Exam 6: Accounting for Merchandising Businesses

If merchandise sells for $3,500, with terms of 3/15, n/45, and the cost of the inventory sold is $2,100, the amount charged to sales is

In the periodic inventory system, purchases of merchandise for resale are debited to the purchases account.

Emma Co. sold to Isabella Co. merchandise on account FOB shipping point, 2/10, net 30, for $15,000. Emma Co. prepaid the $750 shipping charge. Using the perpetual inventory method, which of the following entries will Isabella Co. make to record the payment for the merchandise if Isabella Co. pays within the discount period?

On March 29, customers who owe $10,500 on account to Sonic Sales Company submit payments of $4,250. Journalize this event.

Calculate the gross profit for Jefferson Company based on the following: Sales \ 764,000 Selling expenses 42,500 Cost of merchandise sold 538,000

Prepare (a) a single-step income statement, (b) a statement of owner's equity, and (c) a balance sheet in report form from the following data for Burt Co., taken from the ledger after adjustments on December 31, the end of the fiscal year.​ Accounts Payable \ 97,200 Accounts Receivable 64,300 Accumulated Depreciation-Office Equipment 72,750 Accumulated Depreciation-Store Equipment 162,100 Administrative Expenses 56,500 Cash 53,000 Cost of Merchandise Sold 121,700 Interest Expense 12,000 Maeve Burt, Capital 81,750 Maeve Burt, Drawing 52,000 Merchandise Inventory 93,250 Note Payable (due in two years) 154,000 Office Equipment 149,750 Prepaid Insurance 6,500 Rent Revenue 17,500 Sal aries Payable 28,700 Sales 365,500 Selling Expenses 41,500 Store Equipment 325,000 Supplies 4,000

Which of the following costs would be included in merchandise inventory? (a)Purchase price (b)Insurance in transit FOB shipping point (c)Freight for delivery FOB shipping point (d)Repair due to negligence of receiving clerk (e)Receiving department employee salary (f)Cost of processing purchase orders

Buyers and sellers do not normally record the list prices of merchandise and the trade discounts in accounts.

A business using the perpetual inventory system, with its detailed subsidiary records, does not need to take a physical inventory.

The following data were extracted from the accounting records of Dana Designs for the year ended March 31.? Merchandise inventory, April 1 \ 530,000 Merchandise inventory, March 31 375,000 Purchases 270,000 Purchases returns and all owances 25,000 Purchases discounts 10,000 Sales 770,000 Freight in 3,000 Prepare the cost of merchandise sold section of the income statement for the year ended March 31, using the periodic method.??

Service businesses provide services for income, while a merchandising business sells merchandise.

$\text { Match each of the following items } ( a - h ) \text { with the appropriate definition below. }$ -Account used to record merchandise on hand under a perpetual inventory system. 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

A deduction allowed to wholesalers and retailers from the price of merchandise listed in catalogs is called a cash discount.

Using the following information, what is the amount of gross profit??? 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 ?

When the terms of sale are FOB shipping point, the buyer should pay the freight charges.

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.

In a multiple-step income statement, the dollar amount for income from operations is always the same as net income.

Merchandise is purchased for $6,000 on September 2 subject to terms of 2/10, n/30, FOB destination. Freight costs paid by the seller totaled $200. What is the cost of the merchandise if paid on September 12, assuming the discount is taken?

If the seller is to pay the freight costs of delivering merchandise, the delivery terms are stated as

$\text { Match each of the following items } ( a - h ) \text { with the appropriate definition below. }$ -Account where returned merchandise or price adjustments are recorded by the buyer under the periodic inventory system. 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