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Exam 5: Accounting for Merchandising Businesses

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Question 31

Multiple Choice

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

A) debit to Sales
B) credit to Sales
C) debit to Sales Returns and Allowances
D) credit to Sales returns and Allowances

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

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Question 32

True/False

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Other income and expenses are items that are related to the primary operating activity.

A) True
B) False

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Question 33

Multiple Choice

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Which of the following accounts should be closed to Income Summary at the end of the fiscal year?

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

Sampson Co. sold merchandise to Batson Co. on account, $46,000, terms 2/15, net 45. The cost of the merchandise sold is $38,500. Sampson Co. issued a credit memo for $1,500 for merchandise returned that originally cost $950. The Batson Co. paid the invoice within the discount period. Prepare the entries that both Sampson and Batson Companies would record for the above. Assume both Sampson and Batson use a perpetual inventory system.

Under the perpetual inventory system, all purchases of merchandise are debited to the account entitled

The service fee that credit card companies charge retailers varies and is the primary reason why some businesses do accept all credit cards.

Closing entries for a merchandising business are similar to those for a service business.

Merchandise with a sales price of $800 is sold on account with term 2/10, n/30. The journal entry to record the sale would include a

Who pays the freight cost when the terms are FOB destination?

When companies use a perpetual inventory system, the recording of the purchase of inventory will include a debit to purchases.

Gadget Palace is a retailer selling unique hardware. Gadget Palace uses perpetual inventory. Use a General Journal to journalize the following four transactions during the month of August:

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

Describe the major differences in preparing the financial statements for a service business and a merchandising business.

Under a periodic inventory system, closing entries will include

Which account will be included in both service and merchandising companies closing entries?

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

Using the following information, what is the amount of cost of merchandise sold?

In a perpetual inventory system, the Merchandise Inventory account is only used to reflect the beginning inventory.

The ending merchandise inventory for 2010 is the same as the beginning merchandise inventory for 2011.