Exam 5: Merchandising Operations and the Accounting Cycle

Following is a random list of some of the accounts and their December 31, 2019, balances for Carmen & Company. Carmen & Company uses a periodic inventory system and all account balances are normal. Purchases \ 320,000 Sales revenue 460,000 Interest revenue 23,000 Salary expense 45,000 Freight in 17,000 Purchase discounts 31,000 Sales returns and allowances 35,000 Interest expense 18,000 Delivery expense 24,000 Sales discounts 27,000 Insurance expense 16,000 Purchase returns and allowances 46,000 B.J. Carmen, Capital 30,000 Utilities expense 14,000 Amortization expense-equipment 10,000 B.J. Carmen, Withdrawals 15,000 The beginning and ending amounts for inventory are $58,000 and $65,000, respectively. Prepare the closing entries for Carmen & Company.

Following is a random list of accounts with normal balances for the Sisco Merchandising as of December 31, 2019. All adjusting entries have been made. Closing entries have not been made. C. Sisco, Capital \ 159,000 Land 80,000 Sales discounts 18,000 Supplies expense 9,000 Interest revenue 14,000 Mortgage payable 80,000 Cash 22,000 Accounts receivable 34,000 Unearned service revenue 11,000 Salary expense 23,000 Accounts payable 36,000 Accumulated amort -building 17,000 Equipment 46,000 Prepaid insurance 8,000 Interest expense 6,000 C. Sisco, Withdrawals 15,000 Sales revenue 285,000 Interest receivable 5,000 Inventory 28,000 Accumulated amort -equipment 12,000 Insurance expense 21,000 Salary payable 6,000 Supp lies 4,000 Cost of goods sold 156,000 Sales returns \& allowances 13,000 Amortization expense-building 8,000 Amortization expense-equipment 8,000 Interest payable 14,000 Utilities expense 8,000 Delivery expense 7,000 Building 115,000 Prepare a single-step income statement for Sisco Merchandising for the year ended December 31, 2019.

Cost of goods sold is $7,400. Beginning inventory is $3,500 and ending inventory is $4,000. If there is no freight in and total purchases were $8,250, how much were purchase returns and allowances?

Purchase returns of merchandise decrease the liability to a creditor.

The major revenue of a merchandiser is ________ while the major expense(s)is (are)________.

Table 5-3 Sales revenue \ 750,000 Interest revenue 18,000 Freight in 44,000 Beginning inventory 75,000 Purchases discounts 20,000 Sales returns and allowances 44,000 Operating expenses 99,000 Interest expense 15,000 Ending inventory 72,000 Purchases 415,000 Sales discounts 25,000 William Browning, Withdrawals 61,000 Purchase reburns and allowances 36,000 -Refer to Table 5-3. Net purchases are:

Table 5-9 Reid Art Supply Company uses a perpetual inventory system. The company had the following transactions during August, 2019: $\text {Aug. 5 Purchased \$ 2,900 of merchandise on account; FOB shipp ing point, \(3 / 15 , n / 60\).}$ $\text {Aug. 9 Paid transportation costs of \$ 440 for the Aug. 5 purchase.}$ $\text {Aug. 10 Returned \$ 600 of defective merchandise purchased on Aug. 5.}$ $\text {Aug. 15 Paid the amount owing for the merchandise purchased Aug. 5 .}$ -Record the August journal entries for Reid Art Supply.

Day Company purchased $3,000 of merchandise on credit, terms 3/15 n/30. The entry to record payment for the merchandise within the discount period under a perpetual inventory system would include a:

Under a perpetual inventory system, the entry to record the return of inventory sold on account for $250 with a cost of $185 would be recorded by the seller as a:

Gross margin is equal to net sales plus cost of goods sold.

Refer to the following trial balance. Debit Credit Cash \ 5,000 Accounts receivable 14,000 Inventory 20,000 Supp lies 5,000 Land 100,000 Accounts payable \ 3,000 Notes payable 25,000 Capital 90,000 Drawing 1,000 Sales revenues 160,000 Sales returns and allowances 2,000 Sales discounts 3,000 Cost of goods sold 80,000 Salary expense 5,000 Utility expense 23,000 Rent expense 18,000 Interest expense 2,000 Totals \ 278,000 \ 278,000 Please prepare a multi-step income statement:

Given the following worksheet with the trial balance already entered, and the related adjustment information, complete the worksheet. Additional information: a)Prepaid rent expired, $3 b)Amortization on furniture, $2 c)Unearned sales revenue earned during the period, $4 d)Accrued salaries, $5 e)Physical count of ending inventory, $33

If the shipping terms are FOB shipping point and the freight bill is $200, the purchaser, using a periodic inventory system would record payment of the freight with a debit to:

The income from operations is presented on both the multi-step and single-step income statements.

Under a periodic inventory system, the entries to record a $3,400 sales return for undamaged goods on an original cash sale when the merchandise had a cost of $1,500 include a debit to:

Credit terms of 1/15 n/30 means the purchaser can deduct 1% of the invoice price if paid within 15 days.

What are two key criteria that merchandisers who report under international financial reporting standards (IFRS)must follow?

Table 5-6 The following are transactions for Latest Fashions for the month of June. $\text {June 2 Purchased \$ 2,000 of inventory under terms \(1 / 10 , \mathrm { n } / 60\) and \(\mathrm { FOB }\) shipp ing point from Trendy}$ $\text {Manufacturing. The merchandise had cost Trendy \$ 1,800.}$ $\text {June 7 Returned defective merchandise to Trendy Manufacturing with invoice price of \$ 400.}$ $\text {June 8 Paid the freight charges on the purchase from Trendy Manufacturing in cash for \$ 100.}$ $\text {June 9 Sold merchandise to New Miss Store on account for \$ 5,000 with terms \(2 / 15 , \mathrm { n } / 60 \mathrm { FOB }\) }$ $\text {shipping point. Cost of the merchandise sold was \$ 4,000.}$ $\text {June 10 Paid Trendy Manufacturing the balance on account.}$ $\text {June 12 Granted sales allowance of \$ 300 to New Miss Store for defective merchandise.}$ $\text {June 23 Collected balance owed from New Miss Store.}$ -Refer to table 5-6. Prepare the journal entries for Latest Fashions for the transactions listed, assuming that Latest Fashions uses a periodic inventory system.

Gross margin minus expenses equals gross profit.

Cost of goods sold is $108,000, ending inventory is $12,000 and purchases is $100,000. What is beginning inventory?