Exam 4: Accounting for Merchandising Operations

A company that uses the net method of recording purchases and a perpetual inventory system purchased $1,800 of merchandise on July 5 with terms 2/10,n/30.On July 7,it returned $200 worth of merchandise.On July 28,it paid the full amount due.The correct journal entry to record the payment on July 28 is:

A company purchased $4,000 worth of merchandise.Transportation costs were an additional $350.The company returned $275 worth of merchandise and then paid the invoice within the 2% cash discount period.The total cost of this merchandise is:

Under new revenue recognition rules,the gross method requires a period-end adjusting entry to estimate future sales discounts.

From the adjusted trial balance for Brookstone Art Supplies given below,prepare a multiple-step income statement in good form.

Fill in the blanks (a)through (g)for the Morrison Company for each of the income statements for years 1,2,and 3.

Inventory Returns Estimated is a current asset account used in a period-end adjusting entry to reflect the inventory estimated to be returned in the future.

A company had net sales of $545,000 and cost of goods sold of $345,000.Its gross margin equals $890,000.

A ________company's operating cycle begins with the purchase of merchandise and ends with the collection of cash from merchandise sales.

Liquidity problems are likely to exist when a company's acid-test ratio:

If goods are shipped FOB shipping point,the seller does not record revenue from the sale until the goods arrive at their destination because the transaction is not complete until that point.

On September 12,Vander Company sold merchandise in the amount of $5,800 to Jepson Company,with credit terms of 2/10,n/30.The cost of the items sold is $4,000. -Vander uses the periodic inventory system and the gross method of accounting for sales.On September 14,Jepson returns some of the non-defective merchandise,which is restored to inventory.The selling price of the returned merchandise is $500 and the cost of the merchandise returned is $350.The entry or entries that Vander must make on September 14 is (are):

Sales less sales discounts,less sales returns and allowances equals:

Craig's Snowboards uses the perpetual inventory system and the gross method of accounting for sales,and had the following sales transactions during June: Prepare the journal entries that Craig's Snowboards must make to record these transactions.

Multiple-step income statements:

National Storage Company had sales of $1,000,000,sales discounts of $2,500,sales returns and allowances of $15,000,and cost of goods sold of $525,000.Calculate National's gross profit.

The acid-test ratio is defined as current assets divided by current liabilities.

Delivery expense is reported as part of general and administrative expense in the seller's income statement.

A company has net sales of $825,000 and cost of goods sold of $547,000.Its net income is $98,500.The company's gross margin and operating expenses,respectively,are:

Which of the following statements related to the multiple-step income statement is not true?

Purchase allowances refer to merchandise a buyer acquires but then returns to the seller.