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Exam 4: Accounting for Merchandising Businesses

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Question 51

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What is the term used to describe a firm that primarily sells merchandise to other businesses?

A) Wholesale firm
B) Service firm
C) Retail firm
D) Consulting firm

E) C) and D)
F) All of the above

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Question 52

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[The following information applies to the questions displayed below.] Assume the perpetual inventory system is used. 1) Green Company purchased merchandise inventory that cost $64,000 under terms of 2/10, n/30 and FOB shipping point. 2) Green Company paid freight cost of $2,400 to have the merchandise delivered. 3) Payment was made to the supplier on the inventory within 10 days. 4) All of the merchandise was sold to customers for $94,000 cash and delivered under terms FOB destination with freight cost amounting to $1,600. -What is the amount of gross margin that results from these transactions?

A) $31,280
B) $27,280
C) $28,880
D) $29,680

E) C) and D)
F) B) and D)

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Question 53

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Net sales is calculated by subtracting cost of goods sold from sales revenue.

Gross margin is equal to the amount of change (increase or decrease)in Merchandise Inventory during a period.

A company using the perpetual inventory system paid cash for freight costs to purchase merchandise.Which of the following reflects the effects of this event on the financial statements?

Net income is not affected by a purchase of merchandise.

The following data is from the income statement of Ralston Company: $\begin{array}{lr}\text { Revenue } & \$ 36,000 \\\text { Cost of goods sold } & (14,400 ) \\\text { Operating expenses } & (16,000) \\\text { Net income } & \$ 5,600\end{array}$ What is the company's gross margin percentage?

Sam Company reported the following amounts on its income statement: $\begin{array}{lr}\text { Net income } & 100,000 \\\text { Cost of goods sold } & 400,000 \\\text { Gross margin } & 200,000\end{array}$ Based on the information provided,what was the amount of sales reported on the income statement?

Leonard Company paid freight costs to have goods shipped to one of its customers.What effect will the payment of these freight costs have on the company's financial statements?

A company using a perpetual inventory system treats transportation-out as an operating expense.

What happens when merchandise is delivered FOB Destination?

SX Company sold merchandise on account for $16,000.The merchandise had cost the company $6,000.What is the effect of the sale on the income statement?

Howell Company granted a sales allowance of $360 to a customer who was not totally satisfied with the quality of goods received.The customer did not return the goods and had not yet paid for them.Which of the following reflects the effects of this event on the financial statements?

Which of the following items is not a product cost?

When using a perpetual inventory system,which of the following events is an asset use transaction?

Sullivan Company uses the periodic inventory system.The following balances were drawn from the accounts of Sullivan Company prior to the closing process: What is the gross margin that will be shown on the income statement?

Flagler Company purchased $4,000 of merchandise on account.Flagler sold the merchandise to a customer for $7,000 cash.What is the increase in gross margin and the net change in cash flow from operating activities as a result of these transactions? (Consider the effects of both parts of this event.)

During the current year,Gomez Co.had beginning inventory of $2,400 and ending inventory of $1,200.The cost of goods sold was $9,600.What is the amount of inventory purchased during the year?

How is the net income percentage calculated?

With a perpetual inventory system,the cost of merchandise inventory is recognized at the time of purchase.