Exam 6: Accounting for Merchandising Businesses

Based upon the following data for a business with a periodic inventory system, determine the cost of merchandise sold for August. Merchandise inventory, August 1 \ 75,560 Merchandise inventory, August 31 96,330 Purchases 373,880 Purchases returns and allowances 14,760 Purchases discounts 10,900 Freight in 4,135

When the three sections of a balance sheet are presented on a page in a downward sequence, it is called the

The journal entry to record the receipt of inventory purchased for cash in a perpetual inventory system would be

$\text { Match each of the following items } ( a - h ) \text { with the appropriate definition below. }$ -Informs the seller of the reasons for the return of merchandise or the request for a price allowance. 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

Journalize the following transactions assuming the perpetual inventory system: July 3 Sold merchandise on account for $3,750 including terms. The cost of the merchandise sold was $2,000. 5 Issued credit memo for $1,050 for merchandise returned from sale on July 3.The cost of the merchandise returned was $610. 12 Received check for the amount due for sale on July 3 less return on July 5. 17 Sold merchandise for $7,000 plus 6% sales tax to cash customers. The cost of the merchandise sold was $3,830.??

Selected data from the ledger of Burt Co., after adjustments, on September 30, the end of the fiscal year, are listed as follows:​ Accounts Receivable \ 39,120 Office Equipment \ 82,700 Accumulated Depreciation 60,540 Prepaid Insurance 4,680 Administrative Expenses 90,000 Note Payable 77,750 Bob B urt, Capital 85,000 Salaries Payable 3,060 Bob B urt, Drawing 65,000 Sales 950,000 Cost of Merchandise Sold 550,000 Selling Expenses 102,000 Interest Revenue 10,000 Supplies 3,125 Prepare a single-step income statement and a statement of owner's equity.​

When purchases of merchandise are made on account with a perpetual inventory system, the transaction is recorded with which entry?

Prepare a multiple-step income statement for Armstrong Co. from the following data for the year ended December 31.​Sales, $755,000; cost of merchandise sold, $330,000; administrative expenses, $35,000; interest expense, $30,000; rent revenue, $25,000; selling expenses, $50,000.

Merchandise subject to terms 2/10, n/30, FOB shipping point, is sold on account to a customer for $25,000. What is the amount of the sales discount allowable?

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

Journalize the following transactions for Armour Inc. using both the periodic inventory system and the perpetual inventory system, presented in the side-by-side format of the form provided below.Oct. 7 Sold merchandise on credit to Rondo Distributors, terms n/30. The cost of the merchandise was $720.8 Purchased merchandise, $10,000, terms FOB shipping point, 2/15, n/30, with prepaid freight charges of $525 added to the invoice.? $~~~~~~~~~~~~~\textbf{PERIODIC INVENTORY}~~~~\textbf{PERPETUAL INVENTORY}\\~~~~~~~~~~~~~\textbf{SYSTEM}~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~\textbf{SYSTEM}$ Date Description\nobreakspace\nobreakspace\nobreakspace\nobreakspace Dr. Cr. \mid Description\nobreakspace\nobreakspace\nobreakspace\nobreakspace\nobreakspace Dr. Cr. \mid \mid \mid \mid \mid \mid \mid

If the buyer bears the freight costs related to a purchase, the terms are said to be FOB destination.

Journalize the following transactions for both Abbott Co. (seller) and Dalton Co. (buyer). Assume both the companies use the perpetual inventory system.July 3Abbott Co. sold merchandise on account to Dalton Co., $7,500, terms FOB shipping point, n/eom. The cost of the merchandise sold was $4,400.5Dalton Co. paid $275 freight charges on purchase from Abbott Co.9Abbott Co. issued Dalton Co. a credit memo for merchandise returned, $2,250.The cost of the merchandise returned was $1,325.11Abbott Co. received payment from Dalton Co. for purchase of July 3.?? \quad\quad\quad\quad\quad\quad\quad\quad\textbf { Abbott Co. } \quad \quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\textbf { Dalton Co. }\\ \begin{array}{|l|l|l|l|l|l|l|} \hline \textbf { Date } & \textbf { Description } & \textbf { Debit } & \textbf { Credit } & \textbf { Description } & \textbf { Debit } & \textbf { Credit } \\ \hline & & & & & & \\ \hline & & & & & & \\ \hline & & & & & & \\ \hline & & & & & & \\ \hline & & & & & & \\ \hline & & & & & & \\ \hline & & & & & & \\ \hline & & & & & & \\ \hline & & & & & & \\ \hline & & & & & & \\ \hline \end{array}

Using the following information, what is the amount of income from operations??? Purchases \ 32,000 Selling expenses \ 960 Merchandise inventory, September 1 5,700 Merchandise inventory, September 30 6,370 Administrative expenses 910 Sales 63,000 Rent revenue 1,200 Interest expense 1,040

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

$\text { Match each of the following terms } ( a - h ) \text { with the correct definition below. }$ -Inventory system that updates the merchandise inventory account only at the end of the accounting period based on a physical count of merchandise on hand. a. Credit terms b. FOB destination c. FOB shipping point d. Periodic inventory system e. Perpetual inventory system f. Inventory shrinkage g. Single-step income statement h. Multiple-step income statement

In retail businesses, inventory is reported as a current asset.

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.

What is the term applied to the excess of revenue from sales over the cost of merchandise sold?

In the merchandising income statement, sales will be reduced by administrative expenses to arrive at operating income.