Exam 6: Merchandising Activities

If a company records a purchase at net cost and then fails to take advantage of the discount,the discount not taken is recorded in the Interest Expense account.

At the beginning of 2018,Wilson Stores has an inventory of $300,000.Because sales growth was strong during 2018,the owner wants to increase inventory on hand to $450,000 at December 31,2018.If net sales for 2018 are expected to be $2,600,000,and the gross profit rate is expected to be 35%,compute the cost of the merchandise the owner should expect to purchase during 2018.

In a periodic inventory system,the cost of goods sold is determined by the following end-of-period computation: Beginning Inventory + Purchases - Ending inventory = Cost of Goods Sold.

The operating cycle of a merchandising company consists of (1)purchases of merchandise; (2)sales of the merchandise;and (3)collection of accounts receivable.

Which of the following companies would be most likely to use a periodic inventory system?

Accounting terminology Listed below are nine technical accounting terms introduced in this chapter: Gross profit Gross profit rate General ledger Cost of goods sold Physical inventory Subsidiary ledger Perpetual inventory system Periodic inventory system Inventory shrinkage Each of the following statements may (or may not)describe one of these technical terms.In the space provided below each statement,indicate the accounting term described,or answer "None" if the statement does not correctly describe any of the terms. ________ a.An approach to accounting for inventories and the cost of goods sold used primarily in small businesses with manual accounting systems. ________ b.A reason why perpetual inventory records may not be entirely accurate. ________ c.The difference between the revenue earned by selling merchandise and the cost of goods sold. ________ d.Gross profit divided by average total stockholders' equity. ________ e.An accounting procedure used in both perpetual and periodic inventory systems.In a perpetual system,this procedure brings to light the amount of inventory shrinkage.In a periodic system,it is the basis for computing the cost of goods sold. ________ f.An accounting record showing the individual items comprising the balance of a general ledger account. ________ g.The accounting record in which transactions initially are recorded.

Which of the following should not be classified as inventory in the balance sheet of a large automobile dealership?

Parkside Pool reports net sales of $625,000,gross profit of $275,000,and net income of $15,000.The company's cost of goods sold is:

In a periodic inventory system,which of the following accounts may be closed by debiting Cost of Goods Sold?

Inventory systems Indicate whether you would expect each of the following businesses to maintain a perpetual or a periodic inventory system.Explain the reasoning behind your answers: (a)A jewelry store. (b)A roadside vegetable stand.

The Cost of Goods Sold account is closed by:

The basic purpose of offering customers cash discounts such as 2/10,n/30 is to:

Which account listed below is classified as a contra-revenue account?

Prepare journals entries for the following,assuming the company uses a perpetual inventory method and records purchases at their net amounts.

[The following information applies to the questions displayed below.] Washington Warehouse is a small retail business that specializes in the sale of top-of-the-line televisions.This year,the store has begun to carry the Flat TV manufactured by Bass Co.Thus far,Washington has recorded the following transactions involving the Flat TV: -If Washington uses a perpetual inventory system,the gross profit on the Flat TVs as of February 12th is:

If a transaction takes place with terms 2/10,n/30,the "10" refers to the percent discount a purchaser can take if payment is made within 2 days.

Perpetual inventory system: basic entries Renato Company uses a perpetual inventory system.A partial chart of accounts is shown below,followed by a series of merchandising transactions.Indicate the accounts that should be debited and credited in recording each transaction.(Ignore sales taxes. )

General ledgers contain information about specific control accounts in the company's subsidiary ledger.

The purchasing agent of Superb Service Co.wants to know the dollar amount of inventory purchased on account during the year from a particular supplier.This information can be found most easily in Superb Service's:

Cumberland,Inc.has applied to its bank for a loan.The bank asks Cumberland's controller about the total amount of the company's accounts receivable.Assuming that all accounting records are up-to-date,the controller can best answer this question by referring to: