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Exam 4: Accounting for Merchandising Businesses

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Question 21

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Outdoor World experienced the following business events during its first year of operation.The company uses a perpetual inventory system.1)Purchased merchandise on account for $170,000.2)Sold inventory costing $124,000 for $208,000 on account.3)Paid transportation-out cost of $7,000 on goods sold.4)Paid operating expenses of $55,200.5)Sold land for $45,400 that had cost $50,000.6)A count of the inventory revealed that there was $45,800 of inventory on hand at the end of Year 1.Required:What was Outdoor World's net income for Year 1?What was the gross margin and the gross margin percent for Year 1?What amount of inventory will be reported on the balance sheet for December 31, Year 1?Prepare a multistep income statement for Year 1.

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a)Inventory shrinkage = $170,000 − $124,...

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Question 22

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During the current year, Gomez Company had beginning inventory of $2,400 and ending inventory of $1,200. The cost of goods sold was $9,600. What is the amount of inventory purchased during the year?

A) $8,400
B) $9,600
C) $10,800
D) $13,200

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Question 23

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Which of the following would not be considered as primarily a merchandising business?

Which of the following account titles is normally used in a periodic inventory system?

When are product costs matched directly with sales revenue?

Edgar Corporation purchased merchandise inventory for $4,000 cash. This transaction is

Suppose that merchandise is sold on account. The buyer has not yet paid the invoice because the buyer is dissatisfied with the quality of the merchandise. The seller grants an allowance to the buyer who then agrees to keep goods instead of returning them. What is the effect of granting the allowance on the financial statements of:a)The seller?b)The buyer?

A company that purchases merchandise treats a cash discount as a reduction to the cost of merchandise inventory.

Kenyon Company experienced a transaction that had the following effect on the financial statements: Which of the following business events would result in this effect on the financial statements?

Give three examples of a period cost. At what time are period costs recognized as expenses?

Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter dollar amounts. If an event increases one account and decreases another account equally within the same element (such as an asset exchange event), record I/D. If an event has no impact on the element, record NA.Increase = I Decrease = D Not Affected = NAWetzel Company returned some defective merchandise it had previously purchased on account from a supplier, Jacobs Company. Jacobs Company agreed to credit Wetzel's account.

Which of the following is considered a period cost?

On April 1, Snell Company sold on account merchandise with a list price of $50,000. Payment terms were 3/10/n30. The receivable was collected from the customer on April 8. Considering only the collection of cash from the receivable, what effect will the transaction have on the company's statements?

What type of financial statement matches sales revenue items with related expense items and distinguishes between recurring operating items and nonoperating items such as gains and losses?

What do the credit terms, 2/15, n/30 mean?

James Company experienced the following events during its first accounting period:(1) Purchased $10,000 of inventory on account under terms 1/10 n/30.(2) Returned $2,000 of the inventory purchased in Event 1.(3) Paid the remaining balance in account payable for the inventory purchased in Event 1.Based on this information, which of the following shows how paying off the account payable (Event 3) will affect the Company's financial statements?

The financial statements of Tin Company included the following: Based on the information provided, what was the company's cost of goods sold?

The term FOB shipping point indicates that the seller is responsible forfreight costs.

Aaron Company uses the periodic inventory system. If Aaron's ending inventory is understated due to an accounting error, what is the effect on net income and the ending balance of retained earnings?

The following are the income statements of the Hancock Company for two consecutive years. Increases in which of the expenses contributed to the net loss in Year 2?