Exam 4: Accounting for a Merchandising Business

Merchandise is sold FOB shipping point. If the seller prepays the delivery costs and adds them to the customer's invoice, the entry the seller must prepare, will:

What is liquidity?

If net sales decreases and cost of goods sold increases, the gross profit percentage:

Kramer and Associates has the following account balances listed in alphabetical order: Accumulated Depreciation, $23,000; Accounts Payable, $8,500, Accounts Receivable, $10,000; Cash, $3,000; Equipment, $41,000, Land, $22,000, Mortgage Payable, $42,000; Prepaid Insurance, $9,500; Supplies, $1,000; Unearned Revenue, $4,000; Wages payable, $2,000. Kramer and Associates' current assets are:

Current assets are listed on the Balance Sheet in:

A company pays an invoice early and takes 4% off of the original invoice price. The account to be credited for the discount under a perpetual inventory system is:

A retailer sells goods to a wholesaler.

Sheldon, a customer of Comics, Inc., returned $60 of goods that were purchased on account. Under the perpetual inventory system, Classics will record a:

A journal entry that has more than one debit or more than one credit is known as a complex journal entry.

Most merchandising businesses prepare a single-step Income Statement.

Archer Manufacturing had sales for the week of $3,145, of which $2,500 was on credit and $645 in cash sales. The cost of the merchandise sold was $1,716. The journal entries would include a:

FOB means:

If an invoice reads 2/15, n/30, the 15 refers to the percent that can be taken for the discount.

The major difference in the Statement of Retained Earnings between a service business and a merchandising business is:

A company has a net income percentage of 27.3%. This means that the company makes a little over $0.27 on every dollar of sales.

The discount period is determined by the:

The general public usually purchase merchandise from wholesalers.

An inventory count shows that the general ledger for inventory is understated by $5,000. The entry to correct this would include a debit to cost of goods sold.

Goods that a retailer has available to sell to its customers are classified as inventory.

Greene Company purchases $8,000 of inventory with shipping terms, FOB Columbus. Greene is based in Dayton and the supplier is based in Columbus. The shipping costs are $450. What is the cost of Greene's inventory?