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5-1 Merchandising Operations 133.The collection of a $900 account beyond the 2 percent discount period will result in a a.debit to cash for $882. b.debit to Accounts Receivable for $900. c.debit to Cash for $900. d.debit to Sales Discounts for $18. 134.The collection of a $500 account beyond the 2 percent discount period will result in.
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5-1 Merchandising Operations 163.Financial information is presented below: Operating Expenses              $  21,000 Sales Returns and Allowances              7,000 Sales Discounts              3,000 Sales Revenue              150,000 Cost of Goods Sold              105,000 Gross profit would be a.$42,000. b.$35,000. c.$38,000. d.$45,000. 164.Financial information is presented below: Operating Expenses              $  21,000 Sales Returns and Allowances              7,000 Sales Discounts              3,000 Sales Revenue              150,000 Cost of Goods Sold              105,000 The gross profit rate would be a..30. b..25. c..75. d..27. 165.Financial information is.
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              85.Inventory costing methods place primary reliance on assumptions about the flow of a.good. b.costs. c.resale prices. d.values.               86.Which of the following terms best describes the assumption made in applying the four inventory methods? a.Goods flow b.Cost flow c.Asset flow d.Physical flow               87.An assumption about cost flow is necessary a.because it is required by the income tax regulation. b.even.
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5-1 Merchandising Operations Ex. 230 The trial balance of Rachel Company at the end of its fiscal year, August 31, 2012, includes these accounts: Inventory $19,200; Purchases $144,000; Sales $190,000; Freight-in $8,000; Sales Returns and Allowances $3,000; Freight-out $1,000; and Purchases Returns and Allowances $5,000. The ending inventory is $25,000. Instructions Prepare a cost of.
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5-1 Merchandising Operations 153.Multiple-step income statements show a.gross profit but not income from operations. b.neither gross profit nor income from operations. c.both income from operations and gross profit. d.income from operations but not gross profit. 154.Interest expense would be classified on a multiple-step income statement under the heading a.Other expenses and losses b.Other revenues and gains c.Selling expenses d.Cost of goods.
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5-1 Merchandising Operations SHORT-ANSWER ESSAY QUESTIONS S-A-E 248 You are at a company picnic and the company president starts a conversation with you. The president says “Since we use the perpetual inventory system, there is no reason to take a physical count of our inventory.” What is your response to the president’s remarks? S-A E.
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5-1 Merchandising Operations 143.The form of income statement that derives its name from the fact that the total of all expenses is deducted from the total of all revenues is called a a.multiple-step statement. b.revenue statement. c.report-form statement. d.single-step statement. 144.Gross profit does not appear a.on a multiple-step income statement. b.on a single-step income statement. c.to be relevant in.
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5-1 Merchandising Operations IFRS QUESTIONS 1.The Income statement is a.required under GAAP but not under IFRS. b.required under IFRS in the same format as under GAAP. c.required under IFRS but not under GAAP. d.required under IFRS with some differences as compared to GAAP. 2.The basic accounting entries for merchandising are a.the same under GAAP and under IFRS. b.required under GAAP.
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MULTIPLE CHOICE QUESTIONS               45.Manufactured inventory that has begun the production process but is not yet completed is a.work in process. b.raw materials. c.merchandise inventory. d.finished goods.               46.The factor which determines whether or not goods should be included in a physical count of inventory is a.physical possession. b.legal title. c.management's judgment. d.whether or not the purchase price has been.
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105.Laser Listening has the following inventory data: Nov. 1 Inventory30 units @ $8.00 each 8Purchase120 units @ $8.60 each 17Purchase60 units @ $8.40 each 25Purchase90 units @ $8.80 each A physical count of merchandise inventory on November 30 reveals that there are 100 units on hand. Assuming that the specific identification method is used and.
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5-1 Merchandising Operations BRIEF EXERCISES Be. 207 Presented here are the components in Rowland Company’s income statement. Determine the missing amounts.    Cost of GrossOperating   Net _Sales_Goods Sold_Profit ExpensesIncome $75,000         (a)$30,000     (b)$17,000      (c)          $56,000    $54,000$48,000    (d) Be. 208 On September 4, Roberta’s Knickknacks buys merchandise on account from Dolan Company. The selling price of the goods is.
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5-1 Merchandising Operations Ex. 232 The following information is available from the annual reports of Flynn Company and Tolan Inc. (Amounts in millions)    Flynn     Tolan  Sales$35,622$42,457 Cost of goods sold20,73924,431 Operating expenses10,42811,188 Income before taxes4,4556,838 Net income2,5944,072 Instructions 1.Calculate the profit margin ratio and gross profit rate for each company. 2.What conclusion concerning the relative profitability of the two companies can be.
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              21.If the unit price of inventory is increasing during a period, a company using the LIFO inventory method will show less gross profit for the period, than if it had used the FIFO inventory method.               22.If a company has no beginning inventory and the unit price of inventory is.
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5-1 Merchandising Operations MATCHING 247.Match the items below by entering the appropriate code letter in the space provided. A.Net salesF.Contra revenue B.Sales discountG.Freight-out C.Credit termsH.Gross profit D.Periodic inventory systemI.Sales invoice E.Gross profit rateJ.Purchase discount ____              1.A reduction given by the seller for prompt payment of a credit sale. ____              2.Provides support for a credit sale. ____              3.Gross profit divided by net.
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5-1 Merchandising Operations Ex. 218 June4Black Company purchased $7,000 worth of merchandise, terms n/30 from Hayes Company. The cost of the merchandise was $4,900. 12            Black returned $500 worth of goods to Hayes for full credit. The goods had a cost of $350 to Hayes. 12            Black paid the account in full. Ex. 218(Cont.) Instructions Prepare the journal.
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5-1 Merchandising Operations 183.Which of the following is not considered in computing net cost of purchases? a.Purchases returns and allowances b.Purchases c.Freight paid on purchased goods d.Freight paid on goods shipped to customers               184.Assume Grammar Company uses the periodic inventory system and has a beginning merchandise inventory balance of $5,000, purchases of $75,000, and sales of.
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5-1 Merchandising Operations Ex. 217 (a)Bazil Company purchased merchandise on account from Office Suppliers for $56,000, with terms of 2/10, n/30. During the discount period, Bazil returned some merchandise and paid $53,900 as payment in full. Bazil uses a perpetual inventory system. Prepare the journal entries that Bazil Company made to record.
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5-1 Merchandising Operations 113.A sales invoice is prepared when goods a.are sold for cash. b.are sold on credit. c.sold on credit are returned. d.are sold on credit or for cash.               114.The Sales Returns and Allowances account is classified as a(n) a.asset account. b.contra asset account. c.expense account. d.contra revenue account. 115.The entry to record the return of goods from a customer.
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              65.The LIFO inventory method assumes that the cost of the latest units purchased are a.the last to be allocated to cost of goods sold. b.the first to be allocated to ending inventory. c.the first to be allocated to cost of goods sold. d.not allocated to cost of goods sold or ending inventory.               66.Alpha.
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5-1 Merchandising Operations Ex. 220 On September 1, Pennington Supply had an inventory of 20 backpacks at a cost of $25 each. The company uses a perpetual inventory system. During September, the following transactions and events occurred. Sept.4Purchased 40 backpacks at $25 each from Sievert, terms 2/10, n/30. 6Received credit of $100 for the return.
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5-1 Merchandising Operations 193.A decline in a company’s gross profit could be caused by all of the following except a.selling products with a lower markup. b.clearance of discontinued inventory. c.paying lower prices to its suppliers. d.increasing competition resulting in a lower selling price. 194.If Hostell Company has net sales of $500,000 and cost of goods sold of.
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135.The managers of Hong Company receive performance bonuses based on the net income of the firm. Which inventory costing method are they likely to favor in periods of declining prices? a.LIFO b.Average Cost c.FIFO d.Physical inventory method               136.In periods of inflation, phantom or paper profits may be reported as a result of using the a.perpetual.
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115Dole Industries had the following inventory transactions occur during 2012: UnitsCost/unit Feb. 1, 2012Purchase              54              $90 Mar. 14, 2012Purchase              93              $94 May 1, 2012Purchase              66              $98 The company sold 153 units at $126 each and has a tax rate of 30%. Assuming that a periodic inventory system is used and operating expenses of $2,000, what.
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              31.The LIFO inventory method tends to smooth out the peaks and valleys of a business cycle.               32.The computer has made the periodic inventory system more popular and easier to apply.               33.When the market value of inventory is lower than its cost, the inventory is written down to its market.
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5-1 Merchandising Operations Ex. 229 Presented below is information for Zales Company for the month of January 2012. Cost of goods sold$260,000Rent expense$35,000 Freight-out7,000Sales discounts8,000 Insurance expense12,000Sales returns and allowances13,000 Salaries and wages expense58,000Sales revenue421,000 Instructions (a)Prepare a multiple-step income statement. (b)Calculate the profit margin ratio and the gross profit rate.   .
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5-1 Merchandising Operations Ex. 219 On October 1, the Kile Bicycle Store had an inventory of 20 ten speed bicycles at a cost of $150 each. During the month of October the following transactions occurred. Assume Kile uses a perpetual inventory system. Oct.4Purchased 200 bicycles at a cost of $145 each from the Nixon.
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TRUE-FALSE STATEMENTS               1.Raw materials inventories are the goods that a manufacturing company has completed and are ready to be sold to customers.               2.A manufacturer’s inventory consists of raw materials, work in process, and finished goods.               3.When the terms of sale are FOB shipping point, legal title to the goods remains.
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5-1 Merchandising Operations Ex. 228 The adjusted trial balance of McCoy Company included the following selected accounts:   Debit    Credit Sales Revenue$625,000 Sales Returns and Allowances$  50,000 Sales Discounts 9,500 Cost of Goods Sold396,000 Freight-out2,000 Advertising Expense15,000 Interest Expense19,000 Store Salaries Expense74,000 Utilities Expense23,000 Depreciation Expense3,500 Interest Revenue25,000 Instructions 1.Use the above information to prepare a multiple-step income statement for the year ended December 31, 2012. 2.Calculate the.
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5-1 Merchandising Operations Ex. 227 The following information is available for Quayle Company: Sales Revenue$628,000 Sales Returns and Allowances20,000 Cost of Goods Sold398,000 Selling Expense69,000 Administrative Expense35,000 Interest Expense19,000 Interest Revenue20,000 Instructions 1.Use the above information to prepare a multiple-step income statement for the year ended December 31, 2012. 2.Compute the profit margin ratio.   .
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5-1 Merchandising Operations               93.Davies Company purchased merchandise inventory with an invoice price of $7,500 and credit terms of 2/10, n/30. What is the net cost of the goods if Davies Company pays within the discount period? a.$7,500 b.$7,380 c.$7,350 d$6,000               94.A credit sale of $1,600 is made on April 25, terms 2/10, net/30, on which.
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5-1 Merchandising Operations EXERCISES Ex. 215 Sue Cole is a new accountant with Simon Company. Simon purchased merchandise on account for $5,000. The credit terms are 1/10, n/30. Sue has talked with the company's banker and knows that she could earn 6% on any money invested in the company's savings account. Instructions (a)Should Sue pay the.
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5-1 Merchandising Operations COMPLETION STATEMENTS 237.A _________________ buys and sells inventory rather than performing services as their primary source of revenue. 238.Cost of goods sold is deducted from net sales revenue for the period in order to arrive at ________________. 239.Inventory on hand can be obtained from detailed inventory records when a ________________ inventory system.
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              11.In accounting for inventory, the assumed flow of costs must match the physical flow of goods.               12.Inventory methods such as FIFO and LIFO deal more with flow of costs than with flow of goods.               13.The average cost inventory method relies on a simple average calculation.               14.If prices never changed.
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145.The lower of cost or market basis of valuing inventories is an example of a.comparability. b.the cost principle. c.conservatism. d.consistency.               146.When applying the lower of cost or market rule to inventory valuation, market generally means a.current replacement cost. b.original cost. c.resale value. d.original cost, less physical deterioration.               147.The situation that requires a departure from the cost basis of.
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5-1 Merchandising Operations S-A E 256 The following are the gross profit percentages for Naylor Company: YearGross Profit Percentage 200933% 201034% 201136% 201213% List four possible explanations for the low gross profit percentage in 2012. S-A E 257(Ethics) Hiller Corporation manufactures electronic components for use in many consumer products. Their raw materials are purchased literally from all over the world. Depending.
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5-1 Merchandising Operations Ex. 222 Presented here are selected transactions for the Leiss Company during April. Leiss uses the perpetual inventory system. April1Sold merchandise to Mann Company for $5,000, terms 2/10, n/30.  The merchandise sold had a cost of $2,500. 2.Purchased merchandise from Wild Corporation for $6,000, terms 1/10, n/30. 4Purchased merchandise from Ryan Company for.
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5-1 Merchandising Operations Ex. 221 Petersen Book Store entered into the transactions listed below. In the journal provided, prepare Petersen’s necessary entries, assuming use of the perpetual inventory system. July 6Purchased $1,800 of merchandise on credit, terms n/30. 8                  Returned $100 of the items purchased on July 6. 9                  Paid freight charges of $90 on.
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              55.Goods held on consignment are a.never owned by the consignee. b.included in the consignee’s ending inventory. c.kept for sale on the premises of the consignor. d.included as part of no one’s ending inventory.               56.Many companies use just-in-time inventory methods. Which of the following is not an advantage of this method? a.It limits the.
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5-1 Merchandising Operations Ex. 223 Norman Company completed the following transactions in October: Norman uses a perpetual inventory system.        Credit Sales          Sales Returns  Date of   Date   Amount  Terms     Date  AmountCollection Oct.3$  8002/10, n/30Oct.8 Oct.111,2003/10, n/30Oct. 14$  300Oct.16 Oct.175,0001/10, n/30Oct. 201,200Oct.29 Oct.211,7002/10, n/60Oct. 23400Oct.27 Oct.234,0002/10, n/30Oct. 27500Oct.28 Instructions (a)Indicate the cash received for each collection. Show your calculations. (b)Prepare the journal.
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              75.Olympus Climbers Company has the following inventory data: July 1Beginning inventory20 units at $19              $   380 7Purchases70 units at $20              1,400 22Purchases10 units at $22                   220               $2,000 A physical count of merchandise inventory on July 30 reveals that there are 40 units on hand. Using the FIFO inventory method, the amount allocated.
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5-1 Merchandising Operations 173.Financial information is presented below: Operating Expenses              $ 35,000 Sales Returns and Allowances              12,000 Sales Discounts              3,000 Sales Revenue              140,000 Cost of Goods Sold              80,000 The profit margin ratio would be a..43. b..20. c..07. d..08. 174.What is an advantage of using the multiple-step income statement? a.It highlights the components of net income. b.Gross profit is not a separate item. c.It is easier to.
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5-1 Merchandising Operations Ex. 235 Presented here are selected transactions for the Foyle Company during April. Foyle uses the periodic inventory system. April 1Sold merchandise to Land Company for $3,000, terms 2/10, n/30. The merchandise sold had a cost of $2,000. 2                  Purchased merchandise from Webb Corporation for $5,000, terms 1/10, n/30. 4Purchased merchandise from.
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125.In periods of rising prices, the inventory method which results in the inventory value on the balance sheet that is closest to current cost is the a.FIFO method. b.LIFO method. c.average cost method. d.tax method.               126.In a period of declining prices, which of the following inventory methods generally results in the lowest balance sheet.
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5-1 Merchandising Operations Ex. 233 June4Deere Company purchased $3,750 worth of merchandise, terms n/30 from Gilbert Company. The cost of the merchandise was $2,500. 12            Deere returned $600 worth of goods to Gilbert for full credit. The goods had a cost of $400 to Johnson. 12            Deere paid the account in full. Instructions Prepare the journal entries.
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5-1 Merchandising Operations Be. 210 Prepare the journal entries to record the following transactions on Markowitz Company’s books using a perpetual inventory system. On February 6, Markowitz Company sold $75,000 of merchandise to the Lyman Company, terms 2/10, net /30. The cost of the merchandise sold was $50,000. On February 8, the Lyman.
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5-1 Merchandising Operations Ex. 224 The following transactions are for Kale Company. (1)On December 3 Kale Company sold $400,000 of merchandise to Thomson Co., terms 1/10, n/10. The cost of the merchandise sold was $320,000. (2)On December 8 Thomson Co. was granted an allowance of $20,000 for merchandise purchased on December 3. (3)On December 13.
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5-1 Merchandising Operations 103.Stan’s Market recorded the following events involving a recent purchase of inventory: Received goods for $60,000, terms 2/10, n/30. Returned $1,200 of the shipment for credit. Paid $300 freight on the shipment. Paid the invoice within the discount period. As a result of these events, the company’s inventory a.increased by $57,624. b.increased by $59,100. c.increased by $57,918. d.increased.
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              95.The selection of an appropriate inventory cost flow assumption for an individual company is made by a.the external auditors. b.the SEC. c.the internal auditors. d.management.               96.Which of the following is not a common cost flow assumption used in costing inventory? a.First-in, first-out b.Middle-in, first-out c.Last-in, first-out d.Average cost               97.The accounting principle that requires that the cost flow.
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5-1 Merchandising Operations 123.A Sales Returns and Allowances account is not debited if a customer a.returns defective merchandise. b.receives a credit for merchandise of inferior quality. c.utilizes a prompt payment incentive. d.returns goods that are not in accordance with specifications.               124.As an incentive for customers to pay their accounts promptly, a business may offer its customers a.a.
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5-1 Merchandising Operations Ex. 234 On September 1, Hendricks Supply had an inventory of 18 backpacks at a cost of $20 each. The company uses a periodic inventory system. During September, the following transactions and events occurred. Sept.4Purchased 45 backpacks at $20 each from Neufeld, terms 2/10, n/30. 6Received credit of $100 for the return.
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