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Exam 5: Accounting for Merchandising Businesses

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Question 61

Multiple Choice

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In credit terms of 3/15, n/45, the "3" represents the

A) number of days in the discount period
B) full amount of the invoice
C) number of days when the entire amount is due
D) percent of the cash discount

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

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Question 62

Multiple Choice

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Using the following information, what is the amount of gross profit?

A) $34,870
B) $31,880
C) $27,460
D) $62,090

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

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Question 63

Multiple Choice

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Generally, the revenue account for a merchandising business is entitled

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

When companies use a perpetual inventory system, the recording of the purchase of inventory will include a debit to purchases.

Merchandise with an invoice price of $3,000 is purchased on September 2 subject to terms of 2/10, n/30, FOB destination. Freight costs paid by the seller totaled $200. What is the cost of the merchandise if paid on September 12, assuming the discount is taken?

Under the periodic inventory system, the journal entry to record the purchase of merchandise inventory will include a debit to

If title to merchandise purchases passes to the buyer when the goods are delivered to the buyer, the terms are

The statement of owner's equity shows

The seller may prepay the freight costs even though the terms are FOB shipping point.

Conquest Company uses a perpetual inventory system. Conquest purchased $1,500 of merchandise on account and payment was made within the discount period. The credit terms were 2/10,n/30. Journalize Conquest's purchase and payment.

A buyer who acquires merchandise under credit terms of 1/10, n/30 has 30days after the invoice date to take advantage of the cash discount.

Merchandise with a list price of $4,200 and costing $2,300 is sold on account, subject to the following terms: FOB destination, 2/10, n/30. The seller prepays the freight costs of $85 (debit Freight Out for the freight costs). Prior to payment for the goods, the seller issues a credit memo for $750 to the customer for merchandise costing $425 that is returned. The correct amount is received within the discount period. The company uses a perpetual inventory system. Record the foregoing transactions of the seller in the sequence indicated below.

Describe the major differences in preparing the financial statements for a service business and a merchandising business.

What type of company would normally offer trade discounts to its customers?

Discounts taken by a buyer because of early payment are recorded on the seller's accounting records as

In the merchandising income statement, sales will be reduced by sales discounts and sales returns and allowances to arrive at net sales.

When the three sections of a balance sheet are presented on a page in a downward sequence, it is called the

The buyer will include the sales tax as part of the cost of items purchased for use.

When purchases of merchandise are made for cash, the transaction may be recorded with the following entry