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Exam 5: Accounting for Merchandising Businesses

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Question 101

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Service businesses provide services for income,while a merchandising business sells merchandise.

A) True
B) False

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Question 102

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If merchandise costing $3,500,terms FOB destination,2/10,n/30,with prepaid freight costs of $125,is paid within 10 days,the amount of the purchases discount is $70.

A) True
B) False

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Question 103

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As we compare a merchandise business to a service business,the financial statement that changes the most is the Balance Sheet.

Using a perpetual inventory system,the entry to record the sale of merchandise on account includes a

Using the following information,what is the amount of cost of merchandise sold?

The chart of accounts for a merchandise business would include an account called Delivery Expense.

Expenses that are incurred directly or entirely in connection with the sale of merchandise are classified as

A company,using the periodic inventory system,has merchandise inventory costing $175 on hand at the beginning of the period.During the period,merchandise costing $635 is purchased.At year-end,merchandise inventory costing $160 is on hand.The cost of merchandise sold for the year is

The proper journal entry to record the receipt of inventory purchased on account in a perpetual inventory system would be:

There is no difference between the recording of cash sales and the recording of MasterCard or VISA sales.

On March 29th,customers who owe $10,500.00 for purchases made on Sonic Sales Company submit payments of $4,250.00.Journalize this event.

On March 15th Monroe Sales sells $9,525.00 on account to Garrison Brewer with terms of 2/10,n/30.The cost of merchandise sold was $6,905.00. (a)Journalize the sale and the recognition of the cost of the sale. (b)On March 20th a $125.00 credit memo is given to Garrison Brewer due to merchandise that was the wrong color.Journalize this event.The cost of the returned merchandise was $65. (c)On March 25th Garrison Brewer submits payment in full.Journalize this event.

The following data were extracted from the accounting records of Meridian Designs for the year ended March 31,2014. Prepare the cost of merchandise sold section of the income statement for the year ended March 31,2014,using the periodic method.Also determine gross profit.

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

The effect of a sales return and allowance is a reduction in sales revenue and a decrease in cash or accounts receivable.

Gadget Palace is a retailer selling unique hardware.Gadget Palace uses perpetual inventory.Use a General Journal to journalize the following four transactions during the month of August:

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

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

The seller records the sales tax as part of the sales amount.

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