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Exam 5: Accounting for Merchandising Businesses

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Question 101

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On the income statement in the single-step form, the total of all expenses is deducted from the total of all revenues.

A) True
B) False

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Question 102

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Bargain Wholesalers sells pet supplies to retailers including Pet World Supplies. Bargain Wholesalers uses a perpetual inventory. Journalize the following transactions: May 4, Bargain Wholesalers sells inventory to Pet World Supplies for $8,250.00 with terms 1/10, n/30. The cost of the merchandise is $5,755.00. May 7, Bargain Wholesalers sells an additional $10,985.00 in inventory to Pet World Supplies with terms 1/10, n/30. The cost of the merchandise is $6,925.00. May 13, Bargain Wholesalers receives a check from Pet World Supplies paying the balance due on both invoices. Journal

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Question 103

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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. $\begin{array} { | l | l | } \hline \text { Merchandise inventory, June 1 } & \$ 393,250 \\\hline \text { Merchandise inventory, May } 31 & 380,100 \\\hline \text { Purchases } & 1,579,600 \\\hline \text { Purchases returns and allowances } & 81,200 \\\hline \text { Purchases discounts } & 16,500 \\\hline \text { Sales } & 2,060,000 \\\hline \text { Freight-in } & 59,250 \\\hline\end{array}$

?If title to merchandise purchases passes to the buyer when the goods are shipped from the seller, the terms are

Under the periodic inventory system, the journal entry to record the purchase of merchandise inventory will include a debit to

What is the term applied to the excess of net revenue from sales over the cost of merchandise sold?

Under the periodic inventory system, the cost of merchandise sold is recorded when sales are made.

Customer Refunds Payable is an account used to record merchandise returns from customers.

During the current year, merchandise is sold for $117,500 cash and $241,750 on account. The cost of the merchandise sold is $157,400. What is the amount of the gross profit?

Complete the following data taken from the condensed income statements for merchandising Companies A, B, and C.

Match each of the following terms a-h) with the correct definition below. -Statement where net income is determined by deducting all expenses from all revenues.

Which of the following accounts usually has a debit balance?

Gross profit minus selling expenses equals net income.

The chart of accounts for a merchandising business would include an account called Delivery Expense.

If the buyer bears the freight costs related to a purchase, the terms are said to be FOB destination.

Which of the following accounts will not be found in the Cost of Merchandise Sold section of the income statement for a company using the periodic inventory method?

Taking advantage of a 2/10, n/30 purchases discount is equal to a yearly savings rate of approximately

Sellers and buyers are required to record trade discounts.

If merchandise sold on account is returned to the seller, the seller acknowledges the return by issuing a

If merchandise sells for $3,500, with terms of 3/15, n/45 and the cost of the inventory sold is $2,100, the amount charged to sales is