Exam 4: Accounting for Merchandising Businesses

In a transaction where purchased merchandise has been returned, the buyer will increase the Sales Returns and Allowances account and the seller will increase the Purchases Returns and Allowances account.

When merchandise that was sold is returned, the seller decreases accounts payable.

Available discounts taken by the buyer for early payment of an invoice are termed sales discounts by the seller.

Merchandise subject to terms 1/10, n/30, FOB shipping point, is sold on account to a customer for $20,000. The seller issued a credit memorandum for $5,000 prior to payment. What is the amount of the cash discount allowable?

Details of invoices for purchases of merchandise are as follows: Returns and Allowances Terms Transportation Merchandise \ 200 FOB shipping point, 1/10,/30 \ 25 a. \ 1,000 400 FOB destination, 1/30 -- b. 5,000 150 FOB shipping point, 2/10,/30 50 c.4,000 -- FOB destination, 1/10,1/30 -- d. 5,000 Determine the amount to be paid in full settlement of each of the invoices, assuming that credit for returns and allowances was received prior to payment and that all invoices were paid within the discount period. Also assume that the seller has prepaid the transportation expenses.

A criticism of the single-step income statement is that gross profit and income from operations are not readily available for analysis.

Under a perpetual inventory system,

A payment of dividends decreases which section on the statement of cash flows?

When the terms of sale are FOB shipping point, the buyer should pay the transportation charges.

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

A sales invoice included the following information: merchandise price, $4,500; transportation, $300; terms 1/10, n/eom, FOB shipping point. Assuming that a credit for merchandise returned of $600 is granted prior to payment, that the transportation is prepaid by the seller, and that the invoice is paid within the discount period, what is the amount of cash received by the seller?

Inventory shortage is recorded when:

What is subtracted from sales to arrive at net sales?

In credit terms of 1/10, n/30, the "1" represents the:

In credit terms of 1/10, n/30, the "10" represents the:

Multiple-step income statements show:

Net sales is equal to sales plus cost of merchandise sold.

Which of the following should be shown on a statement of cash flows under the financing activity section?

Which of the following would be subtracted from gross profit to determine operating income?

When merchandise is purchased to resell to customers, it is recorded in the account entitled: