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Exam 5: Accounting for Merchandising Businesses

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Question 21

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Which of the following costs would be included in merchandise inventory?

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Question 22

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Which of the following accounts has a normal credit balance?

A) Sales Returns and Allowances
B) Sales
C) Merchandise Inventory
D) Delivery Expense

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

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Question 23

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Retailers record all credit card sales as credit sales.

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

In a perpetual inventory system, when merchandise is returned to the seller, Cost of Merchandise Sold is debited as part of the transaction.

Gross profit minus selling expenses equals net income.

If merchandise costing $3,500, terms FOB destination, 2/10, n/30, with prepaid freight costs of $125, is paid within 10 days, the amount of the purchases discount is $70.

Income that cannot be associated definitely with operations, such as a gain from the sale of a fixed asset, is listed as Other Income on the multiple-step income statement.

The ratio of net sales to assets measures how effectively a business is using its assets to generate sales.

Under the periodic inventory system, the cost of merchandise sold is recorded when sales are made.

In recording the cost of merchandise sold for cash, based on data available from perpetual inventory records, the journal entry is

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

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

Cleary Company had total Sales of $550,000; Sales Discounts of $10,000; Sales Returns of $40,000 and Cost of Merchandise Sold of $200,000 during 2010. The total asset balance at the beginning of the year was $175,000 and at the end of the year was $167,000. Calculate the ratio of net sales to total assets (Round answer to 2 decimal points) .

Sellers and buyers are required to record trade discounts.

Discuss the following statement:

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

Using a perpetual inventory system, the entry to record the return from a customer of merchandise sold on account includes a

The primary difference between a periodic and perpetual inventory system is that a

Based upon the following data, determine the cost of merchandise sold for August.