Question 1

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

Accepted Answer

1,500,000-102,000-123,000 = 1,275,000 - 420,000 = 855,000

Question 2

What is the difference between the periodic and perpetual inventory systems?

Accepted Answer

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Question 3

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

Accepted Answer

855,000/1,275,000 = 67.1%

Question 4

Total Company has current liabilities in the amount of $1,250,000 and an acid test ratio of 3 and a current ratio of 7.What is the amount of quick assets that Total Company has on the balance sheet?

Accepted Answer

1,250,000*3 = 3,750,000

Question 5

Describe the difference between wholesalers and retailers.

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Question 6

Describe the key attributes of inventory for a merchandising company.

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Question 7

Identify and explain the key components of income for a merchandising company.

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Question 8

A company has net sales of $1,500,000,sales commissions in the amount of $194,000,net income was $366,400,and the gross profit ratio is 60%,what amount listed as gross profit on the income statement for the period?

Accepted Answer

1,500,000*.60 = 900,000

Question 9

Describe the recording process (including costs)for purchasing merchandise inventory using a perpetual inventory system.

Accepted Answer

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Question 10

A company has net sales of $1,832,000,sales commissions in the amount of $194,000,net income was $366,400,and the gross profit ratio is 60%,what is the amount of cost of goods sold?

Accepted Answer

1,832,000*(1-.60) = 732,800

Question 11

Explain the cost flows and operating activities of a merchandising company.

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Question 12

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

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Question 13

Vital Company had net income on this period's income statement in the amount of $624,240,other expense in the amount of $381,480 and a gross profit ratio of 58%,what was the amount of net sales on the income statement?

Accepted Answer

624,240+381,480 = 1,005,720/.58=1,734,000

Question 14

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

Accepted Answer

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Question 15

A company has the following accounts.What is the acid test ratio?
$\begin{array}{c}
\begin{array}{lr}
\text { Cash } & \$ 10,000 \
\text { Accounts receivable } & 20,500 \
\text { Office supplies } & 2,625 \
\text { Land } & 37,153 \
\text { Office equipment } & 14,535 \
\text { Accounts payable } & 18,352 \
\text { Common stock } & 54,490
\end{array}
\begin{array}{lr}
\text { Wages Payable } & \$ 2,000 \
\text { Consulting fees } & 13,718 \
\text { earned } & \ 
\text { Rent expense } & 3,673 \
\text { Salaries expense } & 6,642  \
\text { Telephone expense } &560 \
\text { Miscellaneous } & 280 \
\text { expense } & 
\end{array}
\end{array}$

Accepted Answer

The acid test ratio is calculated as (Cash + Accounts Receivable) / (Accounts Payable + Wages Payable). Here, it is (10,000 + 20,500) / (18,352 + 2,000) = 30,500 / 20,352 = 1.50.

Question 16

What does FOB stand for? Differentiate between FOB shipping point (or FOB factory)and FOB destination?

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Question 17

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

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Question 18

A company has the following accounts.What is the acid test ratio?
$\begin{array}{lrlr}
\text { Cash } & \$ 6,754 & \text { Dividends } & \$ 2,000 \
\text { Accounts receivable } & 13,733 & \text { Consulting fees earned } & 13,718 \
\text { Office supplies } & 2,625 & \text { Rent expense } & 3,673 \
\text { Land } & 37,153 & \text { Salaries expense } & 6,64 \
\text { Office equipment } & 14,535 & \text { Telephone expense } & 560 \
\text { Accounts payable } & 6,463 & \text { Miscellaneous expense } & 280 \
\text { Common stock } & 54,490 & \text { Retained Earnings } & 13.847
\end{array}$

Accepted Answer

Acid test ratio = (Cash + Accounts receivable) / Current liabilities= (6,754 + 13,733) / 6,463= 20,487 / 6,463= 3.17

Question 19

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

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Question 20

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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Quiz 4: Reporting and Analyzing Merchandising Operations