Exam 5: Accounting for Merchandising Operations

The following information is taken from the General Ledger of Ben's BMX Bikes at September 30, 2014. A physical count of the inventory indicates that the actual amount on hand is $5,450. Ben's uses the perpetual inventory system. Instructions a. Prepare the journal entry to adjust inventory. b. Prepare the closing entries. c. Prepare the post-closing trial balance. d. Prepare a multiple-step income statement. e. Calculate Ben's gross profit margin.

Using a perpetual inventory system, the respective normal account balances of Merchandise Inventory, Sales Returns and Allowances, and Cost of Goods Sold are

Mischa Company has an inventory balance of $903,950 on December 31, 2014. During 2015 Mischa purchased merchandise for $97,500 and sold merchandise that had a cost of $714,220. Instructions a. Prepare the adjusting entries assuming the inventory count on December 31, 2014 revealed a balance of $914,450. b. Prepare the adjusting entries assuming the inventory count on December 31, 2015 revealed a balance of $292,370.

In a perpetual inventory system, the entry to record the purchase of merchandise inventory on account would require a

In the periodic system of accounting, the cost of goods sold is NOT recorded at the time of sale of goods.

A Sales Returns and Allowances account is only used in a perpetual inventory system.

FOB Shipping point means that the seller is responsible for the freight costs.

An operating cycle is the average time that it takes to go from cash to cash in producing revenues.

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

Using a perpetual inventory system, state the missing items identified by ?. 1. Net sales - Cost of goods sold = ? 2. Gross profit - Operating expenses = ? 3. Sales - ? = Net sales 4. Profit from operations + ? - ? = Profit 5. Cost of goods sold + Gross profit on sales = ?

Omari Company produces and sells various types of beach toys. Listed below are the transactions for the month of June: June 1 Sold 18 water tubes for $250 each terms n/30 FOB destination. Each tube cost $95. 8 Customer returned 2 tubes due to defects. Issued a full refund and scrapped the defective tubes. 10 Freight charges of $85 paid by the responsible party. 11 Customer complained about competitive pricing. Granted customer a $200 credit for tubes purchased. 15 Sold 92 tubes for $225 each terms 2/10 n/30. Each tube cost $95. 18 Received payment in full for June 1 transaction. 20 Received payment in full for June 15 transaction. Instructions a. Journalize transactions using the perpetual inventory system. b. Determine the amount of net sales to be reported on the income statement of Omari Company.

When a company returns merchandise to its supplier under a perpetual inventory system, the inventory account will be debited.

In the perpetual system of inventory, when merchandise is purchased for resale to customers, the account Merchandise Inventory is debited.

Under a periodic inventory system, the inventory account is updated when the sale is recorded.

Which of the following is NOT needed to calculate the gross profit margin?

A quantity discount is a reduction in price according to the volume of the purchase.

Which of the following companies would NOT be considered a merchandising company?

In a periodic inventory system, when the buyer pays for freight costs, this entails

Hernandez Clothing Store employs the perpetual inventory system and prepares monthly financial statements. All accounts have been adjusted except for merchandise inventory. A physical count of merchandise inventory on November 30, 2014, indicates that $21,000 was on hand. A partial listing of account balances follows: Instructions a. Prepare a partial income statement for the Hernandez Clothing Store for the month ended November 30, 2014. The income statement should show items through the gross profit category. b. Calculate Hernandez's gross profit margin for November, 2014.

Gross profit margin is calculated by dividing cost of goods sold by net sales.