10.The inventory turnover ratio measures which of the following?
a. The number of times a company sells its average level of inventory during a year.
b. The estimated number of times a company sells its average level of inventory during a year.
c. The number of times a company physically sells its inventory items during a year.
d. None of the above.
12. When a buyer returns merchandise purchased for cash, the buyer records the transaction using the following entry. (Assume the buyer records the transaction at the time they receive a check for the returned merchandise).
a.debit Inventory, credit Cash
b.debit Cash, credit Inventory
c.debit Cash, credit Sales Returns and Allowances
d.debit Sales Returns and Allowances, credit Cash
12. When a buyer returns merchandise purchased for cash, the seller records the transaction at the time the goods are received using the following partial entry. (Assume the seller records the transaction at the time they write the check for the returned merchandise.)
a.debit Accounts Payable, credit Inventory
b.debit Accounts Receivable, credit Inventory
c.debit Inventory, credit Cash
d.debit Sales Returns and Allowances, credit Cash
13. When a buyer returns merchandise purchased for cash, the seller records the transaction at the time the goods are received using the following partial entry. (Assume the seller records the transaction at the time they write the check for the returned merchandise.)
a.debit Accounts Payable, credit Inventory
b.debit Inventory, credit Cost of Goods Sold
c.debit Inventory, credit Cash
d.debit Sales Returns and Allowances, credit Cash
14. The entry to record the return of merchandise purchased on account on the part of the seller includes a ______.
a.debit to Sales
b.debit to Inventory
c.credit to Inventory
d.credit to Sales
15. The entry to record the return of merchandise purchased on account on the part of the buyer includes a ______.
a.debit to Sales
b.debit to Inventory
c.credit to Inventory
d.credit to Sales
16. Merchandise subject to terms 2/10, n/30, FOB destination, is sold on account to a customer for $10,000. The seller paid transportation cost of $500 and issued a credit memorandum for $800 prior to payment. What is the amount of the cash discount allowable?
a.$216
b.$210
c.$200
d.$184
17. The following comparative analysis is shown to you by Hercules Company. They wonder if reducing the price of the goods they sell and adding a sales commission to promote sales is a good idea. Include in your explanation what might have caused the net income as percentage of sales to deteriorate while net income went up?
Hercules Parts CompanyVertical Analysis
for the years ended December 31, 07 and 06
2007 / Pecent / 2006 / Pecent
Sales Revenue / $ 7,000,000 / 100% / $ 600,000 / 100%
Cost of Goods Sold / 5,460,000 / 78% / 420,000 / 70%
Gross Profit / 1,540,000 / 22% / 180,000 / 30%
Sales Salaries Expense / 100,000 / 1.4% / 38,850 / 6.5%
Freight Out Expense / - / 20,000 / 3.3%
Advertising Expense / 70,000 / 1.0% / 7,000 / 1.2%
Sales Comm. Expense / 490,000 / 7.0% / 0.0%
Office Salaries Expense / 378,000 / 5.4% / 31,200 / 5.2%
Office Supplies Expense / 35,000 / 0.5% / 2,800 / 0.5%
Net Income / 467,000 / 6.7% / 80,150 / 13.4%