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Exam 5: Accounting for Merchandising Businesses

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Question 31

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Merchandise with an invoice price of $6,000 is purchased on September 2 subject to terms of 2/10,n/30,FOB destination.Freight costs paid by the seller totaled $200.What is the required payment if paid on September 12?

A) $6,120
B) $5,940
C) $6,090
D) $5,880

E) None of the above
F) B) and D)

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Question 32

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

A) purchased units in transit,shipped FOB shipping point
B) purchased units in transit,shipped FOB destination
C) units on hand in the warehouse
D) sold units in transit,not invoiced,and shipped FOB destination

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

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Question 33

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

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.

Gross profit is equal to

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.

During the current year,merchandise is sold for $137,500 cash and $425,600 on account.The cost of the merchandise sold is $322,325.What is the amount of the gross profit?

Using the list of accounts below,construct a chart of accounts for a merchandising business that rents out a portion of its building,and assign account numbers and arranging the accounts in balance sheet and income statement order "1" for assets,and so on.Each account number should have three digits.Contra accounts should be designated with a decimal of the account 100.1 for contra of account 100.Assets and liabilities should be in order of liquidity,expenses should be in alphabetical order.

The retained earnings statement shows

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?

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

Using the following information,what is the amount of income from operations?

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

To encourage a buyer to pay before the end of the credit period,the seller may offer a

Under a perpetual inventory system

In retail businesses,inventory is reported as a current asset.

Details of invoices for purchases of merchandise are as follows: $\begin{array}{cccc}&&&&\underline { \text { Returns and }}\\&\underline { \text { Merchandise }}&\underline { \text { Freight }}&\underline { \text { Terms }}&\underline { \text { Allowances }} \\a&\$ 2,800 & \$ 45 & \text { FOB shipping point, 1/10, n/30 } & \$ 200 \\b&7,600 & 60 & \text { FOB destination, } \mathrm{n} / 30 & 800 \\c&1,400 & 55 & \text { FOB shipping point, 2/10, n/30 } & 600 \\d&500 & 50 & \text { FOB destination 1/10 n/30 }&0\end{array}$ 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.

Which of the following accounts has a normal debit balance?

When the seller offers a sales discount,even if borrowing has to be done,it is generally advantageous for the buyer to pay within the discount period.

When a buyer returns merchandise purchased for cash,the buyer will record the transaction as a