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Exam 4: Reporting and Analyzing Merchandising Operations

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Question 121

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The year-end adjusted trial balance of Gordon Produce for the current year,is shown below: GORDON PRODUCE Adjusted Trial Balance December 31 Prepare closing entries at December 31 for the current year.

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Question 122

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The following statements regarding gross profit are true except:

A) Gross profit is also called gross margin.
B) Gross profit less other operating expenses equals income from operations.
C) Gross profit is not reported on the multiple-step income statement.
D) Gross profit must cover all operating expenses to yield a return for the owner(s) of the business.
E) Gross profit equals net sales less cost of goods sold.

F) A) and B)
G) A) and C)

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Question 123

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Sales discounts has a normal debit balance because it decreases Sales,which has a normal credit balance.

A ________ inventory system updates the accounting record for inventory only at the end of an accounting period.

The gross margin ratio is defined as gross margin divided by net sales.

The following information refers to Percy's Records and its competitors in the music store business. $\begin{array} { | l | c | c | } \hline & \begin{array} { l } \text { Current } \\\text { Ratio }\end{array} & \begin{array} { l } \text { Quick } \\\text { Ratio }\end{array} \\\hline \text { Percy's Records } & 2.0 & 0.95 \\\hline \text { Tewel CDs } & 1.5 & 1.00 \\\hline \text { Rudy's Raps } & 1.8 & 1.20 \\\hline \text { Marvin's Jazz } & 1.9 & 0.80 \\\hline \text { Industry Average } & 2.0 & 1.00 \\\hline\end{array}$ Required: Comment on the relative liquidity positions of these companies.

All of the following statements regarding sales returns and allowances are true except:

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:

Prepare journal entries to record the following merchandising transactions of Margin Company,which applies the perpetual inventory system and the gross method of recording invoices.Margin Company offers all of its credit customers credit terms of 2/10,n/30.

________ can benefit a seller by decreasing the delay in receiving cash and reducing future collection efforts.

The acid-test ratio:

A company's quick assets are $147,000 and its current liabilities are $143,000.This company's acid-test ratio is 1.03.

A common rule of thumb is that a company's acid-test ratio should have a value near or higher than 1 to conclude that a company is unlikely to face near-term liquidity problems.

A company purchased $1,800 of merchandise on July 5 with terms 2/10,n/30.On July 7,it returned $200 worth of merchandise.On July 28,it paid the full amount due.The amount of the cash paid on July 28 equals:

Craig's Snowboards uses the perpetual inventory system and the gross method of accounting for sales,and had the following sales transactions during June: Prepare the journal entries that Craig's Snowboards must make to record these transactions.

Sales less sales discounts,less sales returns and allowances equals:

The periodic inventory system requires updating the inventory account only at the end of the period to reflect the quantity and cost of goods available for sale and the cost of goods sold.

If a company sells merchandise with credit terms 2/10 n/30,the credit period is 30 days and the discount period is 10 days.

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

Operating expenses are classified into two categories: selling expenses and cost of goods sold.