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Exam 5: Accounting for Retail Businesses

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Question 91

True/False

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Inventory normally has a debit balance.

A) True
B) False

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Question 92

Multiple Choice

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The form of income statement that derives its name from the fact that the total of all expenses is deducted from the total of all revenues is called a

A) multiple-step statement
B) revenue statement
C) operating-income statement
D) single-step statement

E) A) and B)
F) B) and D)

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Question 93

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A sales invoice included the following information: merchandise price, $12,000; terms 1/10, n/eom; FOB shipping point with prepaid freight of $900 added to the invoice. Assuming that a credit for merchandise returned of $500 is granted prior to payment and that the invoice is paid within the discount period, what is the amount of cash that should be received by the seller?

A physical inventory taken at year end indicated that there was $125,000 on hand. The Estimated Returns Inventory is $8,200. Depreciation for the year is $24,500. On December 31, the close of the fiscal year, the balances of selected accounts appearing in the ledger of Broxton Gallery, an art retailer, are as follows: ​ ​ Prepare the December 31 closing entries for Broxton Gallery. ​ ​

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

The following selected accounts and their current balances appear in the ledger of Fernandez Co. at the end of its fiscal year. -What is Fernandez Company's ending retained earnings balance for the year?

Under a periodic inventory system, the accounts Purchases, Purchases Returns and Allowances, Purchases Discounts, and Freight In are found on the balance sheet.

Why does the gross method of recording sales discounts require an adjusting entry at the end of the fiscal period?

Cumberland Co. sells $2,000 of inventory to Hancock Co. for cash. Cumberland paid $1,250 for the merchandise. Under a perpetual inventory system, which of the following journal entry(ies) would be recorded?

A business using the perpetual inventory system, with its detailed subsidiary records, does not need to take a physical inventory.

Match the appropriate definition with the following items below.

In recording the cost of goods sold for cash, based on data available from perpetual inventory records, the journal entry is

Journalize the following merchandise transactions. The company uses the perpetual inventory system.

Match each of the following terms (a-h) with the correct definition below. -Shipping terms where the ownership of merchandise passes to the buyer when the buyer receives the merchandise.

A chart of accounts for a merchandising business

Stergell Company had sales of $1,500,000 and related cost of goods sold of $920,000 for the year. Stergell estimates that customers will request refunds for 1.5% of sales and estimates that merchandise costing $12,000 will be returned. Journalize the adjusting entries on December 31 to record the expected customer returns. ​ ​ ​

Inventory is classified on the balance sheet as a

Using the following information for a periodic inventory system, what is the amount of income from operations?

Match each of the following items (a-h) with the appropriate definition below. -Discount to government agencies or customers who purchase large quantities of merchandise.

Alt Tile Company uses a perpetual inventory system. Journalize the December 31 adjusting entries based on the following information: a. The inventory account has a balance of $133,150, while the physical inventory indicates that $130,900 of merchandise is on hand. Assume any shrinkage is a normal amount. b. Sales returns of $11,000 and merchandise returns of $8,000 are estimated for the current year's sales.