Exam 4: Accounting for Merchandising Operations

Serene Spa Sales uses the perpetual inventory system and the gross method of accounting for purchases and sales,and had the following transactions during August. Required: Prepare the general journal entries to record these transactions.

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 net method of accounting for sales.On March 15,Babson returns some of the merchandise,which is not defective.The selling price of the returned merchandise is $600 and the cost of the merchandise returned is $350.The entry(ies)that Klein must make on March 15 is (are):

Beginning inventory plus net purchases equals merchandise available for sale.

A company has sales of $695,000 and cost of goods sold of $278,000.Its gross profit equals:

Inventory Returns Estimated,which reflects an adjustment to inventory for expected future returns,is a liability account reported in the balance sheet,usually under Current Liabilities.

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:

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?

Forrest's Cycle Shop uses a perpetual inventory accounting system and the gross method of accounting for sales had the following transactions during the month of July: July 3 Sold merchandise to a customer on credit for \ 600 , terms 2/10,30. The cost of the merchandise sold was \ 350. July 4 Sold merchandise to a customer for cash of \ 425 . The cost of the merchandise was \ 250. July 6 Sold merchandise to a customer on credit for \ 1,300, terms 2/10,/30. The cost of the merchandise sold was \ 750. July 8 The customer from July 3 returned merchandise with a selling price of \ 100 . The cost of the merchandise returned was \ 55. July 15 The customer from July 6 paid the full amount due, less any appropriate discounts earned. July 31 The customer from July 3 paid the full amount due, less any appropriate discounts earned. Prepare the required journal entries that Forrest's Cycle Shop must make to record these transactions.

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

Match the following definitions with the appropriate terms. -The point of transfer from seller to buyer that takes place when the goods arrive at the buyer's place of business.

All of the following statements regarding inventory shrinkage are true except:

When a company has no reportable non-operating activities,its income from operations is simply labeled net income.

The following information is for Barrel and its competitor Crate. Required: 1.Calculate the dollar amount of gross margin and the gross margin ratio to the nearest percent,for each company for both years. 2.Which company had the more favorable ratio for each year? 3.Which company had the more favorable change in the gross margin ratio over this 2-year period?

A company's current assets are $23,420,its quick assets are $13,890 and its current liabilities are $12,220.Its acid-test ratio equals:

Describe the key attributes of inventory for a merchandising company.

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

A buyer issues a ________ to inform the seller of a debit made to the seller's account payable in the buyer's records.

The current period's ending inventory is:

Match the following definitions with the appropriate terms. -Products a company owns and intends to sell.

A company 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 12,it paid the full amount due.Assuming the company uses a perpetual inventory system,and records purchases using the gross method,the correct journal entry to record the payment on July 12 is: