Accounting Ch 5

The operating cycle of a merchandising company is ordinarily shorter than that of a service company. (true or false)

Jax Company uses a perpetual inventory system and on November 30 purchased merchandise for which it must pay the shipping charges. Which of the following is one part of the required journal entry when Jax pays the shipping charges of $200? =A debit to Delivery Expense for $200 =A debit to Cash for $200 =A debit to Freight-out for $200 =A debit to Inventory for $200

Cosmos Corporation, which uses a perpetual inventory system, purchased $2,000 of merchandise on July 5 on account. Credit terms were 2/10, n/30. It returned $400 of the merchandise on July 9. Which of the following is one effect when Cosmos pays its bill on July 21? =Debit to Cash for $1,600 =Credit to Accounts Payable for $1,600 =Credit to Cash for $1,600 =Debit to Accounts Payable for $2,000

When credit terms of 1/15, n/60 are offered, how long is the discount period?

Martin Company purchases $4,200 of merchandise on March 1, with credit terms of 3/10, n/30. If Martin pays on March 11, what is the cost of this purchase?

Which of the following items does not result in an entry to the Inventory account under a perpetual system? =Payment of freight costs for goods shipped to a customer =Payment of freight costs for goods received from a supplier =A purchase of merchandise =A return of Inventory to the supplier

Sales Discounts is a contra asset account. (true or false)

On what amount is a sales discount based? =Invoice price less returns and allowances =Invoice less discount =Invoice price plus freight-in =Invoice price plus freight-out

Myers and Company sold $1,800 of merchandise on account to Oscar, Inc. on March 1 with credit terms of 2/10, n/30. Oscar returned $500 of the merchandise due to poor quality on March 3. If Oscar pays for the purchase on March 11, what entry does Myers make to record receipt of the payment?

In a perpetual inventory system, which accounts will the seller credit when merchandise is returned by a customer?

Which statement is true when recording the sale of goods for cash in a perpetual inventory system? =Only one journal entry is necessary. It will record the receipt of cash and sales revenue. =Two journal entries are necessary: one to record the receipt of cash and sales revenue, and one to record the cost of goods sold and to reduce inventory. =Only one journal entry is necessary. It will record cost of goods sold and reduce of inventory. =Two journal entries are necessary: one to record the receipt of cash and reduction of inventory, and one to record the the cost of goods sold and sales revenue.

Net income is $15,000, operating expenses are $20,000, and net sales total $75,000. How much is cost of goods sold?

Assume that sales are $450,000, sales discounts are $10,000, net income is $35,000, and cost of goods sold is $320,000. How much are gross profit and operating expenses, respectively?

If sales revenues totals $400,000, cost of goods sold is $310,000, and operating expenses are $60,000, how much is the gross profit?

If beginning inventory is $60,000, cost of goods purchased is $380,000, sales revenue is $800,000 and ending inventory is $50,000, how much is cost of goods sold under a periodic system?

Arbor Corporation had reported the following amounts at December 31, 2011: Sales $184,000; ending inventory $11,600; beginning inventory $17,200; purchases $60,400; purchases discounts $3,000; purchase returns and allowances $1,100; freight-in $600; freight-out $900. Calculate the cost of goods available for sale.

Beginning inventory is $12,000; purchases are $34,000; sales are $60,000; and cost of goods sold is $31,000. How much is ending inventory?

A company has the following accounts balances: Sales $2,000,000; Sales Returns and Allowances $250,000; Sales Discounts $50,000; and Cost of Goods Sold $1,275,000. How much is the gross profit rate?

net income is $15,000, operating expenses are $20,000, net sales total $75,000, and sales revenues total $95,000. How much is the profit margin ratio?

A company has the following balances: Sales $312,000; Sales Returns and Allowances $2,000; Sales Discounts $4,000; Cost of Goods Sold $184,000; Operating Expenses $84,000. How much is the profit margin ratio

Which factor would not affect the gross profit rate? =An increase in the cost of heating the store =An increase in the sale of luxury items =An increase in the use of "discount pricing" to sell merchandise =An increase in the price of inventory items

Given the following quality of earnings ratios, which suggests the company may be using the most conservative accounting techniques? =0.6 =1.0 =1.8 =0.2

What quality of earnings ratio might a company have if it is using more aggressive accounting techniques in order to accelerate income recognition? =significantly more than 1 =Significantly less than 1 =Approximately equal 1 =Close to 0

When using a periodic inventory system and the purchaser directly incurs the freight costs, which account is debited?

In a periodic inventory system, when is the cost of the merchandise sold determined? a. At the time of the sale b. At the end of the period c. Periodically during the period d. Any one of the above can be used

Which statement is true when goods are purchased for resale by a company using a periodic inventory system? =Purchases on account are debited to inventory. =Purchases on account are debited to purchases. =Purchase returns are debited to purchase returns and allowances. =Freight costs are debited to purchases.