Exam 4: Accounting for Merchandising Operations

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.

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.Jepson pays the invoice on September 18,and takes the appropriate discount.The journal entry that Vander makes on September 18 is:

A trade discount is:

On May 1,Anders Company purchased merchandise in the amount of $5,800 from Shilling,with credit terms of 2/10,n/30.Anders uses the perpetual inventory system and the gross method.The journal entry or entries that Anders will make on May 1 is:

Identify and explain the key components of a merchandiser's net income.

In its first month of business,Clausen Corporation reports sales of $1,750,000 and cost of goods sold of $950,000.Clausen estimates that current and future returns and allowances will equal 4% of those sales.Prepare the October 31 adjusting entries necessary to record the revenue side and cost side estimates for returns and allowances.

Explain the way in which costs flow through the merchandise inventory account to a merchandiser's income statement.

A company that uses the perpetual inventory system and the gross method of accounting for purchases purchased $8,500 of merchandise on March 25 with credit terms of 2/10,n/30.The invoice was paid in full on April 4.Prepare the journal entries to record the transactions on March 25 and April 4.

FOB ________ means the buyer accepts ownership when the goods depart the seller's place of business.The buyer is responsible for paying shipping costs and bears the risk of damage or loss when goods are in transit.

On March 12,Klein Company sold merchandise in the amount of $7,800 to Babson Company,with credit terms of 2/10,n/30.The cost of the items sold is $4,500.Klein uses the perpetual inventory system and the gross method of accounting for sales. -On March 15,Babson returns some of the merchandise.The selling price of the merchandise is $600 and the cost of the merchandise returned is $350.Babson pays the invoice on March 20,and takes the appropriate discount.The amount that Klein receives from Babson on March 20 is:

Cost of goods sold is also called cost of sales.

If a buyer does not take advantage of a supplier's credit terms of 2/10,n/30,and instead pays the invoice in full at the end of 30 days,by not taking the discount the buyer loses the equivalent of 18% annual interest on the amount of the purchase.

The Merchandise Inventory account balance at the beginning of the current period is equal to the amount of ending Merchandise Inventory from the previous period.

On March 12,Klein Company sold merchandise in the amount of $7,800 to Babson Company,with credit terms of 2/10,n/30.The cost of the items sold is $4,500.Klein uses the perpetual inventory system and the gross method of accounting for sales. -Babson pays the invoice on March 17,and takes the appropriate discount.The journal entry that Klein makes on March 17 is:

Sabor Company uses a perpetual inventory system and the gross method of accounting for purchases.Sabor purchased $17,800 of merchandise on April 7 with credit terms of 1/10,n/30.Merchandise with a cost of $1,800 was damaged and returned to the seller on April 10.On April 16 the company paid the amount due.Prepare the journal entries to record the transactions on all three dates.

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 merchandise.The selling price of the merchandise is $500 and the cost of the merchandise returned is $350.Jepson pays the invoice on September 18,and takes the appropriate discount.The journal entry that Vander makes on September 18 is:

A company's net sales were $676,600,its cost of goods sold was $236,810 and its net income was $33,750.Its gross margin ratio equals:

In a periodic inventory system,cost of goods sold is recorded as each sale occurs.

A merchandising company's operating cycle begins with the purchase of merchandise and ends with the collection of cash from the sale.

Under the net method of recording purchases,the Discounts Lost account is used when the purchaser fails to take a discount offered by the seller.