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Exam 4: Accounting for Merchandising Operations

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Question 61

True/False

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A company had a gross profit of $300,000 based on sales of $400,000.Its cost of goods sold equals $700,000.

A) True
B) False

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Question 62

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A company records the following journal entry: debit Cash $1,470,debit Sales Discounts $30,and credit Accounts Receivable $1,500.This means that a customer has taken what percentage cash discount for early payment?

A) 1%
B) 2%
C) 5%
D) 10%
E) 15%

F) A) and C)
G) A) and B)

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Question 63

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A ________ income statement format shows net sales and reports subtotals for various types of items such as gross profit,income for operations,and net income.

The current period's ending inventory is:

A company purchased $1,800 of merchandise on July 5 with terms 2/10,n/30.On July 7,it returned $200 worth of merchandise -On July 28,it paid the full amount due.Assuming the company uses a perpetual inventory system,and records purchases using the gross method,the correct journal entry to record the merchandise return on July 7 is:

A merchandiser's classified balance sheet reports merchandise inventory as a current asset.

A buyer of $5,000 in merchandise inventory does not take advantage of a supplier's credit terms of 2/10,n/30,and instead pays the invoice in full at the end of 30 days.The buyer will pay $4,900.

Under the net method,when a company uses a perpetual inventory system,an invoice for $2,000 with terms of 2/10,n/30 should be recorded with a debit to Merchandise Inventory and a credit to Accounts Payable of $2,000.

Johnnycake Restaurant uses a periodic inventory system and the gross method of accounting for purchases.Prepare general journal entries to record the following transactions for Johnnycake:

Sales returns:

On September 12,Vander Company sold merchandise in the amount of $5,800 to Jepson Company,with credit terms of 2/10,n/30.The cost of the items sold is $4,000. -Vander uses the periodic inventory system and the gross method of accounting for sales.On September 14,Jepson returns some of the merchandise.The selling price of the merchandise is $500 and the cost of the merchandise returned is $350.Jepson pays the invoice on September 18,and takes the appropriate discount.The journal entry that Vander makes on September 18 is:

Non-operating activities that include interest expense,losses from asset disposals,and casualty losses are reported as ________.

Merchandise that customers return to the seller after a sale is referred to as________.

Sellers always offer a discount to buyers for prompt payment toward purchases made on credit.

On September 12,Ryan Company sold merchandise in the amount of $5,800 to Johnson Company,with credit terms of 2/10,n/30.The cost of the items sold is $4,000. -Ryan uses the periodic inventory system and the net method of accounting for sales.The journal entry or entries that Ryan will make on September 12 is (are) :

What is gross margin ratio? How is it used as an indicator of profitability?

A ________ buys products from manufacturers and sells to retailers.

Preston Office Furniture uses the periodic inventory system and the gross method of accounting for sales.It had the following transactions during the month of May: Prepare the required journal entries that Preston Office Furniture must make to record these transactions.

On March 12,Klein Company sold merchandise in the amount of $7,800 to Babson Company,with credit terms of 2/10,n/30.The cost of the items sold is $4,500.Klein uses the perpetual inventory system and the gross method of accounting for sales. -On March 15,Babson returns some of the merchandise.The selling price of the merchandise is $600 and the cost of the merchandise returned is $350.Babson pays the invoice on March 20,and takes the appropriate discount.The journal entry that Klein makes on March 20 is:

A company purchased $10,000 of merchandise on June 15 with terms of 3/10,n/45,and FOB shipping point.The freight charge,$500,was added to the invoice amount.On June 20,it returned $800 of that merchandise.On June 24,it paid the balance owed for the merchandise taking any discount it is entitled to.The cash paid on June 24 equals: