Question

Question 1

Given below are account balances for Charlie Company:

Gross sales, $100,000

Sales returns and allowances, $6,000

Selling expenses, $12,000

Cost of goods sold, $54,000

Interest expense, $3,000

How much is the gross profit margin? (enter your percentage as a decimal rounded to two decimal places.  Example - enter 46% as .46)

Question 2

Merchandise is sold on account on January 16, terms 2/10, n/30, and recorded by debiting Accounts Receivable and crediting Sales for $2,000.  If payment occurs on January 21, the journal entry would include a credit to:

Question 2 options:

Sales Discounts for $40

Accounts Receivable for $2,000

Cash for $1,960

Accounts Receivable for $1,960

Question

Merchandise was returned to a supplier.  The goods were previously purchased on account.  The goods had not been paid for and there were no discounts. Assuming a periodic system, what journal entry is needed by the purchaser to record the return?

Question 3 options:

Debit Accounts Payable, and Credit Purchases.

Debit Accounts Payable, and Credit Purchase Discounts.

Debit Accounts Payable, and Credit Inventory.

Debit Accounts Payable, and Credit Purchase Returns and Allowances.

Question 4

Alpha Company provided the following data concerning its income statement: sales, $925,000; purchases, $395,000; beginning inventory, $250,000; ending inventory, $242,000; operating expenses, $117,000; freight-in, $5,000; sales discounts, $21,000; purchases discounts, $15,000; sales returns & allowances, $119,000; and purchases returns & allowances, $41,000.  The data are complete and provide the basis for preparation of an income statement.  How much is net income?

Question 5

Alpha Company used the periodic inventory system for purchase& sales of merchandise. Discount terms for both purchase & sales are, FOB Destination, 2/10, n30 and the gross method is used.

> Alpha Company sold on account $2,500 of merchandise to Bravo Company on May 2, 2016. Selling price was $4,000. Freight charges related to this transaction of $150 were paid by Alpha Company.

> Bravo Company returned, to Alpha Company, $250 of this merchandise on May 3, 2016. Merchandise was sold for $400

Use this information to prepare Alpha Company's  General Journal entries (without explanation) for May 2 & May 3 entries. If no entry is required then write "No Entry Required."

Question 6

Alpha Company replenished a $500 petty cash fund.  The petty cash box contained vouchers of $87 for postage, $173 for supplies, $58 for gasoline, and cash on hand of $180.  The journal entry to reflect replenishment would include a:

credit to Cash for $318

debit to Cash Short for $2

credit to Cash or $180

credit to Petty Cash for $2

Question 7

Annapolis Company's bank statement indicated an ending cash balance of $9,940. Alpha's accountant discovered that outstanding checks amounted to $965 and deposits in transit were $1,000. Additionally, the bank statement showed service charges of $30. What is the correct adjusted ending cash balance?

Question 8

Baltimore Company uses aging to estimate uncollectibles.  At the end of the fiscal year, December 31, 2018, Accounts Receivable has a balance that consists of:

Dollar Value       Age of Account   Estimated Collectible

$190,000           < 30 days old                  99%

80,000               30 to 60 days old            91%

35,000               61 to 120 days old           79%

8,000                > 120 days old                18%

The current unadjusted Allowance for Uncollectible Accounts balance is a debit balance of $2,000 and the Bad Debt Expense accounts has an unadjusted balance of zero. After the adjusting entry is made, what will be the dollar balances in the Allowance for Doubtful Accounts?  Round to nearest whole dollar.

Your Answer:

Question 9

Dorchester Company had the following balances at the end of 2018 and 2019 respectively:

Net Credit Sales - $870,000 for 2018 and $1,012,000 for 2019.

Accounts Receivable - $80,000 for 2018 and $111,000 for 2019.

Allowance for Doubtful Accounts - $6,000 for 2018 and 5,500 for 2019

Calculate the accounts receivable turnover ratio to one decimal place.

Question 10

Easton Company uses the periodic inventory system and had the following inventory & sales activity for the month of May 2019:

Date      Activity                        Quantity            Unit Price

5/1        Beginning Inventory        150                   $10

5/5        Purchase                        170                   $12

5/15      Purchase                        260                   $14

5/25      Purchase                        270                   $16

Sales were 440 units at $20.  Using the FIFO method, determine the dollar value of Cost of Goods Sold for the month of May.

Question 11

Easton Company uses the periodic inventory system and had the following inventory & sales activity for the month of May 2019:

Date      Activity                         Quantity            Unit Price

5/1        Beginning Inventory        100                   $10

5/5        Purchase                        225                   $12

5/15      Purchase                        200                   $14

5/25      Purchase                        200                   $16

Sales were 540 units at $20.  Using the LIFO method, determine the dollar value of Cost of Goods Sold for the month of May.

Question 12

Easton Company had average inventory for the year of $640,000 and an inventory turnover ratio of 10.7.  What was the company's Days Outstanding in Inventory.  Assume a 365 day year.  Round to one decimal place.

Answer 1

Solution to QUESTION-1

Net Sales

Net Sales = Gross sales - Sales returns and allowances

= $100,000 - $6,000

= $94,000

Cost of goods sold = $54,000

Gross Profit = Net Sales – Cost of goods sold

= $94,000 - $54,000

= $40,000

Therefore, the Gross Profit Margin = [Gross Profit / Net Sales] x 100

= [$40,000 / $94,000] x 100

= 43% or

= 0.43

“Hence, the Gross Profit Margin will be 0.43”