College Accounting Chapter 5 C Quiz

Mega Skateboard Supplier had net sales of $2.8 million, its cost of goods sold was $1.6 million, and its net income was $0.9 million. Its gross margin ratio equals:

• 43%

• 175%

• 29%

• 68%

All of the following statements regarding inventory shrinkage are true except:

• Inventory shrinkage can be caused by theft or deterioration.

• Inventory shrinkage is recognized by debiting an operating expense.

• Inventory shrinkage is recognized by debiting Cost of Goods Sold.

• Inventory shrinkage refers to the loss of inventory.

Multiple-step income statements:

• Are required by the FASB and IASB.

• List cost of goods sold as an operating expense.

• Are only used in perpetual inventory systems.

• Contain more detail than a simple listing of revenues and expenses.

Expenses to promote sales by displaying and advertising merchandise, make sales, and deliver goods to customers are known as:

• Non-operating activities.

• Selling expenses.

• Cost of goods sold.

• General and administrative expenses.

• Purchasing expenses.

A company's current assets are $23,420, its quick assets are $13,890 and its current liabilities are $12,220. Its acid-test ratio equals:

• .52

• 1.14

• 0.88

• 1.41

• 1.91