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Exam 5: Accounting for Merchandising Businesses

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Question 1

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On March 4th, Micro Sales makes $4,850.00 in sales on bank credit cards that charge a 2.5% service charge and deposit the funds into Micro Sales bank accounts at the end of the business day. Journalize the sales and recognition of expense.

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The sales can be debited to cash since ...

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Question 2

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Journalize the entries to record the following selected transactions:

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The chart of accounts for a merchandise business would include an account called Delivery Expense.

When the perpetual inventory system is used, the inventory sold is shown on the income statement as

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

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

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

Merchandise subject to terms 1/10, n/30, FOB shipping point, is sold on account to a customer for $25,000. The seller paid freight costs of $2,000 and issued a credit memo for $10,000 prior to payment. What is the amount of the cash discount allowable?

As we compare a merchandise business to a service business, the financial statement that changes the most is the Balance Sheet.

Freight-in is considered a cost of purchasing inventory.

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.

Purchased goods in transit should be included in the ending inventory of the buyer if the goods were shipped FOB shipping point.

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.

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?

The proper journal entry to record the receipt of inventory purchased on account in a perpetual inventory system would be:

Merchandise with a list price of $4,200 and costing $2,300 is sold on account, subject to the following terms: FOB destination, 2/10, n/30. The seller prepays the freight costs of $85 (debit Freight Out for the freight costs). Prior to payment for the goods, the seller issues a credit memo for $750 to the customer for merchandise costing $425 that is returned. The correct amount is received within the discount period. The company uses a perpetual inventory system. Record the foregoing transactions of the seller in the sequence indicated below.

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

Prepare a multiple-step income statement for Armour Co. from the following data for the year ended December 31, 2012. Sales, $905,000; cost of merchandise sold, $540,000; administrative expenses, $10,000; interest expense, $20,000; rent revenue, $25,000; sales returns and allowances, $35,000; selling expenses, $90,000.

The amount of the total cash paid to the seller for merchandise purchased for consumption would normally include

Using the following data taken from Martinez Inc., prepare the cost of merchandise sold section of the income statement for the year ended May 31, 2012.