Exam 5: Merchandising Operations and the Multiple-Step Income Statement

Sandy Lang and Mandy Starr, 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 May 30, 2014, each made a large sale. Both orders were shipped on May 31, 2014, the last day of the month, and both were received by the customers on June 5, 2014. Sandy's sale was FOB shipping point (ownership passes to buyer at time of shipping), and Mandy's was FOB destination (ownership passes to buyer at time of receipt). The printed policy of the company states that sales "count" for purposes of calculating bonuses on the date that ownership passes to the purchaser. Sandy's sale was therefore counted in her May monthly total of sales while Mandy's sale was not. Mandy is quite upset. She has asked you to just include it, or to take Sandy's off as well. She also has told you that you are being unethical for allowing Sandy to get a bonus just for choosing a particular shipping method. As the accounting manager write a memo to Mandy on June 15, 2014, and explain your position.

Betty's Fabrics sold merchandise for $114,000 cash during the month of July. Returns that month totaled $2,400. If the company's gross profit rate is 40%, Betty will report monthly net sales revenue and cost of goods sold of

A _________________ buys and sells inventory rather than performing services as their primary source of revenue.

Sales revenues are usually considered earned when

Retailers and wholesalers are both considered merchandising enterprises.

Financial information is presented below: Operating expenses \ 36,000 Sales revenue 150,000 Cost of goods sold 105,000 The gross profit rate would be

Financial information is presented here for two companies. Instructions (a) Compute the missing amounts. (b) Calculate the profit margin and the gross profit rate for each company.

The normal balance of Sales Returns and Allowances is a credit.

The entry to record the receipt of payment within the discount period on a sale of $700 with terms of 2/10, n/30 will include a

Turner Corporation returned $150 of goods originally purchased on credit from Morgan Industries. Using the periodic Inventory approach, Turner would record this transaction as:

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

In a perpetual inventory system, cost of goods sold is recorded

The entry to record a sale of $1,200 with terms of 2/10, n/30 will include a

Presented here are selected transactions for the Foyle Company during April. Foyle uses the periodic inventory system. April 1 Sold merchandise to Land Company for $4,000, terms 2/10, n/30. The merchandise sold had a cost of $2,000. 2 Purchased merchandise from Webb Corporation for $6,000, terms 1/10, n/30. 4 Purchased merchandise from Ryan Company for $2,000, n/30. 10 Received payment from Land Company for purchase of April 1 less appropriate discount. 11 Paid Webb Corporation for April 2 purchase. Instructions Journalize the April transactions for Foyle Company.

Under the periodic system, when a customer returns goods, Purchases Returns and Allowances is debited.

All of the following statements are true regarding the periodic inventory system except

Under the perpetual inventory system, purchases of merchandise for sale are recorded in the Inventory account.

Assets purchased for resale are recorded in which of the following accounts?

The acquisition of inventory is debited to the ____________ account when a perpetual inventory system is used.

Sales revenues, cost of goods sold, and gross profit are amounts on a merchandising company's income statement not commonly found on the income statement of a service company.