current period's ending inventory is:

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 of $263,500, and cost of goods sold of $420,000. What is the gross profit/margin for the period?

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

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.