intro accounting

ACCT1B - Sample Exam 2

Name: __________________________ Date: _____________
1. The current period's ending inventory is:
A) The next period's beginning inventory.
B) The current period's cost of goods sold.
C) The prior period's beginning inventory.
D) The current period's net purchases.
E) The current period's beginning inventory.
2. Sales returns and allowances:
A) Can provide useful information about dissatisfied customers and the possibility of lost future sales.
B) Are recorded in separate contra-revenue accounts.
C) Are rarely disclosed in published financial statements.
D) Are closed to the Income Summary account.
E) All of the above.
3. 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.
4. A merchandising company:
A) Earns net income by buying and selling merchandise.
B) Can buy products from manufacturers and sell to retailers.
C) Can buy products from manufacturers and sell them to consumers.
D) Can be a wholesaler or a retailer.
E) All of the above.
5. J.C. Penny 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%.

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ACCT1B - Sample Exam 2

6. 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 profit margin.
D) Is a measure of liquidity.
E) Should be greater than 1.
7. Sales less sales discounts less sales returns and allowances equals:
A) Net purchases.
B) Cost of goods sold.
C) Net sales.
D) Gross profit.
E) Net income.
8. A debit to Sales Returns and Allowances and a credit to Accounts Receivable:
A)