Exam 5: Accounting for Merchandising Businesses

Under a periodic inventory system,closing entries will include

Service businesses provide services for income,while a merchandising business sells merchandise.

Other income and expenses are items that are not related to the primary operating activity.

Gross profit minus selling expenses equals net income.

When companies use a perpetual inventory system,the recording of the purchase of inventory will include a debit to Purchases.

If the seller is to pay the freight costs of delivering merchandise,the delivery terms are stated as

A business using the perpetual inventory system,with its detailed subsidiary records,does not need to take a physical inventory.

Norfolk Sporting Goods purchases merchandise with a catalog list price of $30,000.The retailer receives a 30% trade discount and credit terms of 2/10,n/30.What amount should Norfolk debit to the Merchandise Inventory account?

Who is responsible for the freight cost when the terms are FOB destination?

Because many companies use computerized accounting systems,periodic inventory is widely used.

During the current year,merchandise is sold for $86,000 cash and for $93,950 on account.The cost of the merchandise sold is $76,240.What is the amount of the gross profit?

In a perpetual inventory system,the Merchandise Inventory account is only used to reflect the beginning inventory.

Merchandise is ordered on November 10; the merchandise is shipped by the seller and the invoice is prepared,dated,and mailed by the seller on November 13; the merchandise is received by the buyer on November 18; the entry is made in the buyer's accounts on November 20.The credit period begins with what date?

What is the term applied to the excess of net revenue from sales over the cost of merchandise sold?

Sellers and buyers are required to record trade discounts.

If payment is due by the end of the month in which the sale is made,the invoice terms are expressed as n/30.

Freight-in is the amount paid by the company to deliver merchandise sold to a customer.

Under the periodic inventory system,the cost of merchandise sold is equal to the beginning merchandise inventory plus the cost of merchandise purchased plus the ending merchandise inventory.

Kaden Co.sells merchandise on credit to Jase Co.in the amount of $9,600.The invoice is dated on July 15 with terms of 1/15,net 45.If Jase Co.chooses not to take the discount,by when should the payment be made?

Cost of merchandise sold is often the largest expense on a merchandising company income statement.