Exam 5: Accounting for Merchandising Activities

The agreed cost of an item to be purchased by a business on credit is $4,000.The applicable cost will be debited to advertising expense.The item is subject to 5% goods and services tax (GST)and 7% provincial sales tax (PST).When this transaction is recorded,what amount will be recorded as GST Receivable?

Sales of $350,000 and net sales of $323,000 may reflect sales discounts of $27,000.

The agreed cost of an item to be purchased by a business on credit is $4,000.The applicable cost will be debited to advertising expense.The item is subject to 5% goods and services tax (GST)and 7% provincial sales tax (PST).When this transaction is recorded,what amount will be debited to advertising expense?

The purchaser usually records a purchase return by a credit memorandum.

Identify and explain the components of income for a merchandising company.

Sales Discounts,Sales Returns and Allowances,and Cost of Goods Sold are closed to Income Summary with debits.

Explain inventory shrinkage.

_______________ expenses support the overall operations of a company.

A credit to Income Summary of $231,000 and a debit to Income Summary of $216,250 results in profit of $14,750 transferred to Owner's Capital.

Z-Mart did not take advantage of a supplier's offer of 2/10,n/30,and paid the invoice at the end of the month.By not taking the discount Z-Mart lost the equivalent of 18% annual interest on the amount of the purchase.

When a single goods and services tax (GST)or Harmonized Sales Tax (HST)account is used,a credit balance in the account means that the government owes money to the business.

In a perpetual inventory system,the cost of inventory purchased is recorded in the Purchases account.

Accounts unique to merchandising companies include Merchandise Inventory,Sales,Sales Discounts,Sales Returns and Allowances,and Cost of Goods Sold.

Generally accepted accounting principles require companies to use a specific format for financial statements.

Sales returns:

Evenflow had the following sales transactions in January. Prepare journal entries to record these transactions.

Provincial sales tax (PST)is normally calculated on the original purchase price plus the goods and services tax (GST)or Harmonized Sales Tax (HST).

Wholesalers:

Describe the recording process for purchases of merchandise inventory using a perpetual inventory system.

Z-Mart had sales of $569,300.Gross profit was $239,106.What is the cost of goods sold?