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Exam 5: Accounting for Merchandising Businesses

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Question 91

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Using the perpetual inventory system, journalize the entries for the following selected transactions: a) Sold merchandise on account for $12,000, terms n/30. The cost of the merchandise sold was $6,500. b) Sold merchandise to customers who used MasterCard and VISA, $9,500. The cost of the merchandise sold was $5,300. c) Sold merchandise to customers who used American Express, $2,900. The cost of the merchandise sold was $1,700. d) Paid an invoice from First National Bank for $385, representing a service fee for processing MasterCard and VISA sales. e) Received $2,825 from American Express Company after a $75 collection fee had been deducted.

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a) Accounts Receivable 12,000
Sales 12,0...

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Question 92

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Using the following data taken from Hsu's Imports Inc. which uses a periodic inventory system, prepare the cost of merchandise sold section of the income statement for the year ended March 31. $\begin{array} { | l | l | } \hline \text { Merchandise inventory, April } 1 & \$ 193,250 \\\hline \text { Merchandise inventory, March } 31 & 180,100 \\\hline \text { Purchases } & 1,079,600 \\\hline \text { Purchases returns and allowances } & 51,200 \\\hline \text { Purchases discounts } & 18,500 \\\hline \text { Sales } & 1,860,000 \\\hline \text { Freight-in } & 19,250 \\\hline\end{array}$

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Question 93

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

When the terms of sale are FOB shipping point, the buyer pays the freight charges.

In retail businesses, inventory is reported as a current asset.

Match each of the following terms a-h) with the correct definition below. -Losses of inventory due to theft, damage, spoilage, etc. that cause the actual inventory on hand to be less than that on record.

Match each of the following items a-h) with the appropriate definition below. -Informs the seller of the reasons for the return of merchandise or the request for a price allowance.

A company using the periodic inventory system has merchandise inventory costing $210 on hand at the beginning of the period. During the period, merchandise costing $635 is purchased. At year-end, merchandise inventory costing $160 is on hand. The cost of merchandise sold for the year is

Under the perpetual inventory system, a company purchases merchandise on terms 2/10, n/30. The entry to record the purchase will include a debit to Cash and a credit to Sales.

Prepare a multiple-step income statement for Armstrong Co. from the following data for the year ended December 31. Sales, $755,000; cost of merchandise sold, $330,000; administrative expenses, $35,000; interest expense, $30,000; rent revenue, $25,000; selling expenses, $50,000.

A buyer who acquires merchandise under credit terms of 1/10, n/30 has 30 days after the invoice date to take advantage of the sales discount.

Jacob Co. sells merchandise on credit to Isaiah Co. in the amount of $9,700. The invoice is dated on May 1 with terms of 1/15, net 45. What is the amount of the discount and up to what date must the invoice be paid in order for the buyer to take advantage of the discount?

Under the periodic inventory system, the journal entry to record the cost of merchandise sold at the point of sale will include which of the following?

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.

Prepare a single-step income statement from the following data for Burt Co., taken from the ledger after adjustments on December 31, the end of the fiscal year. $\begin{array} { | l | r | } \hline \text { Accounts Payable } & \$ 97,200 \\\hline \text { Accounts Receivable } & 64,300 \\\hline \text { Accumulated Depreciation-Office Equipment } & 72,750 \\\hline \text { Accumulated Depreciation-Store Equipment } & 162,100 \\\hline \text { Administrative Expenses } & 56,500 \\\hline \text { Common Stock } & 81,750 \\\hline \text { Cash } & 53,000 \\\hline \text { Cost of Merchandise Sold } & 121,700 \\\hline \text { Dividends } & 52,000 \\\hline \text { Interest Expense } & 12,000 \\\hline \text { Merchandise Inventory } & 93,250 \\\hline \text { Note Payable, Due in two years } & 154,000 \\\hline \text { Office Equipment } & 149,750 \\\hline \text { Prepaid Insurance } & 6,500 \\\hline \text { Rent Revenue } & 17,500 \\\hline \text { Salaries Payable } & 28,700 \\\hline \text { Sales } & 365,500 \\\hline \text { Selling Expenses } & 41,500 \\\hline \text { Store Equipment } & 325,000 \\\hline \text { Supplies } & 4,000 \\\hline\end{array}$

Selected accounts and amounts appear below. Journalize the closing entry, assuming a perpetual inventory system. Merchandise Inventory $ 45,500 Cost of Merchandise Sold 652,500

In a periodic inventory system, the cost of merchandise purchased includes the cost of freight-in.

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

Who is responsible for the freight cost when the terms are FOB destination?

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