Question 1

Distinguish between selling expenses and general and administrative expenses.

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Question 2

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

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Question 3

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

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Question 4

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

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Question 5

National Storage Company, Inc. had sales of $1,000,000, sales discounts of $2,500, sales returns and allowances of $15,000, and cost of goods sold of $525,000. Calculate National's gross profit.

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Question 6

Describe the difference between accounting for purchases under the periodic and perpetual inventory accounting systems.

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Question 7

Describe the recording process (including costs) for the types of transactions associated with sales of merchandise inventory using a perpetual inventory system and the gross method of accounting for discounts.

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Question 8

Define Merchandise Inventory and describe the types of costs that are included in the inventory account for a merchandising company.

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Question 9

Farmen Company, Inc. had net sales of $600,000 and cost of goods sold of $450,000. Calculate Farmen's gross profit.

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Question 10

What are the steps of the operating cycle for a merchandiser with credit sales?

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Question 11

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

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Question 12

Fill in the blanks (a) through (g) for the Morrison Company, Inc. for each of the income statements for 2015, 2016, and 2017.

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Question 13

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

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Question 14

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

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Question 15

What is the acid-test ratio? How does it measure a company's liquidity?

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Question 16

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

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Question 17

What does the acronym FOB stand for? Describe the differences between FOB shipping point (also called FOB factory) and FOB destination.

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Question 18

How do closing entries for a merchandising company that uses the perpetual inventory system differ from the closing entries for a service company?

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Question 19

Discuss the period-end adjusting entries that are required in the new revenue recognition standards for estimating sales discounts and sales returns and allowances.

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Question 20

Harley's Antique Shop, Inc. had net sales of $772,000. The gross profit was $415,000. Calculate Harley's cost of goods sold.

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Quiz 4: Reporting and Analyzing Merchandising Operations