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Exam 5: Accounting for Merchandising Businesses

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Question 41

True/False

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Cost of merchandise sold is the amount that the merchandising company pays for the merchandise it intends to sell.

A) True
B) False

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Question 42

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A retailer purchases merchandise with a catalog list price of $25,000. The retailer receives a 30% trade discount and credit terms of 2/10, n/30. What amount should the retailer debit to the Merchandise Inventory account?

A) $7,500
B) $17,500
C) $25,000
D) $17,250

E) C) and D)
F) All of the above

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Question 43

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Merchandise is ordered on December 1; the merchandise is shipped by the seller and the invoice is prepared, dated, and mailed by the seller on December 3; the merchandise is received by the buyer on December 8; the entry is made in the buyer's accounts on December 10. The credit period begins with what date?

On the income statement in the single-step form, the total of all expenses is deducted from the total of all revenues.

Computerized systems can be used to capture accounting information such as accounts receivable, inventory items, accounts payable, and sales.

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

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?

Complete the following data taken from the condensed income statements for merchandising Companies A, B, &C.

Most companies will take a purchases discount, because 1% or 2% discounts are insignificant.

Taking advantage of a 2/10, n/30 purchases discount is equal to a savings yearly rate of approximately

A business using the perpetual inventory system, with its detailed subsidiary records, does not need to take a physical inventory.

A sale of $750 on account, subject to a sales tax of 6%, would be recorded as an account receivable of $750.

A retailer purchases merchandise with a catalog list price of $30,000. The retailer receives a 15% trade discount and credit terms of 2/10, n/30. How much cash will be needed to pay this invoice within the discount period?

Office salaries, depreciation of office equipment, and office supplies are examples of what type of expense?

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?

Inventory shortage is recorded when

Journalize the following transactions for the Evans Company. Assume the company uses a perpetual inventory system.

Calculate income from operations for Jonas Company based on the data given below:

For each of the following, calculate the cost of inventory reported on the balance sheet.

A deduction allowed to wholesalers and retailers from the price of merchandise listed in catalogs is called cash discounts.