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Exam 5: Accounting for Merchandising Businesses

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Question 31

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For each of the following, calculate the cost of inventory reported on the balance sheet. a) The total merchandise on hand at the end of the year as determined by taking a physical inventory is $62,000. Of the $62,000, $8,000 has been sold FOB destination and is awaiting pickup by the carrier. b) The total merchandise inventory counted at the end of the year was $63,000. Excluded from the count were purchases of $6,000 in transit under FOB shipping point terms. c) The total merchandise inventory counted at the end of the year was $75,000. Excluded from the count were purchases of $5,000 in transit under FOB destination terms.

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a)$62,000
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Question 32

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Net income plus operating expenses is equal to

A) cost of merchandise sold
B) cost of merchandise available for sale
C) sales
D) gross profit

E) B) and D)
F) B) and C)

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Question 33

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When a large quantity of merchandise is purchased, a reduction allowed on the sale price is called a trade discount.

When a buyer returns merchandise purchased for cash, the buyer will record the transaction as a

If title to merchandise purchases passes to the buyer when the goods are delivered to the buyer, the terms are

A sales invoice included the following information: merchandise price, $12,000; terms 1/10, n/eom; FOB shipping point with prepaid freight of $900 added to the invoice. Assuming that a credit for merchandise returned of $500 is granted prior to payment and that the invoice is paid within the discount period, what is the amount of cash that should be received by the seller?

In credit terms of 3/15, n/45, the "3" represents the

Norfolk Sporting Goods purchases merchandise with a catalog list price of $30,000. The retailer receives a 30% trade discount and credit terms of 2/10, n/30. What amount should Norfolk debit to the Merchandise Inventory account?

When the perpetual inventory system is used, the inventory sold is debited to

Using the following information, what is the cost of merchandise sold?

Match each of the following terms a-h) with the correct definition below. -Shipping terms where the ownership of merchandise passes to the buyer when the seller delivers the merchandise to the freight carrier.

Match each of the following terms a-h) with the correct definition below. -Statement that includes subtotals for net sales, gross profit, and net operating income in determining net income.

In a perpetual inventory system, merchandise returned to vendors reduces the merchandise inventory account.

Marshall Supplies is a janitorial supply store that uses perpetual inventory. Journalize the following transactions: On July 4, Marshall purchases inventory for sale from Tidy Wholesalers for $8,500.00 with terms 1/10, n/30. On July 5, Marshall pays Express Transfer $45.00 for freight-in on the July 4 order. On July 7, Marshall buys an additional $11,985.00 in inventory from Tidy Wholesalers with terms 1/10, n/30. On July 13, Marshall pays Tidy Wholesalers the balance due on both invoices Journal

President's salaries, depreciation of office furniture, and office supplies are

Discuss the following statement: "Operating cycles for all merchandising businesses are the same, with similar profit margins." Include an examples) to illustrate your explanation.

Abbey Co. sold merchandise to Gomez Co. on account, $35,000, terms 2/15, net 45. The cost of the merchandise sold is $24,500. Abbey Co. issued a credit memo for $3,600 for merchandise returned that originally cost $1,700. Gomez Co. paid the invoice within the discount period. What is the amount of gross profit earned by Abbey Co. on the above transactions?

On March 4, Micro Sales makes $4,850 in sales on bank credit cards which charge a 2.5% service charge and deposits the funds into Micro Sales' bank accounts at the end of the business day. Journalize the sales and recognition of expense.

The inventory system employing accounting records that continuously disclose the amount of inventory is called

Using the following data taken from Payton Inc., which uses a periodic inventory system, determine the gross profit to be reported on the income statement for the year ended May 31. $\begin{array} { | l | l | } \hline \text { Merchandise inventory, June 1 } & \$ 393,250 \\\hline \text { Merchandise inventory, May } 31 & 380,100 \\\hline \text { Purchases } & 1,579,600 \\\hline \text { Purchases returns and allowances } & 81,200 \\\hline \text { Purchases discounts } & 16,500 \\\hline \text { Sales } & 2,060,000 \\\hline \text { Freight-in } & 59,250 \\\hline\end{array}$