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Exam 4: Accounting for Merchandising Businesses

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Question 81

True/False

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Gains and losses are recorded for increases and decreases in the market value of assets such as land.

A) True
B) False

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Question 82

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Analyze the following T-account in the ledger of Gibbs Company. If $5,000 in the Inventory account represents merchandise purchased from a supplier,we can assume the company uses the

A) perpetual inventory method and $400 may represent a purchase return.
B) perpetual inventory method and $400 may represent cost of goods sold.
C) perpetual inventory method and $400 may represent a purchase allowance.
D) All of these answer choices are correct.

E) None of the above
F) C) and D)

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Question 83

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Common size financial statements are prepared by converting dollar amounts to percentages.

Use the following for questions Use the following account numbers and corresponding account titles to answer the next three questions. 55.Which accounts would appear on the income statement? A.Account numbers 3,4,7,8,and 9. B.Account numbers 3,4,5,7,and 9. C.Account numbers 2,3,7,8,and 9. D.Account numbers 3,5,7,and 8. Answer: A Learning Objective: 04-01 Topic Area: Ledger accounts and financial statements AACSB: Reflective thinking AICPA: BB Critical thinking AICPA: FN Measurement Blooms: Understand Level of Difficulty: 1 Easy Feedback: Cost of goods sold,transportation-out,selling expense,loss on the sale of land,and sales will all appear on the income statement. -Which accounts would affect operating income?

The following events pertain to the Boardwalk Beach Shop for July 2016,its first month of operation.The company uses the periodic inventory system. 1)July 2 Issued $29,000 of common stock for cash. 2)July 3 Purchased $7,500 of merchandise on account with terms 2/10,n/30,FOB shipping point. 3)July 3 Paid $300 cash for shipping charges on the July 3 purchase. 4)July 4 Returned $1,500 of the merchandise purchased on Feb.3. 5)July 5 Sold merchandise that cost $2,000 for $3,500 cash. 6)July 10 Recorded the discount and paid the amount due from the purchase of merchandise on July 3. 7)July 14 Purchased additional merchandise for $4,600 on account with terms 2/10,n/30,FOB destination. Required: Record the above transactions in general journal form.

With a periodic inventory system,the cost of goods sold is recorded at the time of a sale of merchandise.

Give an example of a product cost.At what time are product costs recognized as expenses? What is the name of the expense account?

Costs of selling inventory are product costs.

A company using the perpetual inventory method paid $250 cash to have goods delivered from one of its suppliers.The payment of $250 for transportation-in is considered:

The Garrett Company uses the perpetual inventory system.Although its inventory records indicated $18,000 in the inventory,a physical count showed only $16,250.Which of the following answers indicates the effect of the necessary write-down entry?

A perpetual inventory system updates the Merchandise Inventory account for all purchases of inventory,as well as returns of inventory to suppliers.

Vargas Company sold a piece of land for $39,000 that had originally cost $32,500.This event would

Use the following for questions Use the following account numbers and corresponding account titles to answer the next three questions. 55.Which accounts would appear on the income statement? A.Account numbers 3,4,7,8,and 9. B.Account numbers 3,4,5,7,and 9. C.Account numbers 2,3,7,8,and 9. D.Account numbers 3,5,7,and 8. Answer: A Learning Objective: 04-01 Topic Area: Ledger accounts and financial statements AACSB: Reflective thinking AICPA: BB Critical thinking AICPA: FN Measurement Blooms: Understand Level of Difficulty: 1 Easy Feedback: Cost of goods sold,transportation-out,selling expense,loss on the sale of land,and sales will all appear on the income statement. -Which accounts would affect gross margin?