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Exam 6: Accounting for Merchandising Businesses

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Question 101

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

A) consigned
B) n/30
C) FOB shipping point
D) FOB destination

E) A) and C)
F) All of the above

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Question 102

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Gross profit is equal to

A) sales plus cost of merchandise sold
B) sales plus selling expenses
C) sales less selling expenses
D) sales less cost of merchandise sold

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

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Question 103

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Details of a purchase invoice and related credit memo are summarized as follows:​ Assume that the credit memo was received prior to payment and that the invoice is paid within the discount period. Determine the following: (a)Amount of the cash discount allowed. (b)Amount to be paid by the purchaser if the discount is taken. (c)Cost of the merchandise to the purchaser if the discount is not​​ taken.

Details of invoices for purchases of merchandise are as follows:? $\begin{array}{cccccc}&&&&\text{Returns and}\\& \text { Merchandise } & \text { Freight } & {\text { Terms }} & \text { Allowance: } \\\hline a)& \$ 2,800 & \$ 45 & \text { FOB shipping point, } 1 / 10, n / 30 & \$ 200 \\b)&7,600 & 60 & \text { FOB destination, } n / 30 & 800 \\c)&1,400 & 55 & \text { FOB shipping point, } 2 / 10, n / 30 & 600 \\d)&500 & 50 & \text { FOB destination, } 1 / 10, \mathrm{n} / 30 & 0 \\\end{array}$ Determine the amount to be paid in full settlement of each of the invoices, assuming that credit for returns and allowances was received prior to payment and that all invoices were paid within the discount period.

The proper journal entry to record the receipt of inventory purchased on account in a periodic inventory system would be a. Jan. 1 Merchandise Inventory 1,600 Accounts Payable $\quad 1,600$ b. Jan. 1 Office Supplies $\quad 1,600$ Accounts Payable $\quad 1,600$ c. Jan. 1 Purchases 1,600 Accounts Payable $\quad 1,600$ d. Jan. 1 Purchases 1,600 Accounts Receivable $\quad 1,600$

The most important differences between a service business and a retail business are reflected in their operating cycles and financial statements.

Travis Company purchased merchandise on account from a supplier for $5,700, terms 2/10, net 30. Travis Company paid for the merchandise within the discount period.?Under a perpetual inventory system, record the journal entries required for the above transactions.

The abbreviation FOB stands for "free on board."

The amount of the total cash paid to the seller for merchandise purchased for consumption would normally include

When goods are shipped FOB destination and the seller pays the freight charges, the buyer

Because many companies use computerized accounting systems, periodic inventory is widely used.

The following data for the current year ended June 30 are from the accounting records of Zanadu Co.:​ $\begin{array}{lr}\text { Administrative expenses } & \$ 28,750 \\\text { Cost of merchandise sold } & 181,440 \\\text { Interest expense } & 3,600\\\text { Rent revenue } & 1,500 \\\text { Sales } & 534,440 \\\text { Selling expenses } & 65,000\end{array}$ Prepare a multiple-step income statement for the year ended June 30.​

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?

Bountiful Company had sales of $650,000 and cost of merchandise sold of $200,000 during the year. The total assets balance at the beginning of the year was $175,000 and at the end of the year was $167,000. Calculate the ratio of sales to total assets.

The arrangements between buyer and seller as to when payments for merchandise are to be made are called

Under a periodic inventory system, closing entries will include

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?

Marshall Supplies is a janitorial supply store that uses perpetual inventory. Journalize the following transactions:July 4Marshall purchases inventory for sale from Tidy Wholesalers for $8,500 with terms 1/10, n/30.5Marshall pays Express Transfer $45 for freight on the July 4 order.7Marshall buys an additional $11,985 in inventory from Tidy Wholesalers with terms 1/10, n/30.13Marshall pays Tidy Wholesalers the balance due on both invoices.??? $\textbf { Journal } \\\begin{array} { | c | c | c | c | c | } \hline \textbf { Date } & \textbf { Description } & \begin{array} { c } \textbf { Post. } \\\textbf { Ref. }\end{array} & \textbf { Debit } & \textbf { Credit } \\\hline & & & & \\\hline & & & & \\\hline & & & & \\\hline & & & & \\\hline & & & & \\\hline & & & & \\\hline & & & & \\\hline & & & & \\\hline & & & & \\\hline & & & & \\\hline & & & & \\\hline & & & & \\\hline & & & & \\\hline & & & & \\\hline & & & & \\\hline & & & & \\\hline\end{array}$ ?

Bradford Company had sales of $700,000 for the year. The total assets at the beginning of the year were $240,000, and the total assets at the end of the year were $280,000. The ratio of sales to total assets is (round answer to two decimal places)

Merchandise with a list price of $4,200 and costing $2,300 is sold on account, subject to the following terms: FOB destination, 2/10, n/30. The seller prepays the freight costs of $85 (debit Delivery Expense for the freight costs). Prior to payment for the goods, the seller issues a credit memo for $750 to the customer for merchandise costing $425 that is returned. Payment is received within the discount period. The company uses a perpetual inventory system.Record the foregoing transactions of the seller in the sequence indicated below. (a)Sold the merchandise, recognizing the sale and cost of merchandise sold. (b)Paid the freight charges. (c)Issued the credit memo. (d)Received payment from the customer.