Question 1

Sales less sales discounts less sales returns and allowances equals:

Accepted Answer

Sales less sales discounts less sales returns and allowances result in the net amount of revenue received from customers, which is known as net sales.

Question 2

On May 1,Shilling Company sold merchandise in the amount of $5,800 to Anders,with credit terms of 2/10,n/30.The cost of the items sold is $4,000.Shilling uses the perpetual inventory system.The journal entry or entries that Shilling will make on May 1 is:

Accepted Answer

The answer of On May 1,Shilling Company sold merchandise in...

Question 3

All of the following statements regarding inventory shrinkage are true except:

Accepted Answer

Inventory shrinkage is recognized by debiting "Cost of Goods Sold," not an operating expense.

Question 4

Which of the following accounts is used in the periodic inventory system but not used in the perpetual inventory system?

Accepted Answer

Purchases account is used in the periodic inventory system to record the cost of merchandise acquired during the accounting period, but it is not used in the perpetual inventory system where the cost of goods sold is calculated continuously by reducing the inventory account for each sale made.

Question 5

On July 1,Ferguson Company sold merchandise in the amount of $5,800 to Tracey Company,with credit terms of 2/10,n/30.The cost of the items sold is $4,000.Ferguson uses the perpetual inventory system.On July 5,Tracey returns some of the merchandise.The selling price of the merchandise is $500 and the cost of the merchandise returned is $350.The entry or entries that Ferguson must make on July 5 is:

Accepted Answer

The answer of On July 1,Ferguson Company sold merchandise in...

Question 6

Garza Company had sales of $135,000,sales discounts of $2,000,and sales returns of $3,200.Garza Company's net sales equals:

Accepted Answer

Net sales is calculated by subtracting sales discounts and sales returns from total sales. 
Net sales = Total sales - Sales discounts - Sales returns 
Net sales = $135,000 - $2,000 - $3,200 = $129,800

Question 7

Juniper Company uses a perpetual inventory system.The company purchased $9,750 of merchandise on August 7 with terms 1/10,n/30.On August 11,it returned $1,500 worth of merchandise.On August 16,it paid the full amount due.The correct journal entry to record the purchase on August 7 is:

Accepted Answer

The correct journal entry to record the purchase on August 7 is to debit Merchandise Inventory for the amount of the purchase and credit Accounts Payable for the same amount, reflecting the liability to pay the supplier.

Question 8

A company records the following journal entry: debit Cash $1,470,debit Sales Discounts $30,and credit Accounts Receivable $1,500.This means that a customer has taken what percentage cash discount for early payment?

Accepted Answer

The total amount of the Accounts Receivable was $1,500 but the customer has taken a discount of $30. Therefore, the customer has paid only $1,470 ($1,500 minus $30). So, the percentage of discount was ($30/$1,500) x 100 = 2%.

Question 9

Which of the following accounts would be closed at the end of the accounting period with a debit?

Accepted Answer

Sales is a revenue account and is closed with a debit to transfer its balance to the income summary at the end of the accounting period.

Question 10

An income statement that includes cost of goods sold as another expense and shows only one subtotal for total expenses is a:

Accepted Answer

A single-step income statement is a simplified format that groups all revenues and gains at the top of the statement and all expenses and losses at the bottom, without any further classification. This type of income statement includes cost of goods sold as another expense and shows only one subtotal for total expenses.

Question 11

Prentice Company had cash sales of $94,275,credit sales of $83,450,sales returns and allowances of $1,700,and sales discounts of $3,475.Prentice's net sales for this period equal:

Accepted Answer

The answer of Prentice Company had cash sales of $94,275,credit...

Question 12

Juniper Company uses a perpetual inventory system.The company purchased $9,750 of merchandise on August 7 with terms 1/10,n/30.On August 11,it returned $1,500 worth of merchandise.On August 26,it paid the full amount due.The amount of the cash paid on August 26 equals:

Accepted Answer

The original purchase was $9,750, and $1,500 was returned, leaving $8,250. Since the payment was made after the discount period (1/10, n/30), no discount is applied, so the full amount of $8,250 is paid.

Question 13

Expenses that support the overall operations of a business and include the expenses relating to accounting,human resource management,and financial management are called:

Accepted Answer

General and administrative expenses are expenses that support the overall operations of a business and include the expenses relating to accounting, human resource management, and financial management. Cost of goods sold refers to the expenses directly related to the production of goods, selling expenses relate to the cost of selling products or services, purchasing expenses relate to the cost of purchasing raw materials, and non-operating activities are not directly related to the operations of the business.

Question 14

Expenses to promote sales by displaying and advertising merchandise,make sales,and deliver goods to customers are known as:

Accepted Answer

Selling expenses are expenses incurred in the process of promoting sales, such as advertising, sales commissions, delivery expenses, etc. General and administrative expenses are expenses incurred for the overall management and operation of the business, cost of goods sold is the expense of the products sold to generate revenue, purchasing expenses are expenses incurred in the procurement of goods or services, and non-operating activities are activities that are not directly related to the core business operations.

Question 15

A company has net sales of $752,000 and cost of goods sold of $543,000.Its net income is $17,530.The company's gross margin and operating expenses,respectively,are:

Accepted Answer

Gross margin is calculated as net sales minus cost of goods sold, which is $752,000 - $543,000 = $209,000. Operating expenses are calculated as gross margin minus net income, which is $209,000 - $17,530 = $191,470.

Question 16

Multiple-step income statements:

Accepted Answer

Multiple-step income statements contain more detail than a simple listing of revenues and expenses, including gross profit, operating income, and net income. They are not required by the FASB or IASB specifically, nor are they required only for periodic inventory systems or perpetual inventory systems. Cost of goods sold is typically listed as a separate expense category before operating expenses on a multiple-step income statement.

Question 17

Juniper Company uses a perpetual inventory system.The company purchased $9,750 of merchandise on August 7 with terms 1/10,n/30.On August 11,it returned $1,500 worth of merchandise.On August 16,it paid the full amount due.The amount of the cash paid on August 16 equals:

Accepted Answer

The correct answer is A.The amount of the cash paid on August 16 equals $8,167.50.The company purchased $9,750 of merchandise on August 7 with terms 1/10,n/30. This means that the company can take a 1% discount if it pays the invoice within 10 days. The net amount of the invoice is $9,750 - (1% x $9,750) = $9,652.50. The company returned $1,500 worth of merchandise on August 11. This means that the net amount of the invoice is now $9,652.50 - $1,500 = $8,152.50. The company paid the full amount due on August 16. This means that the company paid $8,152.50.

Question 18

Juniper Company uses a perpetual inventory system.The company purchased $9,750 of merchandise on August 7 with terms 1/10,n/30.On August 11,it returned $1,500 worth of merchandise.On August 16,it paid the full amount due.The correct journal entry to record the payment on August 16 is:

Accepted Answer

The company originally owed $9,750 but returned $1,500, reducing the payable to $8,250. Paying within the discount period (1/10) allows a 1% discount on $8,250, which is $82.50. Therefore, the payment is $8,167.50, and the discount is recorded as a reduction in Merchandise Inventory.

Question 19

Juniper Company uses a perpetual inventory system.The company purchased $9,750 of merchandise on August 7 with terms 1/10,n/30.On August 11,it returned $1,500 worth of merchandise.On August 26,it paid the full amount due.The correct journal entry to record the merchandise return on August 11 is:

Accepted Answer

The correct journal entry is to debit Accounts Payable for the amount returned and credit Merchandise Inventory for the same amount. This will reduce the amount owed to the supplier and reduce the inventory account balance accordingly.

Question 20

On May 1,Anders Company purchased merchandise in the amount of $5,800 from Shilling,with credit terms of 2/10,n/30.Anders uses the perpetual inventory system.The journal entry or entries that Anders will make on May 1 is:

Accepted Answer

The journal entry to record the purchase on credit would be:
Inventory 5,800 
Accounts Payable 5,800

Since credit terms are 2/10, n/30, a discount of 2% is available if paid within 10 days. If Anders chooses to take advantage of the discount, the journal entry would be:
Accounts Payable 5,664 (5,800 - 2% discount of 116) 
Inventory 116 
Cash 5,548 (5,664 - 2% discount of 116)

Quiz 5: Accounting for Merchandising Operations