Exam 5: Accounting for Merchandising Businesses

Retailers record all credit card sales as credit sales.

Cost of Merchandise Sold is often the largest expense on a merchandising company income statement.

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.

If merchandise costing $3,500, terms FOB destination, 2/10, n/30, with prepaid freight costs of $125, is paid within 10 days, the amount of the purchases discount is $70.

What is the normal balance of the following accounts? a. Sales Tax Payable b. Merchandise Inventory c. Delivery Expense d. Cost of Merchandise Sold e. Sales Returns and Allowance f. Sales Discounts g. Sales

If title to merchandise purchases passes to the buyer when the goods are delivered to the buyer, the terms are

The abbreviation FOB stands for Free On Board.

Which of the following accounts has a normal credit balance?

Inventory shortage is recorded when

Complete the following data taken from the condensed income statements for merchandising Companies X, Y, & Z.

Which of the following accounts will not be found on the Cost of Merchandise Sold section on the Income Statement?

Title to merchandise shipped FOB shipping point passes to the buyer upon delivery of the merchandise to the buyer's place of business.

Using the letter preceding each account, arrange the following selected accounts in the order they would normally appear in a chart of accounts of a company that uses a multiple-step income statement.

On the income statement in the single-step form, the total of all expenses is deducted from the total of all revenues.

If the perpetual inventory system is used, an account entitled Cost of Merchandise Sold is included in the general ledger.

Merchandise inventory is classified on the balance sheet as a

When goods are shipped FOB destination and the seller pays the freight charges, the buyer

Using a perpetual inventory system, the entry to record the purchase of $30,000 of merchandise on account would include a

A retailer purchases merchandise with a catalog list price of $15,000. The retailer receives a 15% trade discount and credit terms of 2/10, n/30. How much cash will be needed to pay this invoice within the discount period?

Under the perpetual inventory system, a company purchases merchandise on terms 2/10, n/30. If payment is made within 10 days of the purchase, the entry to record the payment will include a credit to Cash and a credit to Purchase Discounts.