1.The acid-test ratio differs from the current ratio in that:A) The acid-test ratio excludes short-term investments from the calculation
B) The acid-test ratio measures profitability and the current ratio does not
C) Liabilities are divided by current assets
D) Prepaid expenses and inventory are excluded from the calculation of the acid-test ratio
E) The acid-test ratio is a measure of liquidity but the current ratio is not2.Sellers always offer a discount to buyers for prompt payment toward purchases made on credit.A) True
B) False3.Sales returns:A) Refer to merchandise that customers return to the seller after the sale
B) Represent cash discounts
C) Represent trade discounts
D) Are not recorded under the perpetual inventory system until the end of each accounting period
E) Refer to reductions in the selling price of merchandise sold to customers4.In a perpetual inventory system, the merchandise inventory account must be closed at the end of the accounting period.A) True
B) False5.A company purchased $7,500 worth of merchandise. Transportation costs were an additional $80. The company later returned $900 worth of merchandise and paid the invoice within the 3% cash discount period. The total amount paid for this merchandise is:A) $6,680.00
B) $7,355.00
C) $7,275.00
D) $6,482.00
E) $6,479.606.A perpetual inventory system is able to directly measure and monitor inventory shrinkage.A) True
B) False7.A company's current ratio is 1.2 and its quick ratio is 0.25. This company is probably an excellent credit risk because the ratios reveal no indication of liquidity problems.A) True
B) False8.A company purchased merchandise inventory at a cost of $8,500 with credit terms 2/10, net 60. If the company borrows $8,330 to pay for the purchase on the last day of the discount period and pays the loan plus interest in the amount of $8,466.93 on the last day of the credit period, what is the net savings?A) $170.00
B) There is no savings to the company
C) $33.07
D) $136.93
E) $-33.079.Accounting and reporting for merchandise purchases and sales are treated identically under both GAAP and IFRS.A) True
B) False10.A company purchased $1,500 of merchandise on credit with terms 3/15, n/30. How much will be debited to Accounts Payable if the company pays $485 cash on this account within ten days?A) $470.45
B) $500
C) $1,455
D) Nothing will be debited to Accounts Payable, the account should be credited in this situation
E) $48511.Purchase returns refer to merchandise a buyer acquires but then returns to the seller.A) True
B) False12.The gross margin ratio is defined as gross margin divided by net sales.A) True
B) False13.A perpetual inventory system requires updating of the inventory account only at the beginning of an accounting period.A) True
B) False14.Cost of goods sold:A) Is another term for revenue
B) Is a term only used by service firms
C) Is another term for merchandise sales
D) Is the term used for the cost of buying and preparing merchandise for sale
E) Is also called gross margin15.Merchandise inventory consists of products that a company acquires to resell to customers.A) True
B) False16.A company has the following accounts. What is the acid test ratio?
A) 1.75%
B) 4.50%
C) 2.30%D) 1.50%
E) 4.00%
A merchandising company:A) Earns net income by buying and selling merchandise
B) Earns profit from fares only
C) Buys products from consumers
D) Earns profit from commissions only
E) Receives fees only in exchange for services18.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 paid on December 8 equals:A) $1,600
B) $1,568
C) $200
D) $1,564
E) $1,80019.Total Company has current liabilities in the amount of $1,250,000 and an acid test ratio of 3 and a current ratio of 7. What is the amount of quick assets that Total Company has on the balance sheet?A) $416,667
B) $1,250,000
C) $8,750,000
D) $2,500,000
E) $3,750,00020.A company's cost of goods sold was $4,000. Determine net purchases and ending inventory given goods available for sale were $11,000 and beginning inventory was $5,000.A) Net Purchases: $15,000; Ending Inventory: $7,000
B) Net Purchases: $10,000; Ending Inventory: $15,000
C) Net Purchases: $6,000; Ending Inventory: $7,000
D) Net Purchases: $16,000; Ending Inventory: $20,000
E) Net Purchases: $9,000; Ending Inventory: $6,000
