Exam 5: Accounting for Merchandising Operations

Watson Lawn Equipment sells mowers and other lawn maintenance equipment. The following information relates to its inventory of mowers, which is accounted for using the perpetual inventory method: June 3 Purchased 35 mowers at $400 each from Greensborough Equipment; terms 2/10, net 30, FOB shipping point. 4 The correct company paid freight of $1,200 on the June 4 purchase. 10 Returned 4 of the mowers purchased on June 3. 30 Paid the Greensborough account in full. Instructions a. Prepare the journal entries to record these transactions. b. Determine the ending balance in the Merchandise Inventory account at June 30. c. Determine what the ending balance would be if Watson had paid the Greensborough account on June 12 instead of on June 30.

To increase their gross profit margin, a company should decrease their cost of goods sold.

A single-step Income Statement is named because there is only one step in determining profit.

When contrasting a perpetual inventory system to a periodic system, the

The calculation of net purchases includes all of the following EXCEPT

To increase their gross profit margin, a company should increase their sales.

Gross profit does NOT appear

When recording a credit sale in a perpetual inventory system, all of the following accounts are affected EXCEPT

Artist Company has net sales of $350,000 and cost of goods sold is $275,000. If all other expenses equal $40,000, the company's profit margin is 10%.

A quantity discount is

A perpetual inventory system makes it easier for the company to answer questions about the availability of merchandise.

Under a periodic inventory system, the sale of merchandise on credit requires a debit to

The following is a random list of the accounts and their balances for Gordon Auto Sales (a proprietorship owned by A. Gordon) on December 31, 2014. The company uses a perpetual inventory system. A physical count of inventory on December 31, 2014 reveals $671,575 on hand. Instructions a. Prepare the entry to adjust inventory. b. Prepare the closing entries on December 31, 2014. c. Prepare the post-closing trial balance.

The Purchase Returns and Allowances account is classified as

If a company has net sales of $250,000 and cost of goods sold of $175,000, the gross profit margin is

If sales have decreased in the past 5 years and the cost of goods sold value remains the same each year, this will create

Purchases is a temporary account reported on the income statement as an expense.

If a purchaser returns goods purchased on account to the supplier under a perpetual inventory system, the purchaser would debit

Two items are missing in each of the following columns and are identified by a letter. Instructions Assuming the company uses a perpetual inventory system, calculate the missing amounts and identify them by letter.

Freight costs paid by a seller on merchandise sold to customers will cause an increase