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Chpt 6A-Merchandising-Multiple Choice

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									Chapter 6A-Merchandising Homework

Try to work these multiple choice problems & we will go over them in class.


   1.   Gross profit:
   A)   Is also called gross margin.
   B)   Less total expenses equals net income.
   C)   Equals net sales less cost of goods sold.
   D)   Must cover all operating expenses to yield a return for the owner of the business.
   E)   All of the above.


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


   3.   Cost of goods sold:
   A)   Is another term for merchandise sales.
   B)   Is the term used for the cost of buying and preparing merchandise for sale.
   C)   Are operating expenses.
   D)   Is also called gross margin.
   E)   Is a term only used by service firms.


   4. A company had sales of $695,000 and its cost of goods sold of $278,000. Its gross
      margin equals:
   A) $(417,000).
   B) $ 695,000.
   C) $ 278,000.
   D) $ 417,000.
   E) $ 973,000.


   5. A company had sales of $375,000 and its gross profit was $157,500. Its cost of goods
      sold equals:
   A) $(217,500).
   B) $375,000.
   C) $157,500.
   D) $217,500.
   E) $532,500.




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6.    Merchandise inventory:
A)    Is reported on the balance sheet as a current asset.
B)    Is goods held for resale.
C)    Can include the cost of shipping the goods to the store and making them ready for sale.
D)    Does not appear on the balance sheet of a service company.
E)    All of the above.


7.    Merchandise inventory:
A)    Is a long-term asset.
B)    Is a current asset.
C)    Includes supplies.
D)    Is an investment asset.
E)    Must be sold within one month.


8.    The operating cycle of a merchandising company:
A)    Begins with the purchase of merchandise.
B)    Ends with the collection of cash from the sale of merchandise.
C)    Can vary in length among different merchandising companies.
D)    Sometimes involves accounts receivable.
E)    All of the above.


9. A company had sales of $320,000 and its cash received from customers was $400,000.
   The difference between these amounts reflects:
A) An $80,000 decrease in accounts payable.
B) An $80,000 increase in accounts payable.
C) An $80,000 decrease in accounts receivable.
D) An $80,000 increase in accounts receivable.
E) An $80,000 increase in gross profit.


10.   The gross margin ratio:
A)    Is also called the net profit ratio.
 B)   Measures a merchandising firm's ability to earn a profit from the sale of inventory.
 C)   Is also called the net profit margin ratio.
D)    Is a measure of liquidity.
 E)   Should be greater than 1.




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11. J. C. Penney had net sales of $28,496 million, its cost of goods sold was $19,092
    million, and its net income was $997 million. Its gross margin ratio equals:
A) 3.5%.
 B) 5.2%.
 C) 33%.
D) 67%.
 E) 149.3%.


12. A company's net sales were $676,600, its cost of good sold was $236,810 and its net
    income was $33,750. Its gross margin ratio equals:
A) 5%.
 B) 9.6%.
 C) 35%.
D) 65%.
 E) 285.7%.


13. A company's gross profit was $83,750, and its net sales were $347,800. Its gross
    margin ratio equals:
A) 4.2%.
 B) 24.1%.
 C) 75.9%.
D) $ 83,750.
 E) $264,050.


14. A company purchased $1,800 of merchandise on December 5. On December 7, it
    returned $200 worth of merchandise. On December 8, it paid the balance in full, taking
    a 2% discount. The amount of the cash paind on December 8 equals:
A) $ 200.
 B) $1,564.
 C) $1,568.
D) $1,600.
 E) $1,800.


15.   A closing entry would close any debit balance in:
A)    Sales Discounts.
 B)   Sales Returns and Allowances.
 C)   Cost of Goods Sold.
D)    Operating Expenses.
 E)   All of the above.




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16.   Merchandising companies must account for:
A)    Sales.
 B)   Sales discounts.
 C)   Sales returns and allowances.
D)    Cost of goods sold.
 E)   All of the above.


17.   The credit terms 2/10, n/30 are interpreted as:
A)    2% cash discount if the amount is paid within 10 days, with the balance due in 30 days.
 B)   10% cash discount if the amount is paid within 2 days, with the balance due in 30 days.
 C)   30% discount if paid within 2 days.
D)    30% discount if paid within 10 days.
 E)   2% discount if paid within 30 days.


18. A trade discount is:
A) A term used by a purchaser to describe a cash discount given to customers for prompt
    payment.
 B) A reduction in price below the list price.
 C) A term used by a seller to describe a cash discount granted to customers for prompt
    payment.
D) A reduction in price for prompt payment.
 E) Also called a rebate.


19. To compute the net cost of a merchandise purchase, the invoice amount must be
    adjusted for:
A) Any purchase discounts.
 B) Any returns and allowances.
 C) Any necessary freight costs.
D) Any trade discounts.
 E) All of the above.


20.   Sales returns:
A)    Refer to merchandise that customers return to the seller after the sale.
 B)   Refer to reductions in the selling price of merchandise sold to customers.
 C)   Represent cash discounts.
D)    Represent trade discounts.
 E)   Are not recorded under the perpetual invnetory system until the end of each accounting
      period.




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