Exam 6: Accounting for Merchandising Businesses

Isaac Co. sells merchandise on credit to Sonar Co in the amount of $5,700. The invoice is dated on April 1 with terms of 1/15, net 45. What is the amount of the discount and up to what date must the invoice be paid in order for the buyer to take advantage of the discount?

The ending merchandise inventory for 2010 is the same as the beginning merchandise inventory for 2011.

When the seller offers a sales discount, even if borrowing has to be done, it is generally advantageous for the buyer to pay within the discount period.

In a perpetual inventory system, the Merchandise Inventory account is only used to reflect the beginning inventory.

Ramone Company had $600,000 in Net Sales for the year 2010. The total assets at the beginning of the year were $240,000 and total assets at the end of the year were $280,000. The ratio of net sales to total assets is (round answer to 2 decimal places):

If the seller is to pay the freight costs of delivering merchandise, the delivery terms are stated as

Which of the following items would affect the cost of merchandise inventory acquired during the period?

The chart of accounts for a merchandise business would include an account called Delivery Expense.

Income that be associated definitely with operations, such as a gain from the sale of a fixed asset, is listed as Other Income on the multiple-step income statement.

Merchandise with a list price of $4,700 is purchased on account, terms FOB shipping point, 1/10, n/30. The seller prepaid freight costs of $100. Prior to payment, $1,400 of the merchandise is returned. The correct amount is paid within the discount period. Record the foregoing transactions of the buyer in the sequence indicated below, assuming a perpetual inventory system is used.

Using the perpetual inventory system, journalize the entries for the following selected transactions:

Calculate the gross profit for Jonas Company based on the data given below:

The amount of the total cash paid to the seller for merchandise purchased for consumption would normally include

When a merchandising business is compared to a service business, the financial statement that is affected by that change is the Statement of Owner's Equity.

Purchases of merchandise are typically credited to the merchandise inventory account under the perpetual inventory system.

Cost of merchandise sold is the amount that the merchandising company pays for the merchandise it intends to sell.

Merchandise subject to terms 1/10, n/30, FOB shipping point, is sold on account to a customer for $25,000. The seller paid freight costs of $2,000 and issued a credit memo for $10,000 prior to payment. What is the amount of the cash discount allowable?

Freight-in is considered a cost of purchasing inventory.

A seller may grant a buyer a reduction in selling price and this is called a sales allowance.

When merchandise that was sold is returned, a credit to sales returns and allowances is made.