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Exam 6: Accounting for Merchandising Businesses

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Question 81

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If the ownership of merchandise passes to the buyer when the seller delivers the merchandise for shipment, the terms are stated as FOB destination.

A) True
B) False

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Question 82

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Computerized systems can be used to capture accounting information such as accounts receivable, inventory items, accounts payable, and sales.

A) True
B) False

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Question 83

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In a periodic inventory system, the cost of merchandise purchased includes the cost of freight-in.

Sales Returns and Allowances is a contra-revenue account.

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

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

What is the major difference between a periodic and perpetual inventory system?

Who pays the freight cost when the terms are FOB destination?

For each of the following, calculate the cost of inventory reported on the balance sheet.

A business using the perpetual inventory system, with its detailed subsidiary records, does need to take a physical inventory.

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

Who pays the freight costs when the terms are FOB shipping point?

Sellers and buyers are required to record trade discounts.

Office salaries, depreciation of office equipment, and office supplies are examples of what type of expense?

A company using the periodic inventory system has the following account balances: Merchandise Inventory at the beginning of the year, $3,600; Freight-In, $650; Purchases, $10,700; Purchases Returns and Allowances, $1,950; Purchases Discounts, $330. The cost of merchandise purchased is equal to

Details of a purchase invoice and related credit memo are summarized as follows: Assume that the credit memo was received prior to payment and that the invoice is paid within the discount period. Determine the following:

In a perpetual inventory system, merchandise returned to vendors reduces the merchandise inventory account.

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

Match each of the following terms with the appropriate definition below.

Match each of the following definitions with its term.