Exam 3: Accounting for Merchandising Businesses

Detroit Company is a merchandising business that started its operations in 2012.During the year,Detroit reported sales of $450,000; inventory purchases of $310,000; and an inventory balance of $50,000 at the end of the year. Required: a.What was Detroit's cost of goods available for sale for 2012? b.What was the cost of goods sold? c.Calculate the amount of Detroit's gross margin for 2012 and the gross margin percentage.

Net income percentage is equal to

Merchandising businesses

Ransom Co.purchased $10,000 of merchandise inventory on account from a supplier.Show how the transaction would affect Ransom's financial statements.

Barney Company uses the perpetual inventory system.The company purchased $4,000 of merchandise from Bittiker Company under the terms n/30.Barney also paid $150 freight to obtain the goods under terms FOB shipping point.All of the merchandise purchased was sold for $9,000 cash.The amount of gross margin for this merchandise is:

The chief advantage of the periodic inventory system,compared to a perpetual system,is

Longoria Company purchased merchandise inventory on account with a list price of $5,000 and credit terms of 1/10,n/30.What was the net or cash cost for the merchandise?

The following data are from the income statement of Rathbun Company: The company's gross margin percentage is:

Royal Company uses the periodic inventory method.The following balances were drawn from the accounts of Royal Company prior to the closing process: The amount of gross margin appearing on the income statement should be:

Houston Co.paid a supplier the amount owed on account for a purchase of merchandise.The terms on the purchase had been n/30.Show how the transaction would affect Houston's financial statements.

What was Baxter's Cost of Goods Sold for 2012?

Under a periodic system,shipping costs paid for goods received from a supplier increases the amount of

Explain the computation of and the meaning of each of the following: a.Gross margin percentage b.Net income percentage (also known as return on sales)

On a multistep income statement,gains and losses are included in the calculation of operating income.

The credit terms,2/10,n/30 indicate that a:

The following are the income statements of the Franz Company for two consecutive years.Which expense(s)increased substantially as a percentage of sales and thus contributed to the net loss in 2012?

A loss results from a transaction that is likely to recur whereas an expense results from a transaction that is unlikely to recur.

A multistep income statement shows Sales,Cost of Goods Sold,and Gross Margin.

For a company that uses a perpetual inventory system,a physical count of the inventory can reveal the amount of inventory shrinkage the company has experienced.

Gain on Sale of Land is reported in the operating activities section of the statement of cash flows.