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Exam 6: Accounting for Merchandising Businesses

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Question 111

Multiple Choice

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Merchandise is sold for cash.The selling price of the merchandise is $6,000 and the sale is subject to a 7% state sales tax.The journal entry to record the sale would include a credit to

A) Cash for $6,000
B) Sales for $6,240
C) Sales Tax Payable for $420
D) Sales for $5,580

E) B) and D)
F) B) and C)

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Question 112

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If merchandise costing $3,500,terms FOB destination,2/10,n/30,with prepaid freight costs of $125,is paid within 10 days,the amount of the purchases discount is $70.

A) True
B) False

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Question 113

Multiple Choice

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The primary difference between a periodic and perpetual inventory system is that a

What is the term applied to the excess of revenue from sales over the cost of merchandise sold?

The proper journal entry to record the receipt of inventory purchased on account in a periodic inventory system would be

The accounts Purchases,Purchases Returns and Allowances,Purchases Discounts,and Freight In are found on the balance sheet.

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

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

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 merchandise inventory account?

Matching Match each of the following items (a-h) with the appropriate definition below. -Account used to record merchandise on hand under a perpetual inventory system.

Which of the following items should not be included in the cost of ending merchandise inventory?

Merchandise is sold for $3,600,terms FOB destination,2/10,n/30,with prepaid freight costs of $150.The amount of the sales recorded is $3,528.

Journalize the following transactions for Armour Inc.using both the periodic inventory system and the perpetual inventory system,presented in the side-by-side format of the form provided below.Oct.7 Sold merchandise on credit to Rondo Distributors,terms n/30.The cost of the merchandise was $720.8 Purchased merchandise,$10,000,terms FOB shipping point,2/15,n/30,with prepaid freight charges of $525 added to the invoice.​

Complete the following data taken from the condensed income statements for merchandising Companies A,B,and C.

For each of the following,calculate the cost of inventory reported on the balance sheet.

Closing entries for a merchandising business are not similar to those for a service business.

When a buyer returns merchandise purchased for cash,the buyer will record the transaction as a

Calculate the gross profit for Jefferson Company based on the following:

Abbey Co.sold merchandise to Gomez Co.on account,$35,000,terms 2/15,net 45.The cost of the merchandise sold was $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?

When companies use a perpetual inventory system,the recording of the purchase of inventory will include a debit to Purchases.