Q: A company has net sales of $$500,000 and cost of goods sold of 350$$,000. What is the gross profit percentage?

$$\frac{\500$$,000 - \$$350,000}{\500$$,000} \times 100 = 30\%$

Question 1

Which of the following best describes a key attribute of a merchandiser compared to a service business?

Accepted Answer

Merchandisers purchase finished goods for resale to customers.

Question 2

A company purchases inventory on credit with terms 2/10, n/30. If the company pays within the discount period, how should the purchase be recorded?

Accepted Answer

Inventory is recorded at the net amount after the discount.

Question 3

Which of the following best describes 'sales returns and allowances'?

Accepted Answer

A reduction in sales revenue due to goods returned by customers or allowances granted.

Question 4

A company has net sales of $$500,000 and cost of goods sold of 350$$,000. What is the gross profit percentage?

Accepted Answer

$$\frac{\500$$,000 - \$$350,000}{\500$$,000} 	imes 100 = 30\%$

Question 5

A company purchases inventory for $10,000 with terms 1/10, n/30. They pay on day 8. What is the journal entry for payment?

Accepted Answer

Debit Accounts Payable $$10,000; Credit Cash 9$$,900; Credit Inventory $100.

Question 6

Which of the following is NOT a typical internal control for inventory?

Accepted Answer

Allowing one employee to handle all inventory transactions.

Question 7

A company uses the specific identification method. Which scenario best illustrates its application?

Accepted Answer

A jewelry store tracking the cost of each unique diamond sold.

Question 8

A company uses LIFO. If inventory costs are rising, what is the effect on cost of goods sold and ending inventory?

Accepted Answer

Cost of goods sold is higher and ending inventory is lower.

Question 9

A company has beginning inventory of $$5,000, purchases of 15$$,000, and ending inventory of $4,000. Using the weighted average method, what is the cost of goods sold?

Accepted Answer

$$\5$$,000 + \$$15,000 - \4$$,000 = \$$16,000$$

Question 10

Given cost of goods sold of $$120,000 and average inventory of 30$$,000, what is the inventory turnover ratio?

Accepted Answer

$$\frac{\120$$,000}{\$$30,000} = 4$$

Question 11

Which of the following statements about fraud is most accurate?

Accepted Answer

Fraud is common and often involves intentional deception for personal gain.

Question 12

Which is an effective control over cash receipts?

Accepted Answer

Depositing all cash receipts daily.

Question 13

Which is a recommended control over cash payments?

Accepted Answer

Using pre-numbered checks for all payments.

Question 14

A company has cash of $$8,000, cash equivalents of 2$$,000, and current liabilities of $20,000. What is the cash ratio?

Accepted Answer

$$\frac{\8$$,000 + \$$2,000}{\20$$,000} = 0.5$

Question 15

When replenishing petty cash, which of the following is correct?

Accepted Answer

Debit the appropriate expense accounts and credit Cash.

Question 16

Which of the following transactions can create a receivable?

Accepted Answer

A sale of goods on account.

Question 17

A company estimates bad debts as 2% of credit sales. If credit sales are $100,000, what is the bad debt expense?

Accepted Answer

$$\100$$,000 	imes 0.02 = \$$2,000$$

Question 18

A company has accounts receivable of $50,000 and estimates 5% will be uncollectible. What is the bad debt expense using the percentage of receivables method?

Accepted Answer

$$\50$$,000 	imes 0.05 = \$$2,500$$

Question 19

A company has credit sales of $$360,000 and average accounts receivable of 40$$,000. What is the accounts receivable turnover ratio?

Accepted Answer

$$\frac{\360$$,000}{\$$40,000} = 9$$

Question 20

If a company has average accounts receivable of $$30,000 and credit sales of 180$$,000, what are the days in accounts receivable?

Accepted Answer

$$\frac{\30$$,000}{\$$180,000} 	imes 365 = 60.83$$

Financial Accounting Study Guide: Merchandising, Inventory, Receivables, and Cash Controls

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