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Exam 6: Accounting for Merchandising Businesses

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Question 21

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A company using the periodic inventory system has the following account balances: Merchandise Inventory at the beginning of the year, $3,600; Freight In, $650; Purchases, $10,700; Purchases Returns and Allowances, $1,950; Purchases Discounts, $330. The cost of merchandise purchased is equal to

A) $12,670
B) $9,070
C) $8,420
D) $17,230

E) B) and C)
F) A) and C)

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Question 22

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Under a perpetual inventory system, the cost of merchandise on hand at the end of the year can only be determined by reviewing the ledger.

A) True
B) False

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Question 23

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

$\text { Match each of the following items } ( a - h ) \text { with the appropriate definition below. }$ -The cost associated with delivery of merchandise to the customer. a. $\quad$ Freight b. $\quad$ Delivery Expense c. $\quad$ Merchandise Inventory d. $\quad$ Sales discount e. $\quad$ Purchases Returns and Allowances f. $\quad$ Debit memo g. $\quad$ Purchase discount h. $\quad$ Trade discount

Using the following data taken from Hsu's Imports Inc. which uses a periodic inventory system, determine the gross profit to be reported on the income statement for the year ended March 31.? $\begin{array}{|l|r|}\hline \text { Merchandise inventory, April 1 } & \$ 193,250 \\\hline \text { Merchandise inventory, March 31 } & 180,100 \\\hline \text { Purchases } & 1,079,600 \\\hline \text { Purchases returns and allowances } & 51,200 \\\hline \text { Purchases discounts } & 18,500 \\\hline \text { Sales } & 1,860,000 \\\hline \text { Freight in } & 19,250 \\\hline\end{array}$

Most retailers record all credit card sales as credit sales.

If the buyer is to pay the freight costs of delivering merchandise, delivery terms are stated as

Sales to customers who use bank credit cards, such as MasterCard and VISA, are generally treated as

Which of the following accounts has a normal debit balance?

$\text { Match each of the following terms } ( a - h ) \text { with the correct definition below. }$ -Shipping terms where the ownership of merchandise passes to the buyer when the seller delivers the merchandise to the freight carrier. a. Credit terms b. FOB destination c. FOB shipping point d. Periodic inventory system e. Perpetual inventory system f. Inventory shrinkage g. Single-step income statement h. Multiple-step income statement

Which account is not classified as a selling expense?

When the perpetual inventory system is used, the inventory sold is shown on the income statement as

Using the following data taken from Payton Inc. which uses a periodic inventory system, prepare the cost of merchandise sold section of the income statement for the year ended May 31.​ $\begin{array} { | l | r | } \hline \text { Merchandise inventory, June 1 } & \$ 393,250 \\\hline \text { Merchandise inventory, May } 31 & 380,100 \\\hline \text { Purchases } & 1,579,600 \\\hline \text { Purchases returns and allowances } & 81,200 \\\hline \text { Purchases discounts } & 16,500 \\\hline \text { Sales } & 2,060,000 \\\hline \text { Freight in } & 59,250 \\\hline\end{array}$

A company using the periodic inventory system has merchandise inventory costing $210 on hand at the beginning of a period. During the period, merchandise costing $635 is purchased. At year-end, merchandise inventory costing $160 is on hand. The cost of merchandise sold for the year is

Who is responsible for the freight cost when the terms are FOB destination?

When companies use a perpetual inventory system, the recording of the purchase of inventory will include a debit to Purchases.

A chart of accounts for a merchandising business

The fees associated with credit card sales are periodically recorded as expenses.

Estimated Returns Inventory is an account used when adjusting for expected merchandise sales in the next period.

$\text { Match each of the following items } ( a - h ) \text { with the appropriate definition below. }$ -Discount to government agencies or customers who purchase large quantities of merchandise. a. $\quad$ Freight b. $\quad$ Delivery Expense c. $\quad$ Merchandise Inventory d. $\quad$ Sales discount e. $\quad$ Purchases Returns and Allowances f. $\quad$ Debit memo g. $\quad$ Purchase discount h. $\quad$ Trade discount