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Exam 5: Accounting for Merchandising Businesses

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Question 61

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Using the perpetual inventory system,journalize the entries for the following selected transactions: a Sold merchandise on account for $12,000,terms n/30.The cost of the merchandise sold was $6,500. b Sold merchandise to customers who used MasterCard and VISA,$9,500.The cost of the merchandise sold was $5,300. c Sold merchandise to customers who used American Express,$2,900.The cost of the merchandise sold was $1,700. d Paid an invoice from First National Bank for $385,representing a service fee for processing MasterCard and VISA sales. e Received $2,825 from American Express Company after a $75 collection fee had been deducted.

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Question 62

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When a merchandising business is compared to a service business,the financial statement that is not affected by that change is the retained earnings statement.

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Question 63

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Which of the following costs would be included in merchandise inventory? a Purchase price b Insurance in transit FOB shipping point c Freight for delivery FOB shipping point d Repair due to negligence of receiving clerk e Receiving department employee salary f Cost of processing purchase orders

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

Using a perpetual inventory system,the entry to record the return from a customer of merchandise sold on account includes a

Using the following information,what is the amount of net income?

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

The records of Penny Co.indicated that $415,000 of merchandise should be on hand on December 31.The physical inventory indicates that $370,000 of merchandise is actually on hand.Journalize the adjusting entry for the inventory shrinkage for the year ended December 31.

Using the letter preceding each account,arrange the following selected accounts in the order they would normally appear in a chart of accounts of a company that uses a multiple-step income statement. a Accounts Payable b Accounts Receivable c Merchandise Inventory d Miscellaneous Selling Expense e Interest Expense f Income Summary g Misc.Admin.Expense h Freight Out

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.

When the perpetual inventory system is used,the inventory sold is debited to

Closing entries for a merchandising business are not similar to those for a service business.

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.

Journalize the following transactions assuming the perpetual inventory system: July 3 Sold merchandise on account for $3,750 including terms.The cost of the merchandise sold was $2,000. 5 Issued credit memo for $1,050 for merchandise returned from sale on July 3.The cost of the merchandise returned was $610. 12 Received check for the amount due for sale on July 3 less return on July 5. 17 Sold merchandise for $7,000 plus 6% sales tax to cash customers.The cost of the merchandise sold was $3,830.

The ratio of sales to assets measures how effectively a business is using its assets to generate sales.

Journalize the entries to record the following selected transactions: a Sold $900 of merchandise on account,subject to 7% sales tax.The cost of the merchandise sold was $510. b Paid $436 to the state sales tax department for taxes collected.

Journalize the following transactions assuming a perpetual inventory system: May 5 Purchased merchandise from Archie Co.,$6,000,terms FOB shipping point,2/10,n/30. Prepaid freight costs of $100 were added to the invoice. 12 Issued a debit memo to Archie Co.for $2,500 of merchandise returned from purchase on May 5. 14 Paid Archie Co.for invoice of May 5,less debit memo of May 12.

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

If merchandise costing $3,500,terms FOB destination,2/10,n/30,with prepaid freight costs of $125,is paid within 10 days,the amount of the purchases discount is $70.

Calculate the gross profit for Jefferson Company based on the following: