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A debit to Sales Returns and Allowances and a credit to Accounts Receivable:


A) Reflects an increase in amount due from a customer.
B) Recognizes that a customer returned merchandise and/or received an allowance.
C) Records the cost side of a sales return.
D) Is recorded when a customer takes a discount.
E) Reflects a decrease in amount due to a supplier.

F) B) and D)
G) All of the above

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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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Closing entries are similar for service ...

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Match the following definitions with terms.

Premises
The point of ownership transfer from seller to buyer that takes place when the goods depart the seller's place of business.
A given percent deducted from a list price often granted to customers purchasing large quantities of merchandise.
Products a company owns and intends to sell.
A measure of a company's ability to pay its current liabilities that excludes less liquid current assets such as inventory and prepaid expenses.
Inventory losses that require an adjusting entry to account for losses from theft or deterioration.
An income statement format that lists cost of goods sold as another expense and shows only one subtotal for total expenses.
The point of ownership transfer from seller to buyer that takes place when the goods arrive at the buyer's place of business.
The expenses of advertising merchandise, making sales, and delivering goods to customers.
An income statement format that shows detailed computations of net sales and other costs and expenses, and reports subtotals for various classes of items.
The expenses that support a company's overall operations and include costs related to accounting, human resources and finance.
Responses
Acid-test ratio
FOB shipping point
Selling expenses
General and administrative expenses
Single-step income statement
Trade discount
Inventory shrinkage
Multiple-step income statement
FOB destination
Merchandise inventory

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The point of ownership transfer from seller to buyer that takes place when the goods depart the seller's place of business.
A given percent deducted from a list price often granted to customers purchasing large quantities of merchandise.
Products a company owns and intends to sell.
A measure of a company's ability to pay its current liabilities that excludes less liquid current assets such as inventory and prepaid expenses.
Inventory losses that require an adjusting entry to account for losses from theft or deterioration.
An income statement format that lists cost of goods sold as another expense and shows only one subtotal for total expenses.
The point of ownership transfer from seller to buyer that takes place when the goods arrive at the buyer's place of business.
The expenses of advertising merchandise, making sales, and delivering goods to customers.
An income statement format that shows detailed computations of net sales and other costs and expenses, and reports subtotals for various classes of items.
The expenses that support a company's overall operations and include costs related to accounting, human resources and finance.

The gross margin ratio:


A) Is also called the net profit ratio.
B) Indicates the percent of sales revenue remaining after covering the cost of the goods sold.
C) Is also called the profit margin.
D) Is a measure of liquidity and should exceed 2.0 to be acceptable.
E) Should be greater than 1 for merchandising companies.

F) B) and D)
G) A) and B)

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

A) True
B) False

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Purchase returns refer to merchandise a buyer purchases but then returns to the seller.

A) True
B) False

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Netherland Corporation has the following unadjusted balances: Accounts Receivable,$80,000 (debit) ,and Allowance for Sales Discounts $300 (credit) .Of the receivables,$50,000 of them are within the 2% discount period,and Netherland expects buyers to take $1,000 in future-period discounts ($50,000 × 2%) arising from this period's sales.The adjusting entry or entries to estimate sales discounts is (are) :


A) Netherland Corporation has the following unadjusted balances: Accounts Receivable,$80,000 (debit) ,and Allowance for Sales Discounts $300 (credit) .Of the receivables,$50,000 of them are within the 2% discount period,and Netherland expects buyers to take $1,000 in future-period discounts ($50,000 × 2%) arising from this period's sales.The adjusting entry or entries to estimate sales discounts is (are) : A) B) C) D) E)
B) Netherland Corporation has the following unadjusted balances: Accounts Receivable,$80,000 (debit) ,and Allowance for Sales Discounts $300 (credit) .Of the receivables,$50,000 of them are within the 2% discount period,and Netherland expects buyers to take $1,000 in future-period discounts ($50,000 × 2%) arising from this period's sales.The adjusting entry or entries to estimate sales discounts is (are) : A) B) C) D) E)
C) Netherland Corporation has the following unadjusted balances: Accounts Receivable,$80,000 (debit) ,and Allowance for Sales Discounts $300 (credit) .Of the receivables,$50,000 of them are within the 2% discount period,and Netherland expects buyers to take $1,000 in future-period discounts ($50,000 × 2%) arising from this period's sales.The adjusting entry or entries to estimate sales discounts is (are) : A) B) C) D) E)
D) Netherland Corporation has the following unadjusted balances: Accounts Receivable,$80,000 (debit) ,and Allowance for Sales Discounts $300 (credit) .Of the receivables,$50,000 of them are within the 2% discount period,and Netherland expects buyers to take $1,000 in future-period discounts ($50,000 × 2%) arising from this period's sales.The adjusting entry or entries to estimate sales discounts is (are) : A) B) C) D) E)
E) Netherland Corporation has the following unadjusted balances: Accounts Receivable,$80,000 (debit) ,and Allowance for Sales Discounts $300 (credit) .Of the receivables,$50,000 of them are within the 2% discount period,and Netherland expects buyers to take $1,000 in future-period discounts ($50,000 × 2%) arising from this period's sales.The adjusting entry or entries to estimate sales discounts is (are) : A) B) C) D) E)

F) B) and E)
G) D) and E)

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A single-step income statement includes cost of goods sold as another expense and shows only one subtotal for total expenses.

A) True
B) False

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Which of the following is not included on a purchase invoice?


A) Seller's name and address.
B) Name and address of the purchaser.
C) Description of items purchased.
D) Arrival date of items ordered.
E) Credit terms.

F) A) and D)
G) A) and B)

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Describe the recording process (including costs)for the types of transactions involved in purchasing merchandise inventory when a perpetual inventory system is used.

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The cost of merchandise purchased for re...

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What are the steps of the operating cycle for a merchandiser with credit sales?

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The steps are: (1)cash purchas...

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A merchandising company's operating cycle begins with the purchase of merchandise and ends with the collection of cash from the sale.

A) True
B) False

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Credit terms of 2/10,n/30 imply that the seller offers the purchaser a 2% cash discount if the amount is paid within 10 days of the invoice date.Otherwise,the full amount is due in 30 days.

A) True
B) False

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A company's current ratio is 1.2 and its quick ratio is 0.25.This company is probably an excellent credit risk because the ratios reveal no indication of liquidity problems.

A) True
B) False

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A service company earns net income by buying and selling merchandise.

A) True
B) False

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Quick assets are defined as:


A) Cash,short-term investments,and inventory.
B) Cash,short-term investments,and current receivables.
C) Cash,inventory,and current receivables.
D) Cash,noncurrent receivables,and prepaid expenses.
E) Accounts receivable,inventory,and prepaid expenses.

F) B) and D)
G) D) and E)

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Inventory Returns Estimated,which reflects an adjustment to inventory for expected future returns,is a liability account reported in the balance sheet,usually under Current Liabilities.

A) True
B) False

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On September 12,Ryan Company sold merchandise in the amount of $5,800 to Johnson Company,with credit terms of 2/10,n/30.The cost of the items sold is $4,000. -Ryan uses the periodic inventory system and the net method of accounting for sales.On September 14,Johnson returns some of the non-defective merchandise,which is restored to inventory.The selling price of the returned merchandise is $500 and the cost of the merchandise returned is $350.The entry or entries that Ryan must make on September 14 is (are) :


A) On September 12,Ryan Company sold merchandise in the amount of $5,800 to Johnson Company,with credit terms of 2/10,n/30.The cost of the items sold is $4,000. -Ryan uses the periodic inventory system and the net method of accounting for sales.On September 14,Johnson returns some of the non-defective merchandise,which is restored to inventory.The selling price of the returned merchandise is $500 and the cost of the merchandise returned is $350.The entry or entries that Ryan must make on September 14 is (are) : A) B) C) D) E)
B) On September 12,Ryan Company sold merchandise in the amount of $5,800 to Johnson Company,with credit terms of 2/10,n/30.The cost of the items sold is $4,000. -Ryan uses the periodic inventory system and the net method of accounting for sales.On September 14,Johnson returns some of the non-defective merchandise,which is restored to inventory.The selling price of the returned merchandise is $500 and the cost of the merchandise returned is $350.The entry or entries that Ryan must make on September 14 is (are) : A) B) C) D) E)
C) On September 12,Ryan Company sold merchandise in the amount of $5,800 to Johnson Company,with credit terms of 2/10,n/30.The cost of the items sold is $4,000. -Ryan uses the periodic inventory system and the net method of accounting for sales.On September 14,Johnson returns some of the non-defective merchandise,which is restored to inventory.The selling price of the returned merchandise is $500 and the cost of the merchandise returned is $350.The entry or entries that Ryan must make on September 14 is (are) : A) B) C) D) E)
D) On September 12,Ryan Company sold merchandise in the amount of $5,800 to Johnson Company,with credit terms of 2/10,n/30.The cost of the items sold is $4,000. -Ryan uses the periodic inventory system and the net method of accounting for sales.On September 14,Johnson returns some of the non-defective merchandise,which is restored to inventory.The selling price of the returned merchandise is $500 and the cost of the merchandise returned is $350.The entry or entries that Ryan must make on September 14 is (are) : A) B) C) D) E)
E) On September 12,Ryan Company sold merchandise in the amount of $5,800 to Johnson Company,with credit terms of 2/10,n/30.The cost of the items sold is $4,000. -Ryan uses the periodic inventory system and the net method of accounting for sales.On September 14,Johnson returns some of the non-defective merchandise,which is restored to inventory.The selling price of the returned merchandise is $500 and the cost of the merchandise returned is $350.The entry or entries that Ryan must make on September 14 is (are) : A) B) C) D) E)

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

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

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Which of the following statements regarding the operating cycle of a merchandising company is not true?


A) The operating cycle begins with the purchase of merchandise.
B) The operating cycle is shortened by credit sales.
C) The operating cycle ends with the collection of cash from the sale of merchandise.
D) The operating cycle can vary in length among different merchandising companies.
E) The operating cycle sometimes involves accounts receivable.

F) B) and D)
G) A) and B)

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