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Exam 5: Accounting for Retail Businesses

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Question 31

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The abbreviation FOB stands for "free on board."

A) True
B) False

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Question 32

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Details of invoices for purchases of merchandise are as follows: ​ Determine the amount to be paid in full settlement of each of the invoices, assuming that credit for returns and allowances was received prior to payment and that all invoices were paid within the discount period.

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Question 33

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During the current year, merchandise is sold for $147,500 cash and $381,750 on account. The cost of the goods sold is $242,000. What is the amount of the gross profit?

What is the normal balance of the following accounts? a. Sales Tax Payable b. Inventory c. Delivery Expense d. Cost of Goods Sold e. Customer Refunds Payable f. Estimated Returns Inventory g. Sales

When the seller offers a sales discount, even if borrowing has to be done, it is generally advantageous for the buyer to pay within the discount period.

Freight-in is considered a cost of purchasing inventory.

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

If the buyer is to pay the freight costs of delivering merchandise, delivery terms are stated as

When merchandise purchased on account is returned under the perpetual inventory system, the buyer would debit

Match each of the following terms (a-h) with the correct definition below. -Statement that includes subtotals for sales, gross profit, and income from operations in determining net income.

Using a perpetual inventory system, the entry to record the sale of merchandise on account includes a

Which of the following items would not affect the cost of inventory purchased during the period?

Income that cannot be associated definitely with operations, such as a gain from the sale of a fixed asset, is listed as Other Revenue on the multiple-step income statement.

Merchandise with a list price of $4,700 is purchased on account, terms FOB shipping point, 1/10, n/30. The seller prepaid freight costs of $100. Prior to payment, $1,600 of the merchandise is returned. The invoice is paid within the discount period. Record the foregoing transactions of the buyer in the sequence indicated below, assuming a perpetual inventory system is used. (a) Purchased the merchandise. (b) Recorded receipt of the credit memo for merchandise returned. (c) Paid the amount owed.

Norfolk Sporting Goods purchases merchandise with a catalog list price of $30,000. The retailer receives a 30% trade discount and credit terms of 2/10, n/30. What amount should Norfolk debit to the Inventory account?

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

A seller may grant a buyer a reduction in selling price and this is called a customer discount.

On the income statement in the single-step form, the total of all expenses is deducted from the total of all revenues.

In a perpetual inventory system, the Inventory account is only used to reflect the beginning inventory.

A company using the periodic inventory system has the following account balances: Inventory at the beginning of the year, $3,600; Freight In, $650; Purchases, $10,700; Purchases Returns and Allowances, $1,950; Purchases Discounts, $330. The cost of merchandise purchased is equal to