Exam 5: Accounting for Merchandising Operations

Freight costs paid by a seller on merchandise sold to customers will cause an increase

Paden Company purchased merchandise from Emmett Company with freight terms of FOB shipping point. The freight costs will be paid by the

Cost of goods available for sale is computed by adding

The number of years of income statement information to be presented is

The collection of a $6,000 account within the 2 percent discount period will result in a

A sales discount does not

After gross profit is calculated, operating expenses are deducted to determine

As an incentive for customers to pay their accounts promptly, a business may offer its customers

To grant a customer a sales return, the seller credits Sales Returns and Allowances.

Financial information is presented below for two different companies. Instructions Determine the missing amounts.

Kern Company sells merchandise on account for $8,000 to Block Company with credit terms of 2/10, n/30. Block Company returns $1,600 of merchandise that was damaged, along with a check to settle the account within the discount period. What is the amount of the check?

Glenn Company purchased merchandise inventory with an invoice price of $9,000 and credit terms of 2/10, n/30. What is the net cost of the goods if Glenn Company pays within the discount period?

The adjusted trial balance of J. W. Hatch Company appears below. Instructions Using the information given, prepare the year-end closing entries.

Reineman Supply Company uses a periodic inventory system. During September, the following transactions and events occurred. Sept. 3 Purchased 90 backpacks at $25 each from Zuzu Company, terms 2/10, n/30. Sept. 6 Received credit of $150 for the return of 6 backpacks purchased on Sept. 3 that were defective. Sept. 9 Sold 15 backpacks for $42 each to Bailey Books, terms 2/10, n/30. Sept. 13 Paid Zuzu Company in full. Instructions Journalize the September transactions for Reineman Supply Company.

Ezra Company has sales revenue of $60,000, cost of goods sold of $36,000 and operating expenses of $14,000 for the year ended December 31. Ezra's gross profit is

The operating expense section of an income statement for a wholesaler would not include

Adrland Caselotti believes revenues from credit sales may be recognized before they are collected in cash. Do you agree? Explain.

Under a periodic inventory system, freight-in on merchandise purchases should be charged to the Inventory account.

Ellen Corhy and Bryn Davis, two salespersons in adjoining territories, regularly compete for bonuses. During the last month, their dollar volume of sales, on which the bonuses are based, was nearly equal. On the last day of the month, both made a large sale. Both orders were shipped on the last day of the month and both were received by the customer on the fifth of the following month. Ellen's sale was FOB shipping point, and Bryn's was FOB destination. The company "counts" sales for purposes of calculating bonuses on the date that ownership passes to the purchaser. Ellen's sale was therefore counted in her monthly total of sales, Bryn's was not. Bryn is quite upset. She has asked you to just include it, or to take Ellen's off as well. She also has told you that you are being unethical for allowing Ellen to get a bonus just for choosing a particular shipping method. Write a memo to Bryn. Explain your position.

The steps in the accounting cycle are different for a merchandising company than for a service company.