Exam 4: Accounting for Merchandising Businesses

[The following information applies to the questions displayed below.] Sanchez Company engaged in the following transactions during Year 1: 1) Started the business by issuing $42,000 of common stock for cash. 2) The company paid cash to purchase $26,400 of inventory. 3) The company sold inventory that cost $16,000 for $30,600 cash. 4) Operating expenses incurred and paid during the year, $14,000. Sanchez Company engaged in the following transactions during Year 2: 1) The company paid cash to purchase $35,200 of inventory. 2) The company sold inventory that cost $32,800 for $57,000 cash. 3) Operating expenses incurred and paid during the year, $18,000. Note: Sanchez uses the perpetual inventory system. -What is the amount of inventory that will be shown on the balance sheet at December 31,Year 2?

Anchor Company sold merchandise with a cost of $560 to a customer for $890 on account.Due to an error,this sale was never recorded in the accounting records.What effect will the failure to make the necessary entries have on the company's financial statements?

What happens when merchandise is delivered FOB shipping point?

Melbourne Company sold merchandise that it had purchased with a list price of $3,300.The credit terms were of 2/10,n/30.Assuming that Melbourne paid for the merchandise during the discount period,the cost of goods sold for this transaction would be $2,970.

With a perpetual inventory system,assets and stockholders' equity increase by the amount of the gross margin when inventory is sold.(Consider the effects of both parts of this event. )

[The following information applies to the questions displayed below.] Assume the perpetual inventory system is used. 1) Green Company purchased merchandise inventory that cost $64,000 under terms of 2/10, n/30 and FOB shipping point. 2) Green Company paid freight cost of $2,400 to have the merchandise delivered. 3) Payment was made to the supplier on the inventory within 10 days. 4) All of the merchandise was sold to customers for $94,000 cash and delivered under terms FOB destination with freight cost amounting to $1,600. -What is the net cash flow from operating activities that results from these transactions?

JCS Incorporated experienced the following transactions during its first year of business.The company purchased $16,000 of merchandise from Kent Company.The company paid $2,000 for selling and administrative expenses and purchased land for $5,000.All of the merchandise purchased was sold for $30,000 cash.What is the company's gross margin?

Costs of selling inventory are product costs.

Which of the following is considered a product cost?

Middleton Company uses the perpetual inventory system.The company purchased an item of inventory for $130 and sold the item to a customer for $200.How will the sale affect the company's Inventory account?

What happens when merchandise is delivered FOB Destination?

Gains and losses are recorded for increases and decreases in the market value of land.

A company's chart of accounts includes,in part,the following account numbers and corresponding account titles: -Which accounts would appear on the balance sheet?

A company that purchases merchandise treats a cash discount as a reduction to the cost of merchandise inventory.

Consider the following T-account in the ledger of Gibbs Company.The company uses the perpetual inventory system. What business event would result in the $400 credit?

Exeter Company sold merchandise for $10,000 cash.The merchandise had cost the company $4,500.What is the effect of the sale on the balance sheet?

Under a periodic system,the account debited for freight costs on goods received from the vendor is called:

Net income is not affected by a purchase of merchandise.

Kenyon Company experienced a transaction that had the following effect on the financial statements: Which of the following business events would result in this effect on the financial statements?

Assume a company uses the periodic inventory system.Which of the following accounts would not be used in a journal entry to record purchases and related transactions?