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Exam 3: Accounting for Merchandising Businesses

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Question 71

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Faris Company paid the amount due on a purchase of merchandise on account.Faris uses the perpetual inventory system.Which of the following answers reflects the effect of the payment on the financial statements?

A) Choice A
B) Choice B
C) Choice C
D) Choice D

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

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Question 72

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Youkilis Co.returned some defective merchandise it had previously purchased on account from a supplier.Show how the transaction would affect Youkilis's financial statements.

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Question 73

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The term "FOB shipping point" means

When does a product cost become an expense?

Reno Company experienced a transaction that had the following effect on the financial statements: Which transaction would have this effect?

The term "loss" represents the excess of cost over revenue from transactions that occur on a regular basis.

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

Which of the following account titles is normally used in a periodic inventory system?

When using the perpetual inventory method,when and how would a company normally discover that merchandise inventory has been lost or stolen?

Give an example of a period cost for a merchandising business.

When Tiffany & Co.sells inventory for more than its cost,the difference between the sales revenue and the cost of goods sold is called the gross margin.

The following events pertain to The Craft Shop,which began operations in October 2012.The company uses the perpetual inventory method. Required: a.What was the amount of cash that The Craft Shop paid on October 10? b.What was the amount of cash that The Craft Shop collected on October 12? c.What was the balance in The Craft Shop's cash account at the end of the day on October 12?

The balance in the Merchandise Inventory account at December 31,2012 is:

What costs should be included in the Merchandise Inventory account of a merchandising firm?

What effect does the return of merchandise to the supplier have on the accounting equation?

The net cash flow from operating activities as a result of the four transactions is:

Explain the major difference between a merchandising business and a service business.

An entry to record the purchase of inventory on account under the perpetual inventory method

What is a common size income statement? Explain the benefit of the common size income statement to financial statement users.

The following is a list of selected events for Unger Sales and Service for 2012.Unger uses a perpetual inventory system and had a zero inventory balance prior to these transactions. 1)Purchased merchandise on account for $67,000. 2)Sold inventory costing $48,000 for $88,000 on account. 3)Paid transportation-out cost of $1,000 on goods sold. 4)Paid salary expense of $25,000. 5)A count of the inventory revealed that there was $18,500 of inventory on hand at the end of 2010. Required: Answer the following questions based on the above information. a)What was Unger's net income for 2012? b)Compute gross margin and the gross margin percent for 2012. c)What amount of inventory will appear on the balance sheet for 2012? d)Prepare an income statement for 2012.