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Exam 6: Accounting for Merchandising Businesses

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Question 111

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Gross profit is equal to:

A) sales plus (sales discounts and sales returns and allowances) plus cost of merchandise sold
B) sales plus sales returns and allowances less sales discounts less cost of merchandise sold
C) sales plus sales discounts less sales returns and allowances less cost of merchandise sold
D) sales less (sales discounts and sales returns and allowances) less cost of merchandise sold

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

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Question 112

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Journalize the following transactions assuming the perpetual inventory system: Journal

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Question 113

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Sellers and buyers are required to record trade discounts.

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.

Under the perpetual inventory system, a company purchases merchandise on terms 2/10, n/30. If payment is made within 10 days of the purchase, the entry to record the payment will include a credit to Cash and a credit to Purchase Discounts.

Travis Company purchased merchandise on account from a supplier for $5,700, terms 2/10, net 30. Travis returned $1,100 of the merchandise and received full credit. Travis Company paid for the merchandise within the discount period. Under a perpetual inventory system, record all of the journal entries required for the above transactions.

Purchased goods in transit should be included in the ending inventory of the buyer if the goods were shipped FOB shipping point.

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

In a merchandise business, sales minus operating expenses equals net income.

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

Which of the following items would affect the cost of merchandise inventory acquired during the period?

Prepare (a) a single-step income statement, (b) a statement of owner's equity, and (c) a balance sheet in report form from the following data for Kooper Co., taken from the ledger after adjustment on December 31, 2010 the end of the fiscal year.

Which of the following items should not be included in the cost of ending merchandise inventory?

Calculate the gross profit for Jonas Company based on the data given below: S

The entry to record the return of merchandise from a customer would include a