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Exam 5: Accounting for Merchandising Businesses

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Question 61

True/False

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In a perpetual inventory system,the Merchandise Inventory account is only used to reflect the beginning inventory.

A) True
B) False

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Question 62

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Sales Discounts is a revenue account with a credit balance.

A) True
B) False

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Question 63

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When goods are shipped FOB destination and the seller pays the freight charges,the buyer

Other income and expenses are items that are related to the primary operating activity.

Based upon the following data,determine the cost of merchandise sold for August.

The form of income statement that derives its name from the fact that the total of all expenses is deducted from the total of all revenues is called a

The arrangements between buyer and seller as to when payments for merchandise are to be made are called

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

Sellers and buyers are required to record trade discounts.

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?

Because many companies use computerized accounting systems,periodic inventory is widely used.

Multiple-step income statements show

The form of the balance sheet in which assets,liabilities,and owner's equity are presented in a downward sequence is called the report form.

When companies use a perpetual inventory system,the recording of the purchase of inventory will include a debit to purchases.

Dorman Co.sold merchandise to Smith Co.on account,$23,500,terms 2/15,net 45.The cost of the merchandise sold is $16,000.Dorman Co.issued a credit memo for $1,750 for merchandise returned that originally cost $1,400.The Smith Co.paid the invoice within the discount period.What is amount of net sales from the above transactions?

Purchased goods in transit,shipped FOB destination,should be excluded from ending inventory of the buyer.

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

The ratio of net sales to assets measures how effectively a business is using its assets to generate sales.

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

Emma Co.sold Isabella Co.merchandise on account FOB shipping point,,2/10,net 30,for $15,000.Emma Co.prepaid the $750 shipping charge.Using the perpetual inventory method,which of the following entries will Isabella Co.make to record payment of the merchandise if Isabella Co.pays within the discount period?