BA 3302 ch.3

Walter Company's multistep income statement shows cost of goods sold of $60,000, a gross margin of $42,000, operating income of $12,000 and a $20,000 loss on the sale of land. Based on this information the sales revenue amounted to

$102000

During year 2, Omark Company sold merchandise costing $120,000 for $160,000. Customers returned 10% of the merchandise and a 2% cash discount was provided on $90,000 of the sales. Based on this information the amount of net sales is

$142200

At the beginning of Year 2, Donald company had $5,000 of inventory on hand. During the accounting period, Donald purchased inventory costing $25,000 and sold inventory for $32,000. Operating expenses were $2,000 during the accounting period. A physical count of inventory on December 31, Year 2 revealed $4,000 of inventory on hand. Based on this information, cost of goods sold is

$26000

At the beginning of Year 2, Donald company had $5,000 of inventory on hand. During the accounting period Donald purchased inventory costing $25,000 and sold inventory for $32,000. Operating expenses were $2,000 during the accounting period. A physical count of inventory on December 31, Year 2 revealed $4,000 of inventory on hand. Based on this information, cost of goods available for sale is

$30000

Sales on account amounted to $80,000. Sales returns were $2,000 and sales discounts were $1,000. Cost of goods sold amounted to $45,000. Based on this information the amount of gross margin was

$32000

Amarillo Company experienced the following events during its first accounting period. (1) Purchased $5,000 of inventory on account under terms 1/10/n30 (2) Returned 1,000 of the inventory purchased in Event 1. (3) Paid the remaining balance in account payable within the discount period for the inventory purchased in Event 1. Immediately after the three events have been recognized, the balance in the inventory account is

$3960

Amarillo Company experienced the following events during its first accounting period. (1) Purchased $5,000 of inventory on account under terms 1/10/n30. (2) Returned 1,000 of the inventory purchased in Event 1. (3) Paid the remaining balance in account payable for the inventory purchased in Event 1. If the Company pays the account payable after the discount period has expired, how much cash will be required to settle the liability?

$4000

Keisha Dress Shops experienced the following events during its third accounting period. (1) Sold merchandise that cost $92,000 for $140,000 cash. (2) Paid $30,000 of operating expenses. (3) Paid a $4,000 cash dividend. Based on this information, the amount of the gross margin is

$48,000

At the beginning of Year 2, Donald company had $5,000 of inventory on hand. During the accounting period, Donald purchased inventory costing $25,000 and sold inventory for $32,000. Operating expenses were $2,000 during the accounting period. A physical count of inventory on December 31, Year 2 revealed $4,000 of inventory on hand. Based on this information, gross margin is

$6000

Escrow Company's multistep income statement shows cost of goods sold of $60,000, a gross margin of $42,000, operating income of $12,000 and a $20,000 loss on the sale of land. Based on this information, the net income or (net loss) amounted to

($8000)

The following information was drawn from the annual reports of two companies. Based on this information, Company B's return on sales is

10 %

Mahan Company purchased inventory on account under terms 2/20/n60. Mahan would like to pay the account payable within the discount period in order to receive the discount. Unfortunately, Mahan does not have the cash. What is the maximum annual interest rate that Mahan would be willing to pay in order to borrow the money necessary to settle the account payable?

18.25%

At the beginning of Year 2, Donald Company had $5,000 of inventory on hand. During the accounting period Donald purchased inventory costing $25,000 and sold inventory for $32,000. Also, during the period the company had transportation out of $1,200. Operating expenses were $13,000 during the accounting period. A physical count of inventory on December 31, Year 2 revealed $4,000 of inventory on hand. Based on this information, determine the cost of goods sold.

26000

At the beginning of Year 2, Donald Company had $5,000 of inventory on hand. During the accounting period Donald purchased inventory costing $25,000 and sold inventory for $32,000. Also, during the period the company had purchase returns of $500, purchase discounts of $100, transportation-in of $800, and transportation out of $1,200. Operating expenses were $13,000 during the accounting period. A physical count of inventory on December 31, Year 2 revealed $4,000 of inventory on hand. Based on this information, determine the cost of goods sold.

26200

The following information was drawn from the annual reports of two companies. Based on this information, Company A's gross margin percentage is

40%

The following information was drawn from the annual reports of two companies. Assume both companies receive a $1,000 increase in sales and the return on sales ratio does not change. Under these circumstances

Company A's operating income would increase by $180.

The following income statements were drawn from GreyCo's annual report: At the end of Year 1 GreyCo developed a plan based on a new business strategy. Specifically, the Company planned to move its store to a more expensive location and then to raise its prices to cover the additional cost. Which of the following best describes the results of implementing the plan?

The strategy was unsuccessful because the company was not able to raise its prices enough to cover the additional operating expenses.

AmRon Company sold land that had cost $25,000 for $26,500. Based on this information, the company's year-end financial statements would show

a cash inflow from investing activities of $26,500 on the statement of cash flows.

Which of the following financial statements will be affected by a sales return? Assume the original sale and the sales return were cash transactions.

all of these statements would be affected by the sales return

Paying cash to purchase inventory is

an asset exchange transaction

inventory is

an assets account that appears on the balance sheet.

Amarillo Company experienced the following events during its first accounting period. (1) Purchased $5,000 of inventory on account under terms 1/10/n30. (2) Returned 1,000 of the inventory purchased in Event 1. (3) Paid the remaining balance in account payable within the discount period for the inventory purchased in Event 1. Based on this information, which of the following shows how the recognition of the cash discount will affect the Company's financial statements.

assets: (40) lib: (40) eq: NA rev:NA exp: NA net: NA cF: NA

Taha Company purchased $8,000 of inventory under terms FOB destination. Freight cost amounted to $200. The cost of inventory and freight were paid with cash. Which of the following shows how the recognition of this purchase, including freight costs if applicable, will affect the Company's financial statements?

assets: (8000) lib: 8000 eq: NA rev:NA exp: NA net: NA cF: (8000) OA

Taha Company purchased $8,000 of inventory under terms FOB shipping point. Freight cost amounted to $200. The cost of inventory and freight were paid with cash. Which of the following shows how the recognition of this purchase, including freight costs if applicable, will affect the Company's financial statements?

assets: (8200) lib: 8200 eq: NA rev:NA exp: NA net: NA cF: (8200) OA

Which of the following shows the effects of purchasing inventory on account?

assets: + lib: + eq:NA rev:NA exp: NA net:NA cF: NA

Edwards Shoe Store sold shoes that cost the company $5,700 for $8,200. Which of the following shows how the recognition of the cost of goods sold will affect the Company's financial statement? (Ignore the effects of the associated revenue recognition.)

assets: - lib: NA eq: - rev:NA exp: + net: - cF: NA

Beachwood Clothing Company operates a chain of high end men's clothing stores. Recently the Company closed one of its stores and sold the equipment that was used in the store. The equipment had cost $5,000 and was sold for $6,000. Which of the following shows how the recognition of this event would affect the Company's financial statements?

cash: 6000 eq: (5000) liab: NA eq: 1000 rev: NA gain:1000 exp: NA net: 1000 CF: 6000 IA

Contours, Inc. sold merchandise that cost $6,000 to a customer on account for $9,000 under terms 2/10, n/30. Customers returned merchandise that had been sold for $1,000. This merchandise had originally cost Contours $700. The remaining receivables were collected after the discount period had expired. Which of the following shows how recognizing the collection of the receivables will affect a company's financial statements?

cash: 8000 ar: (8000) inv: NA liab: NA equit: NA N. Sales: NA Exp: NA net inc: NA CF: 8000 OA

Inside, Inc. sold merchandise that cost $7,000 for $9,000 on account. Which of the following shows how recognizing this event will affect the Company's financial statements assuming the periodic inventory method is used?

cash: NA ar: 9000 inv: NA liab: NA equit: 9000 N. Sales: 9000 Exp: NA net inc: 9000 CF: NA

At the end of its Year 1 accounting period, Voss Company had a $35,000 balance in its inventory account. Even so, when the company took a physical count of the inventory, it found only $34,300 of inventory on hand. Which of the following shows how recognizing the inventory shrinkage will affect the Company's financial statements?

cash: NA inventory: (700) liab: NA eq: (700) rev: NA exp: 700 net: (700) CF: NA

Contours, Inc. sold merchandise that cost $6,000 to a customer on account for $9,000 under terms 2/10, n/30. Customers returned merchandise that had been sold for $1,000. This merchandise had originally cost Contours $700. The remaining receivables were collected within the discount period. Which of the following shows how recognizing the collection of the receivables will affect a company's financial statements?

cash: NA 7840 ar: (160) (7840) inv: NA NA liab: NA NA equit: (160) NA N. Sales: (160) NA Exp: NA NA net inc: (160) NA CF: NA 7840 OA

Contours, Inc. sold merchandise that cost $6,000 to a customer on account for $9,000 under terms 2/10, n/30. Customers returned merchandise that had been sold for $1,000. This merchandise had originally cost Contours $700. Which of the following shows how the sales return will affect the company's financial statements?

cash: NA NA ar: (1000) NA inv: NA 700 liab: NA NA equit: (1000) 700 N. Sales: (1000) NA Exp: NA (700) net inc: (1000) 700 CF: NA NA

Contours, Inc. sold merchandise that cost $6,000 to a customer on account for $9,000 under terms 2/10, n/30. Which of the following shows how this event will affect a company's financial statements?

cash: NA NA ar: 9000 NA inv: NA (6000) liab: NA NA equit: 9000 (6000) N. Sales: 9000 NA Exp: NA 6000 net inc: 9000 (6000) CF: NA NA

The gross margin percentage is determined by

dividing the gross margin by the net sales

McDonald's will recognize a gain if it generates an amount of revenue that is higher than its operating expenses. This statement is

false

Product costs are expensed when they are incurred. This statement is

false

Recognizing a sales discount will cause the amount of net sales to increase. This statement is

false

The amount of net income shown on a multi-step income statement will differ from the amount of net income shown on a single-step income statement.

false

Smith Company sold inventory that cost $5,000 for $9,000 cash. Freight cost was $600 paid in cash. The freight terms were FOB shipping point. Based on this information,

gross margin would be $4000

The amount of net sales is determined by which of the following formulas?

gross slaes - sales returns and allowances - sales discounts

The following income statements were drawn from the annual report of The Western Sales Company. If the trends continue, investors can expect the company's net income for Year 3 to

increase

Davis company sold inventory on account. Assuming Davis is using the periodic inventory method recognizing this event will

increase the balance in the accounts receivable account

Which of the following events experienced by a department store would be presented in the operating section of a multistep income statement?

inventory sold for less than its cost

The gross margin appears on a

multistep income statement

Smith Company sold inventory that cost $5,000 for $9,000 cash. Freight cost was $600 paid in cash. The freight terms were FOB destination. Based on this information,

net income would $3400

Davis company purchased inventory on account. Assuming Davis is using the periodic inventory method recognizing this event will

none of the answers are correct

When a merchandising company pays cash to purchase inventory

none of the answers are correct

When a merchandising company sells inventory it will

recognize revenue expenses

Zack's, Inc. sold land that cost $85,000 for $70,000 cash. As a result of this event

total assets decreased

Common size statements are presented as percentages to promote comparisons between different size companies. This statement is

true

Underwood Company's gross margin percentage increased from 40% to 45%. Which of the following is not a possible explanation for this increase, assuming all other things being equal?

underwood sold more products