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Exam 6: Accounting for Merchandising Businesses

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Question 41

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What is the normal balance of the following accounts? a. Sales Tax Payable b. Merchandise Inventory c. Delivery Expense d. Cost of Merchandise Sold e. Sales Returns and Allowance f. Sales Discounts g. Sales

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a. credit
b. debit
c...

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Question 42

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The statement of owner's equity shows

A) only net income, beginning and ending capital
B) only total assets, beginning and ending capital
C) only net income, beginning capital, and withdrawals
D) all the changes in the owner's capital as a result of net income, net loss, additional investments, and withdrawals

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

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Question 43

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The records of Nevada Co. indicated that $420,000 of merchandise should be on hand on December 31, 2010. 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, 2010.

Retailers record all credit card sales as credit sales.

Selected accounts and amounts appear below. Journalize the closing entry, assuming a perpetual inventory system.

Sales to customers who use nonbank credit cards, such as American Express, are generally treated as credit sales.

Sales to customers who use bank credit cards such as MasterCard and Visa are usually recorded by a

Which of the following accounts usually has a debit balance?

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

The seller may prepay the freight costs even though the terms are FOB shipping point.

A company, using the periodic inventory system, has merchandise inventory costing $175 on hand at the beginning of the period. During the period, merchandise costing $635 is purchased. At year-end, merchandise inventory costing $160 is on hand. The cost of merchandise sold for the year is

If payment is due by the end of the month in which the sale is made, the invoice terms are expressed as n/30.

In a multiple-step income statement the dollar amount for income from operations is always the same as net income.

Cost of Merchandise Sold is often the largest expense on a merchandising company income statement.

Prepare a multiple-step income statement for Armour Co. from the following data for the year ended December 31, 2014. Sales, $790,000; cost of merchandise sold, $330,000; administrative expenses, $35,000; interest expense, $20,000; rent revenue, $25,000; sales returns and allowances, $35,000; selling expenses, $50,000.

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

Title to merchandise shipped FOB shipping point passes to the buyer upon delivery of the merchandise to the buyer's place of business.

Under the periodic inventory system, the journal entry to record the cost of merchandise sold at the point of sale will include the following account

If merchandise sold on account is returned to the seller, the seller may inform the customer of the details by issuing a

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