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Exam 4: Accounting for Merchandising Operations

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Question 101

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Neutron uses a periodic inventory system. Prepare general journal entries to record the following transactions for Neutron:

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Question 102

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What does FOB stand for? Differentiate between FOB shipping point (or FOB factory) and FOB destination?

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FOB stands for free on board. If goods a...

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Question 103

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A perpetual inventory system requires updating of the inventory account only at the beginning of an accounting period.

___________________ refer to reductions in the selling price of merchandise sold to customers, often involving damaged or defective merchandise that a customer is willing to purchase with a decrease in the selling price.

In a perpetual inventory system, the merchandise inventory account reflects the cost of goods available for sale.

When preparing the unadjusted trial balance in a periodic inventory system, the amount that appears as Merchandise Inventory is the ending inventory amount.

Sales returns:

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 company has net sales of $1,832,000, sales commissions in the amount of $194,000, net income was $366,400, and the gross profit ratio is 60%, what is the amount of cost of goods sold?

In a periodic inventory system, cost of goods sold is recorded as each sale occurs.

What is the difference between the periodic and perpetual inventory systems?

J.C. Penney had net sales of $24,750 million, cost of goods sold of $16,150 million and net income of $837 million. Its gross margin ratio equals 3.4%. ($24,750 - $16,150)/$24,750 = 34.7%

A company had sales of $350,000 and cost of goods sold of $200,000, which means gross profit is equal to $550,000.

A company had net sales of $741,800. Its cost of goods sold must have been _________ to yield a gross profit of $282,884.

A company purchased $4,000 worth of merchandise. Transportation costs were an additional $350. The company later returned $275 worth of merchandise and paid the invoice within the 2% cash discount period. The total amount paid for this merchandise is: