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Exam 5: Accounting for Retail Businesses

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Question 61

Multiple Choice

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Under the periodic inventory system, the journal entry to record the cost of goods sold at the point of sale will include which of the following?

A) none of these
B) Cost of Goods Sold
C) Inventory
D) Purchases

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

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Question 62

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In the merchandising income statement, sales will be reduced by administrative expenses to arrive at operating income.

A) True
B) False

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Question 63

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

Prepare a balance sheet for Fernandez Company assuming the current portion of the notes payable is $30,000.

The following entry was recorded in the books of Brighty Company.Nov. 3 Customer Refund Payable 120 Accounts Receivable-Tillet Inc.120 Granted customer an allowance.​ What is the impact of this entry on the accounting equation?

From the following list, identify accounts that will be closed at the end of the fiscal period.(a) Advertising Expense (b) Cash (c) Accounts Receivable (d) Salaries Expense (e) Cost of Goods Sold (f) Dividends (g) Accumulated Depreciation-Building (h) Interest Expense (i) Sales Tax Payable

When comparing a retail business to a service business, the financial statement that changes the least is the

When the terms of sale are FOB shipping point, the buyer pays the freight charges.

Sampson Co. sold merchandise to Batson Co. on account, $46,000, terms 2/15, net 45. The cost of the goods sold is $38,500. The Batson Co. paid the invoice within the discount period. Prepare the entries that both Sampson and Batson Companies would record for the above. Assume both Sampson and Batson use a perpetual inventory system.

Most companies will not take a purchase discount, because 1% or 2% discounts are insignificant.

Using a perpetual inventory system, the entry to record the sale of merchandise on account includes a

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

Which of the following accounts will only be found in the chart of accounts of a merchandising company?

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.

When a merchandising business is compared to a service business, the financial statement that is not affected by that change is the statement of stockholders' equity.

Bargain Wholesalers sells pet supplies to retailers including Pet World Supplies. Bargain Wholesalers uses a perpetual inventory system. 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 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

Which of the following accounts has a normal credit balance?

Cumberland Co. sells $2,000 of inventory to Hancock Co. for cash. Cumberland paid $1,250 for the merchandise. Under a perpetual inventory system, which of the following journal entry(ies) would be recorded?

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

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