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Exam 5: Accounting for Merchandising Businesses

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Question 101

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On March 15th Monroe Sales sells $9,525.00 on account to Garrison Brewer with terms of 2/10, n/30. The cost of merchandise sold was $6,905.00. (a) Journalize the sale and the recognition of the cost of the sale. (b) On March 20th, a $125.00 credit memo is given to Garrison Brewer due to merchandise that was the wrong color. Journalize this event. The cost of the returned merchandise was $65. (c) On March 25th, Garrison Brewer submits payment in full. Journalize this event.

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Question 102

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There is no difference between the recording of cash sales and the recording of MasterCard or VISA sales.

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Question 103

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Where are selling and administrative expenses found on the multiple-step income statement?

Purchased goods in transit, shipped FOB destination, should be excluded from ending inventory of the buyer.

If the ownership of merchandise passes to the buyer when the seller delivers the merchandise for shipment, the terms are stated as FOB destination.

Which of the following costs would be included in merchandise inventory?

Determine the amount to be paid in full settlement of each invoice, assuming that credit for returns and allowances was received prior to payment and that all invoices were paid within the discount period.

When a large quantity of merchandise is purchased, a reduction allowed on the sale price is called a trade discount.

A seller may grant a buyer a reduction in selling price and this is called a sales allowance.

Journalize the following merchandise transactions:

Using the following data taken from Hsu's Imports Inc., prepare the cost of merchandise sold section of the income statement for the year ended March 31, 2011.

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

A company using the periodic inventory system has the following account balances: Merchandise 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

Merchandise is sold for $3,600, terms FOB destination, 2/10, n/30, with prepaid freight costs of $150. If $500 of the merchandise is returned prior to payment and the invoice is paid within the discount period, the amount of the sales discount is $65.

Selected data from the ledger of Morrison Co. after adjustment at September 30, 2011, the end of the fiscal year, are as follows: Prepare an income statement, using the single-step form, and a retained earnings statement.

Using a perpetual inventory system, the entry to record the return from a customer of merchandise sold on account includes a

Dorman Co. sold merchandise to Smith Co. on account, $18,000, terms 2/15, net 45. The cost of the merchandise sold is $15,500. Dorman Co. issued a credit memo for $1,750 for merchandise returned that originally cost $1,400. The Smith Co. paid the invoice within the discount period. What is amount of net sales from the above transactions?

Sales Returns and Allowances is a contra-revenue account.

On March 29th, customers who owe $10,500.00 for purchases made on Sonic Sales Company credit cards submit payments of $4,250.00. Journalize this event.

A chart of accounts for a merchandising business