Exam 5: Accounting for Merchandising Operations

Presented here are the components in Bradley Company's income statement. Determine the missing amounts. Sales Revenue Cost of Goods Sold Gross Profit Operating Expenses Net Income \ 75,000 () \ 35,000 () \ 17,000 (c) \ 86,000 \ 59,000 \ 48,000 (d)

Prepare the necessary journal entries to record the following transactions assuming Oldman Company uses a perpetual inventory system. (a) Oldman sells $54000 of merchandise terms 1/10 n/30. The merchandise cost $30000. (b) The customer in (a) returned $5000 of merchandise to Oldman. The merchandise returned cost $3500. (c) Oldman received the balance due within the discount period.

On October 4 2016 TJ Corporation had credit sales transactions of $4800 from merchandise having cost $2880. The entries to record the day's credit transactions include a

Assume that Blaque Company uses a periodic inventory system and has these account balances: Purchases $532000; Purchase Returns and Allowances $16000; Purchase Discounts $8000; and Freight-In $17000. Determine net purchases and cost of goods purchased.

A perpetual inventory system would likely be used by a(n)

Under a perpetual inventory system the cost of goods sold is determined each time a sale occurs.

The gross profit rate is computed by dividing gross profit by

Match the items below by entering the appropriate code letter in the space provided.

In 2016 Rondelli Company had net sales of $650000 and cost of goods sold of $455000. Operating expenses were $150000 and interest expense was $10000. Rondelli prepares a multiple-step income statement. Instructions (a) Compute Rondelli gross profit. (b) Compute the gross profit rate. (c) What is Rondelli income from operations and net income? (d) If Rondelli prepared a single-step income statement what amount would it report for net income?

The gross profit section for a merchandising company appears on both the multiple-step and single-step forms of an income statement.

The basic accounting entries for merchandising are

In a multiple-step income statement income from operations excludes other revenues and gains and other expenses and losses.

An inexperienced accountant for Lamont Company made the following errors in recording merchandising transactions. 1. A $220 refund to a customer for faulty merchandise was debited to Sales Revenue $220 and credited to Cash $220. 2. A $130 credit purchase of supplies was debited to Inventory $130 and credited to Cash $130. 3. A $140 sales return was debited to Sales Revenue. 4. A cash payment of $30 for freight on merchandise purchases was debited to Freight-Out $300 and credited to Cash $300. Instructions Prepare separate correcting entries for each error assuming that the incorrect entry is not reversed. (Omit explanations.)

At the beginning of the year Pace Company had an inventory of $750000. During the year the company purchased goods costing $2400000. If Pace Company reported ending inventory of $758000 and sales of $3680000 the company's cost of goods sold and gross profit rate must be

Operating expenses are different for merchandising and service enterprises.

During August 2016 Shelby's Supply Store generated revenues of $65000. The company's expenses were as follows: cost of goods sold of $33000 and operating expenses of $7000. The company also had rent revenue of $2000 and a loss on the sale of a delivery truck of $3000. Shelby's operating income for the month of August 2016 is

A ________________ buys and sells goods rather than performing services to earn a profit.

During October 2016 Blondie's Catering Company generated sales revenue of $15000. Sales discounts totaled $240 for the month. Expenses were as follows: Cost of goods sold of $7900 and operating expenses of $2600. Calculate (1) gross profit and (2) income from operations for the month.

Inventory on hand can be obtained from detailed inventory records when a ________________ inventory system is maintained.

When a customer returns merchandise previously purchased on credit the entry for the seller to record the return requires a debit to the ________________ account and a credit to the ________________ account.