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Exam 6: Accounting for Merchandising Businesses

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Question 41

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

A) True
B) False

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Question 42

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If merchandise sells for $3,500, with terms of 3/15, n/45, and the cost of the inventory sold is $2,100, the amount charged to sales is

A) $3,395
B) $3,500
C) $2,037
D) $2,100

E) A) and D)
F) A) and C)

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Question 43

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

Emma Co. sold to Isabella Co. merchandise on account FOB shipping point, 2/10, net 30, for $15,000. Emma Co. prepaid the $750 shipping charge. Using the perpetual inventory method, which of the following entries will Isabella Co. make to record the payment for the merchandise if Isabella Co. pays within the discount period?

When the terms of sale are FOB shipping point, the buyer should pay the freight charges.

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

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

Merchandise is purchased for $6,000 on September 2 subject to terms of 2/10, n/30, FOB destination. Freight costs paid by the seller totaled $200. What is the cost of the merchandise if paid on September 12, assuming the discount is taken?

Prepare (a) a single-step income statement, (b) a statement of owner's equity, and (c) a balance sheet in report form from the following data for Burt Co., taken from the ledger after adjustments on December 31, the end of the fiscal year.​ $\begin{array} { | l | r | } \hline \text { Accounts Payable } & \$ 97,200 \\\hline \text { Accounts Receivable } & 64,300 \\\hline \text { Accumulated Depreciation-Office Equipment } & 72,750 \\\hline \text { Accumulated Depreciation-Store Equipment } & 162,100 \\\hline \text { Administrative Expenses } & 56,500 \\\hline \text { Cash } & 53,000 \\\hline \text { Cost of Merchandise Sold } & 121,700 \\\hline \text { Interest Expense } & 12,000 \\\hline \text { Maeve Burt, Capital } & 81,750 \\\hline \text { Maeve Burt, Drawing } & 52,000 \\\hline \text { Merchandise Inventory } & 93,250 \\\hline \text { Note Payable (due in two years) } & 154,000 \\\hline \text { Office Equipment } & 149,750 \\\hline \text { Prepaid Insurance } & 6,500 \\\hline \text { Rent Revenue } & 17,500 \\\hline \text { Sal aries Payable } & 28,700 \\\hline \text { Sales } & 365,500 \\\hline \text { Selling Expenses } & 41,500 \\\hline \text { Store Equipment } & 325,000 \\\hline \text { Supplies } & 4,000 \\\hline\end{array}$

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

Calculate the gross profit for Jefferson Company based on the following: $\begin{array} { | l | r | } \hline \text { Sales } & \$ 764,000 \\\hline \text { Selling expenses } & 42,500 \\\hline \text { Cost of merchandise sold } & 538,000 \\\hline\end{array}$

On March 29, customers who owe $10,500 on account to Sonic Sales Company submit payments of $4,250. Journalize this event.

Service businesses provide services for income, while a merchandising business sells merchandise.

$\text { Match each of the following items } ( a - h ) \text { with the appropriate definition below. }$ -Account where returned merchandise or price adjustments are recorded by the buyer under the periodic inventory system. a. $\quad$ Freight b. $\quad$ Delivery Expense c. $\quad$ Merchandise Inventory d. $\quad$ Sales discount e. $\quad$ Purchases Returns and Allowances f. $\quad$ Debit memo g. $\quad$ Purchase discount h. $\quad$ Trade discount

$\text { Match each of the following items } ( a - h ) \text { with the appropriate definition below. }$ -Account used to record merchandise on hand under a perpetual inventory system. a. $\quad$ Freight b. $\quad$ Delivery Expense c. $\quad$ Merchandise Inventory d. $\quad$ Sales discount e. $\quad$ Purchases Returns and Allowances f. $\quad$ Debit memo g. $\quad$ Purchase discount h. $\quad$ Trade discount

Using the following information, what is the amount of gross profit??? $\begin{array} { | l | r | l | l | r | } \hline \text { Purchases } & \$ 32,000 && \text { Selling expenses } & \$ 960 \\\hline \begin{array} { l } \text { Merchandise inventory, } \\\text { September 1 }\end{array} & 5,700 & & \begin{array} { l } \text { Merchandise inventory, } \\\text { September 30 }\end{array} & 6,370 \\\hline \text { Administrative expenses } & 910 & & \text { Sales } & 63,000 \\\hline \text { Rent revenue } & 1,200 & & \text { Interest expense } & 1,040 \\\hline\end{array}$ ?

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

Under the periodic inventory system, the cost of merchandise sold is equal to the beginning merchandise inventory plus the cost of merchandise purchased plus the ending merchandise inventory.

The following data were extracted from the accounting records of Dana Designs for the year ended March 31.? $\begin{array} { | l | r | } \hline \text { Merchandise inventory, April } 1 & \$ 530,000 \\\hline \text { Merchandise inventory, March } 31 & 375,000 \\\hline \text { Purchases } & 270,000 \\\hline \text { Purchases returns and all owances } & 25,000 \\\hline \text { Purchases discounts } & 10,000 \\\hline \text { Sales } & 770,000 \\\hline \text { Freight in } & 3,000 \\\hline\end{array}$ Prepare the cost of merchandise sold section of the income statement for the year ended March 31, using the periodic method.??

Buyers and sellers do not normally record the list prices of merchandise and the trade discounts in accounts.