Accounting #8 part 2 exam 3

A merchandiser has four closing journal entries at the end of an accounting cycle. Select the correct entries below. (Check all that apply.) Multiple select question. A. Close the merchandise inventory account. B. Close the dividends account. C. Close revenue accounts. D. Close the income summary account. E. Close expense accounts. F. Close asset accounts.

B,C,D,E

Identify the financial statements of a merchandiser. (Check all that apply.) Multiple select question. A. Statement of merchandise inventory B. Balance sheet C. Merchandise profit statement D. Statement of retained earnings E. Income statement

B,D,E

Sales Discounts is a contra- (expense/revenue/asset) account and is increased with a (debit/credit).

revenue, debit

Sales is a(n) (expense/revenue/asset) account and is reported on the (income/balance) (statement/sheet).

revenue, income, statement

Sales is a(n) ______ account. Multiple choice question. A. asset B. revenue C. expense D. liability

B.

On June 5, Jo's Market sold $1,000 of goods on credit with terms of 2/10,n/30. How will Jo's Market record the customer's payment on June 8? Multiple choice question. A. Debit Accounts Receivable $1,000; credit Merchandise Inventory $20; and credit Cash $980 B. Debit Cash $980; debit Sales Discounts $20; and credit Accounts Receivable $1,000 C. Credit Accounts Receivable $1,000; debit Cash $980; and credit Merchandise Inventory $20 D. Debit Cash $1,000 and credit Accounts Receivable $1,000

B. (Cash= 1000-discount(20), sales discount= 1000*.02)

Identify the statements below that are correct regarding the closing entries for a merchandiser using the perpetual inventory system. (Check all that apply.) Multiple select question. A. Cost of goods sold is closed with the expense accounts. B. The Dividends account is closed to Retained Earnings C. Sales is closed as a revenue account. D. Sales Discounts is closed with the expense accounts. E. Cost of goods sold is closed with the revenue accounts. F. Sales Discounts is closed with the revenue accounts. G. The Dividends account is closed to Income Summary. H. Sales Returns and Allowances is closed with the expense accounts. I.Merchandise Inventory is closed with the expense accounts.

A,B,C,D,H

A journal entry for a sale of merchandise on credit will result in all of the following: (Check all that apply). Multiple select question. A. Credit to Merchandise Inventory B. Debit to Cost of Goods Sold C. Debit to Accounts Receivable D. Credit to Cost of Goods Sold E. Debit to Sales F. Credit to Sales

A,B,C,F (remeber to journal both revenue and cost)

Select all that apply Sticky Company's merchandise inventory balance at year end is $15,050, but a physical count reveals that only $15,000 of inventory exists. The adjusting entry to record the shrinkage includes: Multiple select question. A. Debit to Cost of Goods Sold for $50 B. Credit to Cost of Goods Sold for $50 C. Debit to Merchandise Inventory for $50 d. Credit to Merchandise Inventory for $50

A,D

X-Mart uses the perpetual inventory system to account for its merchandise. On May 1, it sold $1,400 of merchandise for cash. The original cost of the merchandise to X-Mart was $500. Demonstrate the required journal entry to record the sale and the cost of the sale by selecting all of the correct actions below. (Check all that apply.) Multiple select question. A. Debit Merchandise Inventory $500. B. Debit Cash $1,400. C. Debit Cost of Goods Sold $500. D. Debit Sales $1,400. E. Credit Merchandise Inventory $500. F. Credit Cost of Goods Sold $500. G. Credit Sales $1,400. H. Credit Accounts Receivable $1,400.

B,C,E,G

X-Mart uses the perpetual inventory system to account for its merchandise. On May 1, it sold $1,400 of merchandise for cash. The original cost of the merchandise to X-Mart was $500. Demonstrate the required journal entry to record the cost of the sale by selecting all of the correct actions below. (Check all that apply.) Multiple select question. A. Credit Cost of Goods Sold $500. B. Credit Merchandise Inventory $500. C. Debit Merchandise Inventory $500. D. Debit Cost of Goods Sold $500.

B,D

A sales allowance can be described as: Multiple choice question. A. the implied interest paid when not taking advantage of a sales discount B. a reduction in the selling price of defective or unacceptable merchandise sold to customers C. a discount given by the seller of merchandise for early payment D. the reduction in the sales price of an item because of the quantity purchased

B.

A multiple-step income statement will have all of the following main parts except: Multiple choice question. A. income from operations B. gross profit C. net sales D. net income

C.

On July 5, Jo's Market sold $1,000 of goods on credit with terms of 2/10,n/30. The required journal entry to record Jo's Market customer's payment on August 6 would be: Multiple choice question. A. debit Accounts Receivable $1,000; credit Cash $1,000 B. debit Cash $980; debit Sales Discounts $20; and credit Accounts Receivable $1,000 C. debit Cash $1,000; credit Accounts Receivable $1,000 D. debit Accounts Receivable $1,000; credit Sales Discounts $20; and credit Cash $980

C.

Sales Discounts is a ______ account. Multiple choice question. A. expense B. revenue C. contra-revenue D. asset E. contra-asset

C.

The balance sheet of a merchandiser and a service business have one major difference. Select the item below that would appear only on a merchandiser's balance sheet. Multiple choice question. A. Accounts payable B. Retained Earnings C. Merchandise inventory D. Accounts receivable E. Cash

C.

Which are the two classifications of operating expenses on a multiple-step income statement? Multiple choice question. A. Selling; managerial B. Selling; costs of goods sold C. Selling; general and administrative D. Operating; non-operating

C.

Which of the following equations correctly identify the cost flow of a merchandising company? Multiple choice question. A. Net purchases plus cost of goods sold equals merchandise available for sale B. Beginning inventory plus cost of goods sold equals merchandise available for sale C. Net purchases plus beginning inventory equals merchandise available for sale D. Net purchases minus beginning inventory equals merchandise available for sale

C.

Which of the statements below summarizes what the acid-test ratio measures? Multiple choice question. A. The acid-test ratio measures the marketability of a company's merchandise. B. The acid-test ratio measures the efficiency of capital spending. C. The acid-test ratio measures a merchandiser's ability to pay its current liabilities. D. The acid-test ratio measures the profitability of a company.

C.

Why is it important for a business's success to have a high gross margin? Multiple choice question. A. Without sufficient gross profit on the sale of its merchandise, a business's inventory level will be too low to maintain sales demands. B. A high gross margin ratio measures the efficiency of capital spending. C. A high gross margin helps creditors determine if debt can be repaid on time. D. A merchandiser must make a sufficient profit on the sale of its merchandise to cover the other expenses of its business.

D.

True or false: A single-step income statement shows only one subtotal for expenses. True false question.

True

Which of the following are the three main parts of a multiple-step income statement? (Check all that apply.) Multiple select question. a. Income from operations b. Net income c. Gross profit d. Total sales

a,b,c

A __________ discount benefits a seller through earlier cash receipts and reduced collection efforts.

cash

True or false: Merchandise inventory is generally converted to cash more quickly than accounts receivable.

false

Gross profit is computed as net __________ minus cost of goods sold.

sales

Explain what a credit memorandum is by completing the following sentence. When a seller grants an allowance on a previous sale, the (customer/creditor/seller) issues a credit memorandum to inform the (customer/seller) of a credit made to the buyer's Account Receivable in the seller's records.

seller, customer

Select all that apply Dogs R US uses the perpetual inventory system to account for its merchandise. A customer returned merchandise. Assuming that the purchase was originally bought on credit for $400 with a cost to Dogs R US of $100, demonstrate required journal entry of Dogs R US to record the return by selecting all of the correct actions below. (Check all that apply.) Multiple select question. A. Debit Merchandise Inventory $100. B. Credit Accounts Receivable $400. C. Debit Accounts Payable $400. D. Debit Sales Returns and Allowances $400. E. Credit Merchandise Inventory $100. F. Credit Cost of Goods Sold $100. G. Credit Cash $400. G. Debit Cost of Goods Sold $100. I Credit Sales Returns and Allowances $400.

A,B,D,F (when it is a return with no defective inventory you debit sales returns and allowances, credit cash or accounts receivable, debit merchandise inventory and credit costs of goods sold)

Select the statements below that correctly describe the flow of costs in a merchandiser's accounting cycle. (Check all that apply.) Multiple select question. A. Beginning inventory + net purchases = Merchandise available for sale. B. Ending inventory + Cost of goods sold = Total merchandise available for sale. C. Merchandise that is sold becomes an asset reported on the balance sheet. D. Merchandise purchased is an expense and is reported on the income statement. E. When it is sold, it becomes an expense. F. Merchandise that is sold becomes an expense reported on the income statement. g. Merchandise that is purchased becomes an asset reported on the balance sheet.

A,B,F,G

Select all that apply Sally Beauty Warehouse uses the perpetual inventory system to account for its merchandise. On Nov 2, it sold $700 of merchandise on credit with terms of 2/15,n/30. Demonstrate the required journal entry to record the receipt of payment from the customer on Nov 13, by selecting all of the correct actions below. (Check all that apply.) Multiple select question. A. Debit Sales Discounts $14. B. Credit Sales Discounts $14. C. Credit Accounts Receivable $700. D. Debit Cash $686. E. Debit Cash $700.

A,C,D (cash=700- discount (14), discount= 700*.02)

Select all that apply Which of the statements below summarize why a seller would give a sales allowance? (Check all that apply.) Multiple select question. A. The seller wants to keep a customer happy. B. The buyer could not pay within the discount period. C. The seller wants to avoid future lost sales. D. Sold merchandise was defective or unacceptable. E. The buyer purchased a large amount of merchandise and was eligible for a reduced purchase price. F. In order to entice a customer to keep damaged or defective merchandise, the seller is willing to decrease the selling price.

A,C,D,F

Select all that apply Identify the statements below which are correct regarding a merchandiser's multi-step income statement. (Check all that apply). Multiple select question. A. All expenses are subtracted from gross profit in order to calculate net income. B. Accounts receivable is included on the statement. C. Total assets is the last line on the statement. D. Cost of goods sold is subtracted from net sales in order to determine gross profit. E. Merchandise inventory is reported on the statement.

A,D

A journal entry for a sale of merchandise on credit will result in all of the following: (Check all that apply). Multiple select question. A. Debit to Accounts Receivable B. Debit to Sales C. Credit to Cost of Goods Sold D. Credit to Merchandise Inventory E. Debit to Cost of Goods Sold F. Credit to Sales

A,D,E,F

A single-step income statement can be identified by which of the following formats? Multiple choice question. A. It shows only one total for all expenses. B. It lists a figure for gross profit. C. It shows cost of goods sold as a subtraction from net sales to determine the subtotal cost of goods sold. D. It shows subheadings for operating and non-operating items.

A.

Explain how to determine gross profit on an income statement by selecting the correct statement below. Multiple choice question. A. Cost of goods sold is subtracted from net sales. B. Cost of goods sold is added to sales discounts. C. Sales is subtracted from cost of goods sold. D. Cost of goods sold is added to net sales.

A.

Recall the formula for calculating a company's acid-test ratio. Multiple choice question. a. (Cash plus Short-term investments plus Current receivables) divided by Current liabilities B. Current assets divided by Total assets C. (Cash plus Short-term investments plus Current receivables plus Inventory) divided by Current liabilities D. Merchandise inventory divided by Total assets

A.

Review the statements below and select the one that explains the purpose of a sales discount. Multiple choice question. A. They decrease the time that the seller has to wait for payment. B. They increase the time that the customer has to make payment. C. They increase the amount of money collected by the seller. D. They increase the credit period allowed to customers.

A.

The Merchandise Inventory account on a classified balance sheet is reported in the: Multiple choice question. A. current assets section B. long-term investments section C. intangible assets section D. plant assets section

A.

X-Mart uses the perpetual inventory system to account for its merchandise. On June 1, it sold $7,000 of merchandise for cash. The original cost of the merchandise to X-Mart was $500. Demonstrate the required journal entry to record the sale and the cost of the sale by selecting all of the correct actions below. (Check all that apply.) Multiple select question. A. Credit Cash $7,000. B. Credit Sales $7,000. C. Debit Cash $7,000. D. Credit Merchandise Inventory $500. E. Debit Merchandise Inventory $500. F. Debit Sales $7,000. g. Debit Cost of Goods Sold $500. H. Credit Cost of Goods Sold $500.

B,C,D,G

Jo's Market makes a credit sale for $1,000 with terms of 2/10,n/30. The cost of the merchandise is $400. The required journal entry to record the sale and cost of the sale is: Multiple choice question. A. debit Accounts Receivable $600; credit Sales $600; debit Cost of Goods Sold $400; and credit Merchandise Inventory $400 B. debit Accounts Receivable $1,000; credit Sales $1,000; debit Cost of Goods Sold $400; and credit Merchandise Inventory $400 C. debit Accounts Payable $1,000; and credit Sales $1,000 D. debit Accounts Receivable $1,000 and credit Sales 1,000

B.

On Jan 5, a customer returned merchandise that had been purchased earlier on credit. The original sale was for $500, and the cost to the seller was $150. The seller uses the perpetual inventory system. Demonstrate the required journal entry to record the return on the books of the seller, assuming the goods can be sold to another customer. Multiple choice question. A. Debit Accounts Receivable $500; credit Sales Returns and Allowances $500; credit Merchandise inventory $150; and credit Cost of Goods Sold $150. B. Debit Sales Returns and Allowances $500; debit Merchandise Inventory $150; credit Accounts Receivable $500; and credit Cost of Goods Sold $150. C. Debit Accounts Receivable $500 and credit Cash $500. D. Debit Sales Returns and Allowances $150; credit Accounts Receivable $150.

B.

X-Mart uses the perpetual inventory system to account for its merchandise. On May 1, it sold $1,400 of merchandise on credit with terms of 1/10,n/40. Demonstrate the required journal entry to record the receipt of payment on May 25 by selecting all of the correct actions below. (Check all that apply.) Multiple select question. A. Credit Cash $1,400. B. Credit Accounts Receivable $1,400. C. Debit Cash $1,400. D. Debit Accounts Receivable $1,400. E. Credit Sales Discounts $14. F. Debit Sales Discounts $14.

C,D (reason; when it is outside of discount date you debit cash and credit accounts receivable. the 1/10 shows that yo can have a 1% discount within 10 days)

Identify the statement below that is the correct definition of "shrinkage". Multiple choice question. A. Shrinkage is the discount received against the purchase price of merchandise. B. Shrinkage refers to the diminished floor space that an inventory item has in a store. C. Shrinkage refers to the loss of inventory due to theft, breakage or deterioration.

C.

Jan's Jams makes a credit sale for $300 with terms of 2/10,n/30. The cost of the merchandise is $200. The required journal entry to record the sale and the cost of the sale is: Multiple choice question. A. debit Sales $300 and credit Cost of Goods Sold $300 B. debit Accounts Receivable $200; credit Sales $200; debit Cost of Goods Sold $300; and credit Merchandise Inventory $300 C. debit Accounts Receivable $300; credit Sales $300; debit Cost of Goods Sold $200; and credit Merchandise Inventory $200 D. debit Accounts Payable $300; and credit Sales $300

C.