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ACG 2021 Test 2 Review Questions and Correct Answers
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  • Course
  • ACG 2021
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  • ACG 2021

Definition of a merchandising company -They are wholesalers and retailers -They sell inventory in the wholesale market or to the final customers in the retail market -They sell PRODUCTS to earn revenue instead of services How to calculate cost of goods sold Gross Profit=Net Sales-Cost of Goods Sol...

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  • August 11, 2024
  • 4
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers

Subjects

  • acg 2021 test 2 review questions and correct answe
  • definition of a merchandising company they are w
  • how to calculate cost of goods sold gross profit

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  • ACG 2021
  • ACG 2021

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ACG 2021 Test 2 Review Questions and
Correct Answers
Definition of a merchandising company ✅-They are wholesalers and retailers
-They sell inventory in the wholesale market or to the final customers in the retail market
-They sell PRODUCTS to earn revenue instead of services

How to calculate cost of goods sold ✅Gross Profit=Net Sales-Cost of Goods Sold

Gross Margin Calculation ✅Gross Margin=Net Sales-CofGS
/Net Sales
*It is the percentage of dollar sales available to cover expenses and provide a profit

What 'inventory' is before it is sold ✅A current asset

What 'inventory' is after it is sold ✅An expense

What a trade discount is: ✅Used by manufacturers and wholesalers to offer better
prices for greater quantities purchased by customers (ie. Walmart buys in bulk so they
buy it cheap so they can sell it cheap)

Quick Asset Ratio ✅Quick Asset Ratio=((current assets-inventory))/liabilities

Current Asset Ratio ✅Current Asset Ratio=current assets/current liabilities

How to apply discounts ✅Debit CASH the amount paid and debit SALES DISCOUNT
the amount discounted. The two added together is the original price which is what you
credit to ACCOUNTS RECEIVABLE

How to apply returned items to purchases ✅Debit SALE RETURN AND
ALLOWANCES and credit ACCOUNTS RECEIVABLE and note that the customer
returned the merchandise from xx/xx/xx sale. Also, debit MERCHANDISE INVENTORY
and credit COST OF GOODS SOLD and note that the returned goods are added to
inventory.

What are credit terms: ✅2/10, n/60: if the customer pays the bill in the first 10 days
they will get a 2% discount but if they do not pay in that time they have 60 pays to pay it
before interest is added.

FOB Destination ✅The seller owns and is responsible for the merchandise until it
reaches the destination so the seller pays the freight costs and will debit it to delivery
expenses.

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