Exam 5: Accounting for Merchandising Operations

Financial information is presented below: Operating Expenses \ 92,800 Sales Returns and Allowances 18,000 Sales Discounts 12,000 Sales Revenue 350,000 Cost of Goods Sold 176,000 The amount of net sales on the income statement would be

Under a periodic inventory system acquisition of merchandise is debited to the

A merchandiser frequently has a need to use contra accounts related to the sale of goods. Identify the contra accounts that have normal debit balances and explain why they are not considered expenses.

Under GAAP companies generally classify income statement items by

Glover Co. returned defective goods costing $5000 to Mal Company on April 19 for credit. The goods were purchased April 10 on credit terms 3/10 n/30. The entry by Glover Co. on April 19 in receiving full credit is: a. Accounts Payable 5,000 Inventory 5,000 b. Accounts Payable 5,000 Inventory 150 Cash 5,150 c. Iccounts Payable 5,000 Purchase Discounts 120 Inventory 4,850 d. Accounts Payable 5,000 Inventory 120 Cash 4,850

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 nonoperating income (loss) for the month of August 2016 is

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

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

The Sales Returns and Allowances account and the Sales Discounts account are both classified as expense accounts.

Under a perpetual inventory system acquisition of merchandise for resale is debited to the

Companies cannot use the

Freight terms of FOB Destination means that the seller pays the freight costs.

Under IFRS companies can apply revaluation to

Distinguish between FOB shipping point and FOB destination. Identify the freight terms that will result in a debit to Inventory by the purchaser and a debit to Freight-out by the seller.

Sales returns and allowances and sales discounts are subtracted from sales in reporting net sales in the income statement.

Presented below is information for Oakley Company for the month of March 2016. Cost of goods sold \ 254,000 Rent expense \ 36,000 Freight-out 7,500 Sales discounts 8,800 Insurance expense 5,000 Sales returns and allowances 11,000 Salaries and wages expense 75,000 Sales revenue 425,000 Instructions (a) Prepare a multiple -step income statement. (b) Compute the gross profit rate.

In a perpetual inventory system the Cost of Goods Sold account is used

Which of the following accounts is not closed to Income Summary?

For each of the following determine the missing amounts. Beginning Inventory Purchases Goods Available for Sale Cost of Goods Sold Ending Inventory 1. \1 0,000 \4 5,000 \2 5,000 2. \2 20,000 \2 65,000 \4 0,000

Which of the following would not be classified as a contra account?