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Exam 4: Reporting and Analyzing Merchandising Operations

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Question 91

Multiple Choice

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A company had net sales of $82,000,cost of goods sold of $70,000,and other expenses of $2,000.Its gross margin ratio equals:

A) 85.37%.
B) 2.44%.
C) 14.63%.
D) 16.67%.
E) 683.33%.

F) B) and E)
G) None of the above

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Question 92

Multiple Choice

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A company had sales of $695,000 and cost of goods sold of $278,000.Its gross profit equals:

A) $(417,000) .
B) $695,000.
C) $278,000.
D) $417,000.
E) $973,000.

F) B) and D)
G) B) and C)

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Question 93

Multiple Choice

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A company's gross profit was $83,750 and its net sales were $347,800.Its gross margin ratio equals:

Successful use of a just-in-time inventory system can narrow the gap between the acid-test and the current ratio.

A perpetual inventory system continually updates accounting records for inventory transactions.

What is the acid-test ratio? How does it measure a company's liquidity?

What is gross margin ratio? How is it used as an indicator of profitability?

J.C.Penny had net sales of $28,496 million,cost of goods sold of $19,092 million,and net income of $997 million.Its gross margin ratio equals:

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:

___________________ 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.

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

Distinguish between selling expenses and general and administrative expenses.

Multiple-step income statements:

Merchandise inventory is reported in the long-term assets section of the balance sheet.

Burlington Company uses the perpetual inventory method.On February 12,Burlington Company purchased merchandise inventory from Huffington Inc.with an invoice price of $140,000 and credit terms of 2/10,n/30.Burlington Company paid Huffington on February 20.How would Burlington Company record this transaction?

In a perpetual inventory system,the merchandise inventory account must be closed at the end of the accounting period.

A retailer is an intermediary that buys products from manufacturers and sells them to wholesalers.

A company uses the perpetual inventory system and recorded the following entry: This entry reflects a:

A company has the following accounts.What is the acid test ratio?

A company purchased $7,500 worth of merchandise.Transportation costs were an additional $80.The company later returned $900 worth of merchandise and paid the invoice within the 3% cash discount period.The total amount paid for this merchandise is: