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Exam 6: Accounting for Merchandising Businesses

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Question 1

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Match each of the following terms with the appropriate definition below.

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Question 2

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On March 25, 2014, Patton Company sold merchandise on account,$10,000. The applicable sales tax percentage is 8.5%. Record the transaction.

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Journalize the following transactions assuming a perpetual inventory system.: Journal

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

Conquest Company uses a perpetual inventory system. Conquest purchased $1,500 of merchandise on account and payment was made within the discount period. The credit terms were 2/10,n/30. Journalize Conquest's purchase and payment.

What is the major difference between a periodic and perpetual inventory system?

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

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

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

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?

The cost of merchandise inventory is limited to the purchase price less any purchase discounts.

Which of the following accounts will not be found on the Cost of Merchandise Sold section on the Income Statement?

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

Under the perpetual inventory system, when a sale is made, both the sale and cost of merchandise sold are recorded.

Maxi Company's perpetual inventory records indicate that $820,300 of merchandise should be on hand on October 31, 2014. The physical inventory indicates that $781,900 is actually on hand. Journalize the adjusting entry for the inventory shrinkage for Maxi Company for the year ended October 31, 2014.

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.

Merchandise inventory is classified on the balance sheet as a

On the income statement in the single-step form, the total of all expenses is deducted from the total of all revenues.

Net sales is equal to sales minus cost of merchandise sold.

Abbey Co. sold merchandise to Gomez Co. on account, $35,000, terms 2/15, net 45. The cost of the merchandise sold is $24,500. Abbey Co. issued a credit memo for $3,600 for merchandise returned that originally cost $1,700. Gomez Co. paid the invoice within the discount period. What is the amount of gross profit earned by Abbey Co. on the above transactions?