Exam 4: Accounting for Merchandising Operations

Frisco Company's Merchandise Inventory account at year-end has a balance of $62,115,but a physical count reveals that only $61,900 of inventory exists.The adjusting entry to record this $215 of inventory shrinkage is:

A ________ income statement lists cost of goods sold as another expense and shows only one subtotal for total expenses.

Under a periodic inventory system,purchases,purchases returns and allowances,purchase discounts,and transportation-in transactions are recorded in the Merchandise Inventory account.

Expenses to promote sales by displaying and advertising merchandise,make sales,and deliver goods to customers are known as:

Inventory shrinkage can be computed by comparing the ________ of inventory with recorded quantities and amounts.

Under the ________ inventory accounting system,each purchase,purchase return and allowance,purchase discount,and transportation-in transaction is recorded in a separate temporary account.

A company with an acid-test ratio of 4.1 is unlikely to face near-term liquidity problems.

Merchandise inventory:

Austin's Pub Supply uses the periodic inventory system and the gross method of accounting for sales.The company had the following sales transactions during August: Prepare the journal entries that Austin's Pub Supply must make to record these transactions.

Cash sales shorten the operating cycle for a merchandiser; credit sales lengthen operating cycles.

Purchase discounts are the same as trade discounts.

A company uses the perpetual inventory system and recorded the following entry: This entry reflects a:

Merchandise inventory refers to products that a company owns and plans to sell to customers.

When preparing an unadjusted trial balance using a periodic inventory system,the amount shown for Merchandise Inventory is:

Fragment Company is a wholesaler that sells merchandise in large quantities.Its catalog indicates a list price of $300 per unit on a particular product and a 40% trade discount is offered for quantity purchases of 50 units or more.The cost of shipping the merchandise is $7 per unit under terms FOB shipping point.If a customer purchases 100 units of this product,what is the amount of sales revenue that Fragment will record from this sale?

Discuss the period-end adjusting entries that are required in the new revenue recognition standards for estimating sales discounts and sales returns and allowances.

Under the perpetual inventory system,the cost of merchandise purchased is recorded in the Merchandise Inventory account.

Using the following year-end information for Bauman,LLC,calculate the current ratio and acid-test ratio:

Sales Discounts and Sales Returns and Allowances are contra revenue accounts that are debited to close the accounts during the closing process.

Cost of goods sold represents the expense of buying and preparing merchandise for sale.