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Exam 6: Accounting for Merchandising Businesses

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Question 111

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

A) Merchandise Inventory
B) Purchases
C) Accounts Payable
D) Cost of Merchandise Purchased

E) A) and D)
F) A) and C)

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Question 112

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The entry to record the return of merchandise from a customer would include a

A) debit to Sales
B) credit to Sales
C) debit to Customer Refunds Payable
D) debit to Estimated Returns Inventory

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

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Question 113

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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 4Bargain Wholesalers sells inventory to Pet World Supplies for $8,250 with terms 1/10, n/30. The cost of the merchandise is $5,755.7Bargain Wholesalers sells an additional $10,985 in inventory to Pet World Supplies with terms 1/10, n/30. The cost of the merchandise is $6,925.13Bargain Wholesalers receives a check from Pet World Supplies paying the balance due on both invoices.?? $\begin{array}{l}\text { Journal }\\\begin{array} {| l | c | c | c | c | } \hline \text { Date } & \text { Description } & \begin{array} { l } \text { Post. } \\\text { Ref. }\end{array} & \text { Debit } & \text { Credit } \\\hline & & & & \\\hline & & & & \\\hline & & & & \\\hline & & & & \\\hline & & & & \\\hline & & & & \\\hline & & & & \\\hline & & & & \\\hline & & & & \\\hline & & & & \\\hline & & & & \\\hline & & & & \\\hline\end{array}\end{array}$

Gross profit minus selling expenses equals net income.

Complete the following data taken from the condensed income statements for merchandising Companies A, B, and C. $\begin{array} { | l | r | r | r | } \hline & \text { Company A } & \text { Company B } & \text { Company C } \\\hline \text { Operating income } & \$ 315 & \$ ? & \$ 215 \\\hline \text { Sales } & ? & 865 & 560 \\\hline \text { Gross profit } & 430 & ? & 325 \\\hline \text { Operating expenses } & ? & 125 & ? \\\hline \text { Cost of merchandise sold } & 545 & 320 & ? \\\hline\end{array}$

The form of the balance sheet in which assets, liabilities, and owner's equity are presented in a downward sequence is called the report form.

In a merchandising business, operating income plus operating expenses is equal to

Merchandise with a list price of $4,700 is purchased on account, terms FOB shipping point, 1/10, n/30. The seller prepaid freight costs of $100. Prior to payment, $1,600 of the merchandise is returned. The invoice is paid within the discount period.Record the foregoing transactions of the buyer in the sequence indicated below, assuming a perpetual inventory system is used. (a)Purchased the merchandise. (b)Recorded receipt of the credit memo for merchandise returned. (c)Paid the amount owed.

There is no difference between the recording of cash sales and the recording of MasterCard or VISA sales.

Which of the following items should not be included in the cost of ending merchandise inventory?

Calculate income from operations for Jonas Company based on the following data: $\begin{array} { | l | r | } \hline \text { Sales } & \$ 764,000 \\\hline \text { Operating expenses } & 52,500 \\\hline \text { Cost of merchandise sold } & 538,000 \\\hline\end{array}$

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

Cost of merchandise sold is often the largest expense on a merchandising company income statement.

$\text { Match each of the following terms } ( a - h ) \text { with the correct definition below. }$ -Shipping terms where the ownership of merchandise passes to the buyer when the buyer receives the merchandise. 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

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?

Purchases of merchandise are typically credited to the merchandise inventory account under the perpetual inventory system.

In a perpetual inventory system, when merchandise is returned to the supplier, Cost of Merchandise Sold is debited as part of the transaction.

If the perpetual inventory system is used, an account entitled Cost of Merchandise Sold is included in the general ledger.

On March 25, Osgood Company sold merchandise on account, $10,000, terms n/30. The applicable sales tax percentage is 7.5%. Record the transaction.​ $\begin{array}{l}\text { Journal }\\\begin{array} { | c | c | c | c | c | } \hline \text { Date } & \text { Description } & \begin{array} { c } \text { Post. } \\\text { Ref. }\end{array} & \text { Debit } & \text { Credit } \\\hline & & & & \\\hline & & & & \\\hline & & & & \\\hline\end{array}\end{array}$

When merchandise that was sold is returned, a credit to sales returns and allowances is made.