Exam 5: Accounting for Merchandising Operations

The financing period is also referred to as the cash gap.

The calculation of cost of goods available for sale during the year is not affected by the previous year's ending merchandise inventory.

On the income statement,freight-out is included as part of cost of goods sold.

Companies that sell goods that have a high unit value tend to use the perpetual inventory system.

Given the following information,prepare in good form the cost of goods sold section of an income statement for 20x5.

Under the perpetual inventory system,the purchase of merchandise is recorded with a debit to Purchases.

When the buyer bears the transportation charge,it is called freight-out.

Using the following information,calculate for 20x5 (a)net sales, (b)cost of goods sold, (c)gross margin,and (d)net income.

Adding together the ending merchandise inventory and cost of goods sold gives the cost of goods available for sale.

The collection of a $2,000 account beyond the 2 percent discount period would result in a(n)

Wolf Equipment uses a perpetual inventory method.Discuss how Wolf Equipment accounts for freight-in and freight-out.

Under the periodic inventory system,the amount for inventory on hand is accurate only on the balance sheet date.

Distinguish between the cost of goods available for sale and the cost of goods sold.

Cost of Goods Sold would not be found on a single-step income statement.

Upon making a credit card sale,a business should record the sale as an accounts receivable until the customer pays his or her credit card bill.

A purchase on account with an invoice price of $1,500 has been made.The entry to record the payment after the 2 percent discount period would include a(n)