QUIZ 4

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Question 1

5 out of 5 points
A common rule of thumb is that a company's acid-test ratio should have a value near or higher than 1 to conclude that a company is unlikely to face near-term liquidity problems.
Selected Answer:
True

·         Question 2

5 out of 5 points
The following statements regarding merchandise inventory are true except:
Selected Answer:
Merchandise inventory appears on the balance sheet of a service company.

·         Question 3

5 out of 5 points
Sales returns:
Selected Answer:
Refer to merchandise that customers return to the seller after the sale.

·         Question 4

5 out of 5 points
Expenses to promote sales by displaying and advertising merchandise, make sales, and deliver goods to customers are known as:
Selected Answer:
Selling expenses.

·         Question 5

5 out of 5 points
Successful use of a just-in-time inventory system can narrow the gap between the acid-test and the current ratio.
Selected Answer:
True

·         Question 6

5 out of 5 points
Cost of goods sold is an expense, and is reported on the income statement.
Selected Answer:
True

·         Question 7

0 out of 5 points
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:
Selected Answer:
32%.

·         Question 8

5 out of 5 points
A debit to Sales Returns and Allowances and a credit to Accounts Receivable:
Selected Answer:
Recognizes that a customer returned merchandise and/or received an allowance.

·         Question 9

5 out of 5 points
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. The amount of the cash paid on July 28 equals:
Selected Answer:
$1,600.

·         Question 10

5 out of 5 points
A perpetual inventory system continually updates accounting records for merchandising transactions.
Selected Answer:
True

·         Question 11

5 out of 5 points
Beginning inventory plus net purchases equals merchandise available for sale.
Selected Answer:
True

·         Question 12

0 out of 5 points
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 26, it paid the full amount due. The amount of the cash paid on August 26 equals:
Selected Answer:
$8,167.50.

·         Question 13

5 out of 5 points
Cash sales shorten the operating cycle for a merchandiser; credit sales lengthen operating cycles.
Selected Answer:
True

·         Question 14

5 out of 5 points
The acid-test ratio differs from the current ratio in that:
Selected Answer:
Prepaid expenses and inventory are excluded from the calculation of the acid-test ratio.

·         Question 15

5 out of 5 points
Purchase discounts are the same as trade discounts.
Selected Answer:
False

·         Question 16

0 out of 5 points
Using the following year-end information for Bauman, LLC, calculate the current ratio and acid-test ratio:
 
Cash
$
48,000
Short-term investments

12,000
Accounts receivable

45,000
Inventory

225,000
Prepaid expenses

12,500
Accounts payable

86,500
Other current payables

22,000
Selected Answer:
3.16 and 1.21

·         Question 17

0 out of 5 points
On September 12, Ryan Company sold merchandise in the amount of $5,800 to Johnson Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Ryan uses the periodic inventory system and the net method of accounting for sales. Johnson pays the invoice on September 18, and takes the appropriate discount. The journal entry that Ryan makes on September 18 is:
Selected Answer:
Cash
5,684

Sales discounts
116

Accounts receivable

5,800

·         Question 18

5 out of 5 points
A wholesaler buys products from manufacturers or other wholesalers and sells them to consumers.
Selected Answer:
False

·         Question 19

0 out of 5 points
If goods are shippedcydestination, the seller does not record revenue from the sale until the goods arrive at their destination because the transaction is not complete until that point.
Selected Answer:
False

·         Question 20

5 out of 5 points
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 correct journal entry to record the payment on August 16 is:
Selected Answer:
Debit Accounts Payable $8,250; credit Merchandise Inventory $82.50; credit Cash $8,167.50.

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