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Exam 5: Accounting for Merchandising Businesses

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Question 91

Multiple Choice

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Who is responsible for the freight costs when the terms are FOB shipping point?

A) the ultimate customer
B) the buyer
C) the seller
D) either the seller or the buyer

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

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Question 92

Multiple Choice

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Sales to customers who use bank credit cards such as MasterCard and Visa are usually recorded by a

A) debit to Bank Credit Card Sales,debit to Credit Card Expense,and a credit to Sales
B) debit to Cash and a credit to Sales
C) debit to Cash,credit to Credit Card Expense,and a credit to Sales
D) debit to Sales,debit to Credit Card Expense,and a credit to Cash

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

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Question 93

Multiple Choice

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If merchandise sells for $3,500,with terms of 3/15,n/45 and the cost of the inventory sold is $2,100,the amount charged to sales is

A customer discount encourages customers to pay accounts more quickly than if a discount were not available.

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

The fees associated with credit card sales are periodically recorded as expenses.

A retailer purchases merchandise with a catalog list price of $30,000.The retailer receives a 15% trade discount and credit terms of 2/10,n/30.How much cash will be needed to pay this invoice within the discount period?

Under a periodic inventory system,the cost of merchandise on hand at the end of the year is determined by a physical count of the inventory.

A company using the periodic inventory system has merchandise inventory costing $210 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

?If title to merchandise purchases passes to the buyer when the goods are shipped from the seller,the terms are

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?

Under the perpetual inventory system,all purchases of merchandise are debited to the account

Using the following data taken from Hsu's Imports Inc.which uses a periodic inventory system,determine the gross profit to be reported on the income statement for the year ended March 31.

Income that cannot be associated definitely with operations,such as a gain from the sale of a fixed asset,is listed as Other Income on the multiple-step income statement.

Most retailers record all credit card sales as credit sales.

Complete the following data taken from the condensed income statements for merchandising Companies A,B,and C. $\begin{array}{|l|r|r|r|}\hline & \text { Company A } & \text { Company B } & \text { Company C } \\\hline \text { Net income } & \$ 315 & \$ ? & \$ 215 \\\hline \text { Sales } & ? & 865 & 560 \\\hline \text { Gross profit } & 430 & ? & 325 \\\hline \text { Operating expenses } & ? & 125 & ? \\\hline \text { Cost of merchandise sold } & 545 & 320 & ? \\\hline\end{array}$

Merchandise with a sales price of $5,000 is sold on account with terms 2/10,n/30.The journal entry to record the sale would include a

Pierce Company sold to Stanton Company merchandise on account FOB shipping point,2/10,net 30,for $20,000.Pierce prepaid the $500 shipping charge.Which of the following entries does Pierce make to record this sale?

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

The cost of merchandise inventory is limited to the purchase price less any purchase discounts.