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Exam 4: Reporting and Analyzing Merchandising Operations

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Question 71

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Using the following year-end information for Bauman,LLC,calculate the current ratio and acid-test ratio: $\begin{array}{lr}\text { Cash } & 48,000 \\\text { Short-term investments } & 12,000 \\\text { Accounts receivable } & 45,000 \\\text { Inventory } & 225,000 \\\text { Prepaid expenses } & 12,500 \\\text { Accounts payable } & 86,500 \\\text { Other current payables } & 22,000\end{array}$

A) 3.01 and 1.21
B) 3.16 and .97
C) 3.04 and 1.21
D) 1.09 and 4.77
E) 3.16 and 1.21

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

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Question 72

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A company records the following journal entry: debit Cash $1,470,debit Sales Discounts $30,and credit Accounts Receivable $1,500.This means that a customer has taken what percentage cash discount for early payment?

A) 1%
B) 2%
C) 5%
D) 10%
E) 15%

F) A) and E)
G) A) and D)

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Question 73

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Prepare journal entries to record the following merchandise transactions of Martinez Excavation Equipment,which applies the perpetual inventory system and the gross method of recording invoices.

A company purchases merchandise with a catalog price of $20,000.The company receives a 35% trade discount from the seller.The seller also offers credit terms of 2/10,n/30.Assuming no returns were made and that payment was made within the discount period,what is the net cost of the merchandise?

When preparing an unadjusted trial balance using a periodic inventory system,the amount shown for Merchandise Inventory is:

A retailer buys products from manufacturers and sells them to wholesalers.

The acid-test ratio is also called the quick ratio.

The adjusting entry to reflect inventory shrinkage is a debit to Cost of Goods Sold and a credit to Merchandise Inventory.

On May 1,Anders Company purchased merchandise in the amount of $5,800 from Shilling,with credit terms of 2/10,n/30.Anders uses the perpetual inventory system and the gross method.The journal entry or entries that Anders will make on May 1 is:

Cost of goods sold:

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

A ________ income statement format shows detailed computations of net sales and other costs and expenses,and reports subtotals for various classes of items.

Prentice Company had cash sales of $94,275,credit sales of $83,450,sales returns and allowances of $1,700,and sales discounts of $3,475.Prentice's net sales for this period equal:

All of the following accounts are included in the calculation of gross profit except:

A company had net sales of $340,500,its cost of goods sold was $257,000,and its net income was $13,750.The company's gross margin ratio equals 24.5%.

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

A perpetual inventory system is able to directly measure and monitor inventory shrinkage and there is no need for a physical count of inventory.

Explain the difference between the single-step and multiple-step income statements.

From the adjusted trial balance for Fabricated Products Company given below,prepare the necessary closing entries.

If a buyer does not take advantage of a supplier's credit terms of 2/10,n/30,and instead pays the invoice in full at the end of 30 days,by not taking the discount the buyer loses the equivalent of 36.5% annual interest on the amount of the purchase.