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Exam 4: Reporting and Analyzing Merchandising Operations

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Question 91

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A company purchased $8,750 worth of merchandise,with terms of 2/10,n/30.The invoice was paid within the cash discount period.Accordingly,the company received a cash discount of _______________.

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$8,750 x ...

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Question 92

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FOB _________________ means ownership of goods transfers to the buyer when the goods arrive at the buyer's place of business.The seller is responsible for paying shipping charges and bears the risk of damage or loss in transit.

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Question 93

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The gross margin ratio:

The gross margin ratio is defined as gross margin divided by net sales.

The gross margin ratio reflects the relation between sales and cost of goods sold.

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 company purchased $1,500 of merchandise on credit with terms 3/15,n/30.How much will be debited to Accounts Payable if the company pays $485 cash on this account within ten days?

Maia's Bike Shop uses the periodic inventory system and had the following transactions during the month of May: $\begin{array}{|l|l|}\hline \text { May 3 } & \begin{array}{l}\text { Sold merchandise to a customer on credit for } \$ 600, \text { terms } 2 / 10, \mathrm{n} / 30 . \text { The cost of the } \\\text { merchandise sold was } \$ 350 .\end{array} \\\hline \text { May 4 } & \text { Sold merchandise to a customer for cash of } \$ 425 . \text { The cost of the merchandise was } \$ 250 \text {. } \\\hline \text { May 6 } & \begin{array}{l}\text { Sold merchandise to a customer on credit for } \$ 1,300, \text { term } 2 / 10, \mathrm{n} / 30 . \text { The cost of the } \\\text { merchandise sold was } \$ 750 .\end{array} \\\hline \text { May 8 } & \begin{array}{l}\text { The customer from May } 3 \text { returned merchandise with a selling price of } \$ 100 . \text { The cost of } \\\text { merchandise returned was } \$ 55 .\end{array} \\\hline \text { May 15 } & \text { The customer from May } 6 \text { paid the full amount due, less any appropriate discounts earned. } \\\hline \text { May 31 } & \text { The customer from May } 3 \text { paid the full amount due, less any appropriate discounts earned. }\\\hline \end{array}$ Prepare the required journal entries that Maia's Bike Shop must make to record these transactions.

Explain the cost flows and operating activities of a merchandising company.

Match each definition to its term

A company has net sales of $1,500,000,sales commissions in the amount of $194,000,net income was $366,400,and the gross profit ratio is 60%,what amount listed as gross profit on the income statement for the period?

Describe the difference between wholesalers and retailers.

A ___________ is an intermediary that buys products from manufacturers and sells to retailers.

________________________ refers to products that a company owns and intends to sell.

Under the perpetual inventory system,the cost of merchandise purchased is recorded in the Purchases account.

_______________________ are non-operating activities that include interest,dividend and rent revenues and gains from asset disposals.

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%.

ABC Corporation had total quick assets $5,888,000,current assets $11,700,000 and current liabilities $8,000,000.Its acid-test ratio equals:

Credit terms include the specifics regarding the amount owed and timing of payments from a buyer to a seller.

A company reported the following year-end information: $\begin{array} { | l | r | } \hline \text { Cash } & \$ 52,000 \\\hline \text { Short-term investments } & 12,000 \\\hline \text { Accounts receivable } & 54,000 \\\hline \text { Inveritory } & 325,000 \\\hline \text { Prepaid expenses } & 17,500 \\\hline \text { Accounts payable } & 106,500 \\\hline \text { Other current payables } & 25,000 \\\hline\end{array}$ Required: Explain the purpose of the acid-test ratio. Calculate the acid-test ratio for this company. What does the acid-test ratio reveal about this company?