Question 1

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

Accepted Answer

Under both U.S. GAAP and IFRS, there is a requirement for the separate disclosure of items when their size, nature, or frequency is important, contrary to what statement D suggests.

Question 2

On September 12, Jepson Company purchased merchandise in the amount of $5,800 from Vander Company, Inc. on credit with terms of 2/10, n/30. Jepson uses the gross method of accounting for purchases and a periodic inventory system. Jepson pays the invoice on September 18, and takes the appropriate discount. The journal entry that Jepson makes on September 18 is:
A) 
B) 
C) 
D) 
E)

Accepted Answer

The answer of On September 12, Jepson Company purchased merchandise...

Question 3

On September 12, Vander Company, Inc. sold merchandise in the amount of $5,800 to Jepson Company on credit with terms of 2/10, n/30. The cost of the items sold is $4,000. Vander uses the gross method of accounting for sales and a periodic inventory system. Jepson pays the invoice on September 18, and takes the appropriate discount. The journal entry that Vander makes on September 18 is:
A) 
B) 
C) 
D) 
E)

Accepted Answer

The answer of On September 12, Vander Company, Inc. sold...

Question 4

Cushman Company, Inc. had $800,000 in net sales, $350,000 in gross profit, and $200,000 in operating expenses. Cost of goods sold equals:
A)$150,000.
B)$450,000.
C)$800,000.
D)$350,000.
E)$200,000.

Accepted Answer

Gross profit is net sales minus cost of goods sold. Therefore, cost of goods sold can be calculated by subtracting gross profit from net sales.

COGS = Net sales - Gross profit 
COGS = $800,000 - $350,000 
COGS = $450,000

Therefore, the correct answer is (B), $450,000.

Question 5

A company's net sales are $775,420, its costs of goods sold are $413,890, and its net income is $117,220. Its gross margin ratio equals:
A)46.6%.
B)53.4%.
C)28.3%.
D)31.5%.
E)40.5%.

Accepted Answer

The answer of A company's net sales are $775,420, its...

Question 6

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. Net income equals:
A)$770,000.
B)$402,000.
C)$390,000.
D)$115,000.
E)$408,000.

Accepted Answer

Net income is calculated as sales minus sales discounts, sales returns and allowances, cost of goods sold, and operating expenses. So, $800,000 - $12,000 - $18,000 - $380,000 - $275,000 = $115,000.

Question 7

A company purchased $10,000 of merchandise on June 15 with terms of 3/10, n/45. On June 20, it returned $800 of that merchandise. On June 24, it paid the balance owed for the merchandise taking any discount it was entitled to. The cash paid on June 24 equals:
A)$8,924.
B)$9,700.
C)$10,000.
D)$9,800.
E)$8,724.

Accepted Answer

The answer of A company purchased $10,000 of merchandise on...

Question 8

On September 12, Jepson Company purchased merchandise in the amount of $5,800 from Vander Company, Inc. on credit with terms of 2/10, n/30. Jepson uses the gross method of accounting for purchases and a periodic inventory system. The journal entry that Jepson will make on September 12 is:
A) 
B) 
C) 
D) 
E)

Accepted Answer

The answer of On September 12, Jepson Company purchased merchandise...

Question 9

On September 12, Vander Company, Inc. sold merchandise in the amount of $5,800 to Jepson Company on credit with terms of 2/10, n/30. The cost of the items sold is $4,000. Vander uses the gross method of accounting for sales and a periodic inventory system. On September 14, Jepson returns some of the merchandise. The selling price of the returned merchandise is $500 and the cost of the merchandise returned is $350. The entry or entries that Vander must make on September 14 is:
A) 
B) 
C) 
D) 
E)

Accepted Answer

Vander Company should make the following entry on September 14:
Accounts Receivable   500
Sales                             500
Cost of Goods Sold      350
Merchandise Inventory 350

This entry removes the revenue and cost associated with the returned merchandise. The net effect on sales is a reduction of $500, while the net effect on cost of goods sold is a reduction of $350.

Question 10

The unadjusted Merchandise Inventory balance under a periodic inventory system is:
A)The ending inventory amount for the period.
B)The beginning inventory amount for the period.
C)Equal to the cost of goods sold.
D)Equal to the cost of goods purchased.
E)Equal to the gross profit.

Accepted Answer

Under periodic inventory system, the Merchandise Inventory balance is not updated throughout the accounting period. Therefore, the unadjusted Merchandise Inventory balance is the beginning inventory amount for the period.

Question 11

On September 12, Vander Company, Inc. sold merchandise in the amount of $5,800 to Jepson Company on credit with terms of 2/10, n/30. The cost of the items sold is $4,000. Vander uses the gross method of accounting for sales and a periodic inventory system. On September 14, Jepson returns some of the merchandise. The selling price of the merchandise is $500 and the cost of the merchandise returned is $350. Jepson pays the invoice on September 18 and takes the appropriate discount. The journal entry that Vander makes on September 18 is:
A) 
B) 
C) 
D) 
E)

Accepted Answer

The answer of On September 12, Vander Company, Inc. sold...

Question 12

On September 12, Jepson Company purchased merchandise in the amount of $5,800 from Vander Company, Inc. on credit with terms of 2/10, n/30. Jepson uses the gross method of accounting for purchases and a periodic inventory system. On September 14, Jepson returns some of the merchandise. The purchase price of the returned merchandise is $500. The entry or entries that Jepson must make on September 14 is:
A) 
B) 
C) 
D) 
E)

Accepted Answer

The answer of On September 12, Jepson Company purchased merchandise...

Question 13

On September 12, Jepson Company purchased merchandise in the amount of $5,800 from Vander Company, Inc. on credit with terms of 2/10, n/30. Jepson uses the gross method of accounting for purchases and a periodic inventory system. On September 14, Jepson returns some of the merchandise with a purchase price of $500. Jepson pays the invoice on September 18 and takes the appropriate discount. The journal entry that Jepson makes on September 18 is:
A) 
B) 
C) 
D) 
E)

Accepted Answer

The answer of On September 12, Jepson Company purchased merchandise...

Question 14

Kramer, Inc. uses a periodic inventory system. Kramer purchased $1,000 of merchandise on credit, with terms 1/10, n/30, FOB shipping point. The shipping cost of $150 was paid upon receipt of the goods. The journal entry to record the shipping cost includes a credit to Cash and a debit to:
A)Freight Expense
B)Merchandise Inventory
C)Purchases
D)Transportation-In
E)Accounts Payable

Accepted Answer

In a periodic inventory system, the shipping cost is recorded as "Transportation-In" or "Freight-In," which is added to the cost of purchases.

Question 15

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.

Accepted Answer

The answer of Cushman Company, Inc. had $800,000 in sales,...

Question 16

Using the following year-end information for Bauman, LLC, calculate the current ratio and acid-test ratio: 
A)3.01 and 1.21
B)3.16 and 0.97
C)3.04 and 1.21
D)1.09 and 4.77
E)3.16 and 1.21

Accepted Answer

The answer of Using the following year-end information for Bauman,...

Question 17

A company's current assets are $23,420, its quick assets are $13,890 and its current liabilities are $12,220. Its acid-test ratio equals:
A)0.88.
B)1.91.
C)1.14.
D)0.52.
E)1.41.

Accepted Answer

Acid-test ratio = (Quick Assets) / (Current Liabilities)
Acid-test ratio = 13,890 / 12,220
Acid-test ratio = 1.14

Question 18

Which of the following accounts is used in a periodic inventory system to record the cost of freight to transport purchased merchandise?
A)Merchandise Inventory
B)Freight Expense
C)Miscellaneous Expense
D)Purchases
E)Transportation-In

Accepted Answer

In a periodic inventory system, the cost of freight to transport purchased merchandise is recorded in the Transportation-In account. This account is used to capture the transportation costs incurred to bring the goods to the company's warehouse or distribution center. The amount is then added to the cost of the merchandise to determine the total cost of inventory. The other accounts listed (Merchandise Inventory, Freight Expense, Miscellaneous Expense, and Purchases) are not specifically used to record transportation costs in a periodic inventory system.

Question 19

On September 12, Vander Company, Inc. sold merchandise in the amount of $5,800 to Jepson Company on credit with terms of 2/10, n/30. The cost of the items sold is $4,000. Vander uses the gross method of accounting for sales and a periodic inventory system. The journal entry or entries that Vander will make on September 12 is(are):
A) 
B) 
C) 
D) 
E)

Accepted Answer

The answer of On September 12, Vander Company, Inc. sold...

Question 20

A company purchased $10,000 of merchandise on June 15 with terms of 3/10, n/45, and FOB shipping point. The freight charge of $500 was paid by the seller and added to the sales invoice. On June 20, the company returned $800 of the merchandise. On June 24, it paid the balance owed for the merchandise taking any discount it is entitled to. The cash paid on June 24 equals:
A)$9,224.
B)$10,200.
C)$10,500.
D)$10,300.
E)$9,424.

Accepted Answer

The answer of A company purchased $10,000 of merchandise on...

Quiz 4: Reporting and Analyzing Merchandising Operations

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

Cushman Company, Inc. had $800,000 in net sales, $350,000 in gross profit, and $200,000 in operating expenses. Cost of goods sold equals:

A company's net sales are $775,420, its costs of goods sold are $413,890, and its net income is $117,220. Its gross margin ratio equals:

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. Net income equals:

A company purchased $10,000 of merchandise on June 15 with terms of 3/10, n/45. On June 20, it returned $800 of that merchandise. On June 24, it paid the balance owed for the merchandise taking any discount it was entitled to. The cash paid on June 24 equals:

On September 12, Jepson Company purchased merchandise in the amount of $5,800 from Vander Company, Inc. on credit with terms of 2/10, n/30. Jepson uses the gross method of accounting for purchases and a periodic inventory system. The journal entry that Jepson will make on September 12 is:

The unadjusted Merchandise Inventory balance under a periodic inventory system is:

Kramer, Inc. uses a periodic inventory system. Kramer purchased $1,000 of merchandise on credit, with terms 1/10, n/30, FOB shipping point. The shipping cost of $150 was paid upon receipt of the goods. The journal entry to record the shipping cost includes a credit to Cash and a debit to:

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:

Using the following year-end information for Bauman, LLC, calculate the current ratio and acid-test ratio:

A company's current assets are $23,420, its quick assets are $13,890 and its current liabilities are $12,220. Its acid-test ratio equals:

Which of the following accounts is used in a periodic inventory system to record the cost of freight to transport purchased merchandise?