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Exam 6: Accounting for Merchandising Businesses

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Question 1

Multiple Choice

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If the seller is to pay the freight costs of delivering merchandise,the delivery terms are stated as

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

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

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Question 2

Multiple Choice

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If the physical count of inventory revealed $158,000 of merchandise on hand and the inventory records reported $163,000,what would be the necessary adjusting entry to record inventory shrinkage?

A) debit Merchandise Inventory, $158,000; credit Cost of Merchandise Sold, $158,000
B) debit Merchandise Inventory, $5,000; credit Cost of Merchandise Sold, $5,000
C) debit Cost of Merchandise Sold, $163,000; credit Merchandise Inventory, $158,000
D) debit Cost of Merchandise Sold, $5,000; credit Merchandise Inventory, $5,000

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

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Question 3

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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.

In the periodic inventory system,purchases of merchandise for resale are debited to the purchases account.

If the buyer bears the freight costs related to a purchase,the terms are said to be FOB destination.

Which account is not classified as a selling expense?

Which of the following accounts usually has a debit balance?

Purchased goods in transit should be included in the ending inventory of the buyer if the goods were shipped FOB shipping point.

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 following information,what is the cost of merchandise sold?

Under the perpetual inventory system,a company purchases merchandise on terms 2/10,n/30.The entry to record the purchase will include a debit to Cash and a credit to Sales.

Dollar Co.sold merchandise to Pound Co.on account,$25,500,terms 2/15,net 45.Pound Co.paid the invoice within the discount period.What is the amount of sales from the above transactions?

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

When the perpetual inventory system is used,the inventory sold is shown on the income statement as

A seller may grant a buyer a reduction in selling price and this is called a customer discount.

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

Complete the following data taken from the condensed income statements for merchandising Companies X,Y,and Z.

Matching Match each of the following items (a-h) with the appropriate definition below. -Account where returned merchandise or price adjustments are recorded by the buyer under the periodic inventory system.

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.

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