Merchandising Company Quiz )

A company has net sales and cost of goods sold of $752,000 and $543,000, respectively. Its net income is $17,530. The company's gross margin and operating expenses are ________ and ____________, respectively.

• A. $209,000; $191,470

• B. $191,470; $209,000

• C. $525,470; $227,000

• D. $227,000; $525,470

• E. $734,000; $191,470

A merchandising company: A. Earns net income by buying and selling merchandise. B. Receives fees only in exchange for services. C. Earns profit from commissions only. D. Earns profit from fares only. E. Buys products from consumers.

• Earns net income by buying and selling merchandise

• Receives fees only in exchange for services

• Earns profit from commissions only

• Earns profit from fares only

• Buys products from consumers

The acid-test ratio differs from the current ratio in that:

• Liabilities are divided by current assets.

• Prepaid expenses and inventory are excluded from the calculation of the acid-test ratio.

• The acid-test ratio measures profitability and the current ratio does not.

• The acid-test ratio excludes short-term investments from the calculation.

• The acid-test ratio is a measure of liquidity but the current ratio is not.

The quick assets are defined as:

• Cash, short-term investments, and inventory.

• Cash, short-term investments, and current receivables.

• Cash, inventory, and current receivables.

• Cash, noncurrent receivables, and prepaid expenses.

• Accounts receivable, inventory, and prepaid expenses.

The operating cycle for a merchandiser that sells only for cash moves from: A. Purchases of merchandise to inventory to cash sales. B. Purchases of merchandise to inventory to accounts receivable to cash sales. C. Inventory to purchases of merchandise to cash sales. D. Accounts receivable to purchases of merchandise to inventory to cash sales. E. Accounts receivable to inventory to cash sales.

• Purchases of merchandise to inventory to cash sales

• Purchases of merchandise to inventory to accounts receivable to cash sales

• Inventory to purchases of merchandise to cash sales

• Accounts receivable to purchases of merchandise to inventory to cash sales

• Accounts receivable to inventory to cash sales

Cost of goods sold:

• Is another term for merchandise sales

• Is the term used for the cost of buying and preparing merchandise for sale

• Is another term for revenue

• Is also called gross margin

• Is a term only used by service firms

The amount recorded for merchandise inventory includes:

• Any purchase discounts.

• Any returns and allowances.

• Any necessary freight costs.

• Any trade discounts.

• All of these.

Breanna Boutique reported the following year-end information: The current ratio and acid-test ratio for the boutique are _________ and ________, respectively:

• 1.8 and 1

• 1.97 and 1.52

• 2.73 and 1.52

• 3.50 and 0.90

• None of these

A debit memorandum is:

• Required whenever a journal entry is recorded.

• The source document for the purchase of merchandise inventory.

• Required when a purchase discount is granted.

• The document a buyer issues to inform the seller of a debit made to the seller's account in the buyer's records.

• Not necessary in a perpetual inventory system.

The acid-test ratio:

• Is also called the quick ratio

• Measures profitability

• Measures inventory turnover

• Is generally greater than the current ratio

• All of these