Exam 5: Accounting for Merchandising Operations

A company purchased $10,000 of merchandise on June 15 with terms of 3/10, n/45. On June 20, it returned $800 of that merchandise. On June 24, it paid the balance owed for the merchandise taking any discount it is entitled to. The cash paid on June 24 equals:

Under a periodic inventory system, purchases, purchases returns and allowances, purchase discounts, and transportation in transactions are recorded in separate temporary accounts

Operating expenses are classified into two categories: selling expenses and cost of goods sold.

A credit memorandum from a seller informs a buyer of the seller's credit to its Accounts Payable account arising from a sales return or allowance.

Steve's Skateboards uses the periodic inventory system and had the following sales transactions during April: Prepare the journal entries that Steve's Skateboards must make to record these transactions.

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

The current period's ending inventory is:

Nichole Company had net sales of $500,000 and cost of goods sold of $350,000. Calculate Nichole's gross profit.

Purchase allowances refer to merchandise a buyer acquires but then returns to the seller.

The amounts and timing of payment from a buyer to a seller are the ___________________.

A company had sales of $695,000 and cost of goods sold of $278,000. Its gross margin equals:

A company has net sales and cost of goods sold of $752,000 and $543,000, respectively. Its net income is $17,530. The company's gross margin and total other expenses are ________ and ___________, respectively.

A merchandising company's ___________ begins with the purchase of merchandise and ends with the collection of cash from merchandise sales.

Describe the difference between wholesalers and retailers.

A company reported the following information for the month of November: Required: Calculate this company's gross margin ratio.

A company's current assets are $23,420, its quick assets were $13,890 and its current liabilities were $12,220. Its acid-test ratio equals:

Brig Company had $800,000 in sales, sales discounts of $12,000, sales returns and allowances of $18,000, cost of goods sold of $380,000, and $275,000 in total other expenses. Gross profit equals:

FOB _________________ means the buyer accepts ownership when the goods depart the seller's place of business. The buyer is responsible for paying shipping costs and bears the risk of damage or loss when goods are in transit.

Delivery expense is reported as part of general and administrative expense in the seller's income statement.

Brig Company had $800,000 in sales, sales discounts of $12,000, sales returns and allowances of $18,000, cost of goods sold of $380,000, and $275,000 in total other expenses. Net income equals: