ACCT 101 Chapter 4

A company had net sales of $350,000 and cost of goods sold of $200,000. Its gross profit equals $150,000.

• Yes

• No

Cost of goods sold:

• Is another term for merchandise sales.

• Is the term used for the expense 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.

Beginning inventory plus net purchases is:

• Cost of goods sold.

• Merchandise available for sale.

• Ending Inventory.

• Sales.

• Shown on the balance sheet.

The credit terms 2/10, n/30 are interpreted as:

• 2% cash discount if the amount is paid within 10 days, or the full balance due in 30 days.

• 10% cash discount if the amount is paid within 2 days, or the full balance due in 30 days.

• 30% discount if paid within 2 days.

• 30% discount if paid within 10 days.

• 2% discount if paid within 30 days.

A company purchased $1,800 of merchandise on July 5 with terms 2/10, n/30. On July 7, it returned $200 worth of merchandise. On July 28, it paid the full amount due. Assuming the company uses a perpetual inventory system, and records purchases using the gross method, the correct journal entry to record the payment on July 28 is:

• Debit Merchandise Inventory $1,600; credit Cash $1,600.

• Debit Cash $1,600; credit Accounts Payable $1,600.

• Debit Accounts Payable $1,600; credit Merchandise Inventory $32; credit Cash $1,568.

• Debit Accounts Payable $1,800; credit Cash $1,800.

• Debit Accounts Payable $1,600; credit Cash $1,600.

A buyer of $7,000 in merchandise inventory failed to take advantage of the vendor's credit terms of 2/15, n/45, and instead paid the invoice in full at the end of 45 days. By not taking advantage of the cash discount, the buyer lost the discount of:

• 70

• 1050

• 700

• 100

• 140

Sales less sales discounts, less sales returns and allowances equals:

• Net purchases

• Cost of goods sold

• Net Sales

• Gross profit

• Net Income

Juniper Company uses a perpetual inventory system and the gross method of accounting for purchases. The company purchased $9,750 of merchandise on August 7 with terms 1/10, n/30. On August 11, it returned $1,500 worth of merchandise. On August 16, it paid the full amount due. The amount of the cash paid on August 16 equals:

• $8,167.50.

• $9,652.50.

• $9,750.00.

• $8,250.00.

• $8,152.50.

A sales discount is a cash discount from the buyer’s perspective.

• True

• False

A company has net sales of $755,700 and cost of goods sold of $545,700. Its net income is $18,410. The company's gross margin and operating expenses, respectively, are:

• $210,000 and $191,590

• $210,000 and $228,880

• $527,290 and $228,880

• $228,880 and $527,290

• $736,820 and $191,590