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Exam 5: Accounting for Merchandising Operations

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Question 91

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Garth Company sold goods on account to Kyle Enterprises with terms of 2/10, n/30. The goods had a cost of $600 and a selling price of $1,100. Both Garth and Kyle use a perpetual inventory system. Record the sale on the books of Garth and the purchase on the books of Kyle.

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Question 92

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The respective normal account balances of Purchases, Purchase Discounts, and Freight-In are

A) credit, credit, debit.
B) debit, credit, credit.
C) debit, credit, debit.
D) debit, debit, debit.

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Question 93

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Under a perpetual inventory system, acquisition of merchandise for resale is debited to the

A credit sale of $4,000 is made on April 25, terms 2/10, n/30, on which a return of $250 is granted on April 28. What amount is received as payment in full on May 4?

Inventories are defined by IFRS as

Dawson's Fashions sold merchandise for $40,000 cash during the month of July. Returns that month totaled $1,000. If the company's gross profit rate is 40%, Dawson's will report monthly net sales revenue and cost of goods sold of

Newell Company completed the following transactions in October: Instructions (a) Indicate the cash received for each collection. Show your calculations. (b) Prepare the journal entry for the (1) Oct. 17 sale. The merchandise sold had a cost of $3,500. (2) Oct. 23 sales return. The merchandise returned had a cost of $140. (3) Oct. 28 collection. Newell uses a perpetual inventory system.

With respect to the income statement,

Freight terms of FOB Destination means that the seller pays the freight costs.

You are at a company picnic and the company president starts a conversation with you. The president says "Since we use the perpetual inventory system, there is no reason to take a physical count of our inventory." What is your response to the president's remarks?

Company X sells $900 of merchandise on account to Company Y with credit terms of 2/10, n/30. If Company Y remits a check taking advantage of the discount offered, what is the amount of Company Y's check?

Argentina Company gathered the following condensed data for the year ended December 31, 2018: Instructions 1. Prepare a single-step income statement for the year ended December 31, 2018. 2. Prepare a multiple-step income statement for the year ended December 31, 2018.

The entry to record the receipt of payment within the discount period on a sale of $2,000 with terms of 2/10, n/30 will include a credit to

During August, 2018, Baxter's Supply Store generated revenues of $60,000. The company's expenses were as follows: cost of goods sold of $36,000 and operating expenses of $4,000. The company also had rent revenue of $1,000 and a gain on the sale of a delivery truck of $2,000. Baxter's gross profit for August, 2018 is

Sales Returns and Allowances and Sales Discounts are both ______________ accounts and have _______________ normal balances.

Scott Company purchased merchandise with an invoice price of $3,000 and credit terms of 1/10, n/30. Assuming a 360 day year, what is the implied annual interest rate inherent in the credit terms?

Retailers and wholesalers are both considered merchandisers.

Three items are missing in each of the following columns and are identified by letter. $\begin{array}{lrr}\text { Sales revenue } & \$(a) & \$ 840,000 \\\text { Sales returns and allowances } & 15,000 & 22,000 \\\text { Sales discounts } & 10,000 & 15,000 \\\text { Net sales } & 440,000 & \text { (d) } \\\text { Beginning inventory } & \text { (b) } & 300,000\\\text { Cost of goods purchased } & 220,000 & \text { (e) } \\\text { Ending inventory } & 170,000 & 303,000 \\\text { Cost of goods sold } & 252,000 & 575,000 \\\text { Gross profit } & \text { (c) } & \text { (f) }\end{array}$ Instructions Calculate the missing amounts and identify them by letter.

Prepare the necessary journal entries to record the following transactions, assuming Eustace Company uses a perpetual inventory system. (a) Eustace sells $45,000 of merchandise, terms 1/10, n/30. The merchandise cost $30,000. (b) The customer in (a) returned $4,000 of merchandise to Eustace. The merchandise returned cost $2,400. (c) Eustace received the balance due within the discount period.

All of the following items would be reported as other expenses and losses except