Exam 3: Accounting for Merchandising Businesses

What annual interest rate is implied by the credit terms,1/10,n/30?

Refer to the figure above.Based on common size income statements,which of the companies spent,relative to sales,the most on operating expenses?

Lynx Company purchased $4,000 of merchandise on account and sold the merchandise to a customer for $7,000 cash.What is Lynx's gross margin and the net change in cash flow from operating activities as a result of these transactions?

Items that are not expected to recur on a regular basis are subtracted from gross margin to determine the amount of net income.

If the buyer is to pay the transportation cost for receiving merchandise,how would the delivery terms be stated?

The cash inflow from the sale of a business asset other than inventory is reported in the operating activities section of the statement of cash flows.

The amount of Retained Earnings at December 31,2013 is:

The term "gain" represents profit resulting from transactions that are not likely to regularly recur.

On May 1,Houston Co.sold goods to a customer on account.On May 9,before payment had been received from the customer,the customer returned some of the goods.The returned goods cost Houston $1,000,and the customer had been charged $1,500.Show the effects of the return of goods on Houston's financial statements.

A common size income statement is prepared by dividing all amounts on the statement by net income.

Ransom Co.sold merchandise to a customer for $1,000 on account.Ransom's cost of the merchandise was $800.Show how the transaction would affect Ransom's financial statements.

Ruthven Company had the following transactions for 2012,the first year of operations: 1)Issued common stock for $50,000 cash. 2)Purchased merchandise on account,$40,000,terms 1/10,n/30. 3)Sold merchandise on account for $25,000.The inventory sold had cost $14,000. 4)Paid for the merchandise purchased within the discount period. 5)Collected $20,000 on the merchandise sold on account. 6)Paid operating expense of $5,000. Required: a)What are total assets at the end of 2012? b)What is the balance of the cash account at the end of 2012? c)What is gross margin for 2012? d)What is net income for 2012? e)What are total liabilities at the end of 2012? f)What is total equity at the end of 2012? g)What is total retained earnings at the end of 2012? h)What was the amount of cash flows from operating activities?

A discount given to encourage prompt payment on a credit purchase of merchandise is called:

The net income percentage indicates the amount of each sales dollar that is left over after covering the cost of goods sold.

The term "FOB destination" means

What was Baxter's Cost of Goods Available for Sale for the year 2012?

Youkilis Company discovered that a recent shipment of merchandise it had purchased was not of good quality.The seller agreed to grant Youkilis an allowance of $500.Youkilis had not yet paid the amount owed for the merchandise.Show how the transaction would affect Youkilis's financial statements.

Gross margin is equal to

Merrick Company began operations in 2012 by issuing common stock for $400 cash.During the year,Merrick Company purchased $800 of merchandise on account.It sold for $920 cash inventory that had cost $650.It paid off $500 on its account payable and also paid $180 cash for operating expenses. Required: a)Record the events in the statements model,below.Show amounts of increases and decreases.Indicate whether each cash flow is an operating activity,investing activity,or financing activity. b)Prepare the 2012 income statement for Merrick using a multistep format.

The gross margin for the year 2013 is: