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Exam 5: Accounting for Merchandising Businesses

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Question 111

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Dollar Co. sold merchandise to Pound Co. on account, $25,500, terms 2/15, net 45. The Pound Co. paid the invoice within the discount period. What is the sales amount to be recorded in the above transactions?

A) $25,500
B) $26,010
C) $24,990
D) $16,000

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Question 112

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Match each of the following items a-h) with the appropriate definition below. -The cost associated with delivery of merchandise to the customer.

A) Freight
B) Delivery Expense
C) Merchandise Inventory
D) Sales discount
E) Purchases Returns and Allowances
F) Debit memo
G) Purchases discount
H) Trade discount

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Question 113

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If the physical count of the inventory revealed $158,000 of merchandise on hand and the inventory records reported $163,000, what would be the necessary adjusting entry to record inventory shrinkage?

During the current year, merchandise is sold for $137,500 cash and $425,600 on account. The cost of the merchandise sold is $322,325. What is the amount of the gross profit?

Using the list of accounts below, construct a chart of accounts for a merchandising business that rents out a portion of its building, and assign account numbers and arranging the accounts in balance sheet and income statement order "1" for assets, and so on). Each account number should have three digits. Contra accounts should be designated with a decimal of the account 100.1 for contra of account 100). Assets and liabilities should be in order of liquidity, expenses should be in alphabetical order.

Service businesses provide services for income, while a merchandising business sells merchandise.

Cost of merchandise sold is often the largest expense on a merchandising company income statement.

Sales to customers who use bank credit cards, such as MasterCard and VISA, are generally treated as credit sales.

Abbey Co. sold merchandise to Gomez Co. on account, $35,000, terms 2/15, net 45. The cost of the merchandise sold is $24,500. Abbey Co. issued a credit memo for $3,600 for merchandise returned that originally cost $1,700. Gomez Co. paid the invoice within the discount period. What is the amount of gross profit earned by Abbey Co. on the above transactions?

Expenses that are incurred directly or entirely in connection with the sale of merchandise are classified as

To encourage a buyer to pay before the end of the credit period, the seller may offer a

Which account is not classified as a selling expense?

Buyers and sellers do not normally record the list prices of merchandise and the trade discounts in accounts.

In a perpetual inventory system, when merchandise is returned to the supplier, Cost of Merchandise Sold is debited as part of the transaction.

The fees associated with credit card sales are periodically recorded as expenses.

Match each of the following items a-h) with the appropriate definition below. -Early payment discount offered to customers by the seller.

The Corbit Corp. sold merchandise for $10,000 cash. The cost of the merchandise sold was $7,590. The journal entries to record this transaction under the perpetual inventory system would be

Selected data from the ledger of Beck Co., after adjustments, on September 30, the end of the fiscal year, are listed as follows: $\begin{array} { l l l l } \text { Accounts Receivable } & \$ 39,120 & \text { Prepaid Insurance } & \$ 4,680 \\\text { Accumulated Depreciati on } & 60,540 & \text { Note Payable } & 77,750 \\\text { Administrative Expenses } & 90,000 & \text { Retained Earnings } & 25,000 \\\text { Common Stock } & 65,000 & \text { Salaries Payable } & 3,060 \\\text { Cost of Merchandise Sold } & 550,000 & \text { Sales } & 950,000 \\\text { Dividends } & 65,000 & \text { Selling Expenses } & 102,000 \\\text { Interest Revenue } & 10,000 & \text { Supplies } & 3,125 \\\text { Office Equipment } & 82,700 & &\end{array}$ Prepare a single-step income statement and a statement of retained earnings.

Match each of the following items a-h) with the appropriate definition below. -Discount taken by the buyer for early payment of invoice.

Conquest Company uses a perpetual inventory system. Conquest purchased $1,500 of merchandise on account and payment was made within the discount period. The credit terms were 2/10, n/30. Journalize Conquest's purchase and payment.