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Exam 5: Accounting for Retail Businesses

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Question 51

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

A) debit to Accounts Payable
B) debit to Inventory
C) credit to Inventory
D) credit to Sales

E) A) and C)
F) A) and B)

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Question 52

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Sellers and buyers are required to record trade discounts.

A) True
B) False

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Question 53

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In a perpetual inventory system, the Inventory account is only used to reflect the beginning inventory.

For each of the following, calculate the cost of inventory reported on the balance sheet.(a)The total inventory on hand at the end of the year as determined by taking a physical inventory is $62,000. Of the $62,000, $8,000 has been sold FOB destination and is awaiting pickup by the carrier.(b)The total inventory counted at the end of the year was $63,000. Excluded from the count were purchases of $6,000 in transit under FOB shipping point terms.(c)The total inventory counted at the end of the year was $75,000. Excluded from the count were purchases of $5,000 in transit under FOB destination terms.

Title to merchandise shipped FOB shipping point passes to the buyer upon delivery of the merchandise to the buyer's place of business.

Record the following transactions for Oyster Corp. using the general journal form provided below. Assume Oyster Corp. uses the gross method of recording sales discounts. Omit transaction descriptions from the entries.​

Other revenue and expenses are items that are not related to the primary operating activity.

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 $1,200 of merchandise on credit to Rondo Distributors, terms n/30; the cost of the merchandise was $720.Oct. 8 Purchased merchandise, $10,000; terms FOB shipping point and 2/15, n/30; with prepaid freight charges of $525 added to the invoice.

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

Service businesses provide services for income, while a merchandising business sells merchandise.

The following entry was recorded in the books of Brighty Company.Mar. 31 Cost of Goods Sold 18,000 Inventory 18,000 Recorded cost of goods sold.​ What is the impact of this entry on the accounting equation?

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.

The following data for the current year ended June 30 are from the accounting records of Zanadu Co.: Prepare a multiple-step income statement for the year ended June 30.

Inventory normally has a debit balance.

If the seller is to pay the freight costs of delivering merchandise, the delivery terms are stated as

During the current year, merchandise is sold for $117,500 cash and $241,750 on account. The cost of the goods sold is $157,400. What is the amount of the gross profit?

Journalize the following transactions assuming a perpetual inventory system: May 5 Purchased merchandise from Archie Co., $6,000, terms FOB shipping point, 2/10, n/30.Prepaid freight costs of $100 were added to the invoice.12 Issued a debit memo to Archie Co. for $2,500 of merchandise returned from purchase on May 5.14 Paid Archie Co. for invoice of May 5, less debit memo of May 12.

Journalize the following transactions assuming the perpetual inventory system: July 3 Sold merchandise on account for $3,750 terms n/eom. The cost of the goods sold was $2,000.5 Issued credit memo for $1,050 for merchandise returned from sale on July 3.The cost of the merchandise returned was $610.12 Received check for the amount due for sale on July 3 less return on July 5.17 Sold merchandise for $7,000 plus 6% sales tax to cash customers. The cost of the goods sold was $3,830.​

The asset turnover ratio measures how effectively a business is using its assets to generate sales.

Madison Company's perpetual inventory records indicate that $875,300 of merchandise should be on hand on October 31. The physical inventory indicates that $781,900 is actually on hand. Journalize the adjusting entry for the inventory shrinkage for Madison Company for the year ended October 31.