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Exam 5: Accounting for Merchandising Businesses

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Question 1

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The journal entry to record the receipt of inventory purchased for cash in a perpetual inventory system would be

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Question 2

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Under the periodic inventory system, the cost of merchandise sold is equal to the beginning merchandise inventory plus the cost of merchandise purchased plus the ending merchandise inventory.

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Question 3

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When the three sections of a balance sheet are presented on a page in a downward sequence, it is called the

The seller records the sales tax as part of the sales amount.

The primary difference between the periodic and perpetual inventory systems is that a

A retailer purchases merchandise with a catalog list price of $30,000. The retailer receives a 15% trade discount and credit terms of 2/10, n/30. How much cash will be needed to pay this invoice within the discount period?

When a merchandising business is compared to a service business, the financial statement that is not affected by that change is the retained earnings statement.

Based upon the following data for a business with a periodic inventory system, determine the cost of merchandise sold for August. $\begin{array}{ll}\text { Merchandise inventory, August } 1 & \$ 75,560 \\\text { Merchandise inventory, August } 31 & 96,330 \\\text { Purchases } & 373,880 \\\text { Purchases returns \& allowances } & 14,760 \\\text { Purchases discounts } & 10,900 \\\text { Freight-in } & 4,135\end{array}$

Other income and expenses are items that are not related to the primary operating activity.

The retained earnings statement shows

On March 25, Osgood Company sold merchandise on account, $10,000, terms n/30. The applicable sales tax percentage is 7.5%. Record the transaction. Journal $\begin{array} { | c | c | c | c | c | } \hline \text { Date } & \text { Description } & \begin{array} { c } \text { Post. } \\\text { Ref. }\end{array} & \text { Debit } & \text { Credit } \\\hline & & & & \\\hline & & & & \\\hline & & & & \\\hline\end{array}$

Purchases of merchandise are typically credited to the merchandise inventory account under the perpetual inventory system.

Using a perpetual inventory system, the entry to record the purchase of $30,000 of merchandise on account would include a

Merchandise is ordered on November 10; the merchandise is shipped by the seller and the invoice is prepared, dated, and mailed by the seller on November 13; the merchandise is received by the buyer on November 18; the entry is made in the buyer's accounts on November 20. The credit period begins with what date?

What is the major difference between a periodic and perpetual inventory system?

When goods are shipped FOB destination and the seller pays the freight charges, the buyer

Purchased goods in transit should be included in the ending inventory of the buyer if the goods were shipped FOB shipping point.

Match each of the following items a-h) with the appropriate definition below. -Discount to government agencies or customers who purchase large quantities of merchandise.

Journalize the following merchandise transactions: a) Sold merchandise on account, $17,300, with terms 2/10, net 30. The cost of the merchandise sold was $12,600. b) Received payment within the discount period.

Calculate the gross profit for Jefferson Company based on the following: $\begin{array} { | l | r | } \hline \text { Sales } & \$ 764,000 \\\hline \text { Selling Expenses } & 42,500 \\\hline \text { Cost of Merchandise Sold } & 538,000 \\\hline\end{array}$