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Exam 6: Accounting for Merchandising Businesses

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Question 81

Multiple Choice

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Merchandise with a sales price of $6,000 is sold on account with term 2/10, n/30. The journal entry to record the sale would include a

A) debit to Cash for $6,000
B) Debit to Sales Discounts for $120
C) Credit to Sales for $6,000
D) Debit to Accounts Receivable for $5,880

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

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Question 82

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If the perpetual inventory system is used, an account entitled Cost of Merchandise Sold is included in the general ledger.

A) True
B) False

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Question 83

Multiple Choice

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Isaac Co. sells merchandise on credit to Sonar Co in the amount of $5,700. The invoice is dated on April 1 with terms of 1/15, net 45. What is the amount of the discount and up to what date must the invoice be paid in order for the buyer to take advantage of the discount?

Net income plus operating expenses is equal to

Anthony Company sold Madison Company merchandise on account FOB shipping point, 2/10, net 30, for $10,000. Anthony prepaid the $300 shipping charge. Which of the following entries does Anthony make to record this sale?

Which of the following accounts should be closed to Income Summary at the end of the fiscal year?

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

Journalize the following merchandise transactions:

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.

When merchandise is sold for $600 plus 6% sales tax, the Sales account should be credited for $636.

A retailer purchases merchandise with a catalog list price of $25,000. The retailer receives a 30% trade discount and credit terms of 2/10, n/30. What amount should the retailer debit to the Merchandise Inventory account?

Income that 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.

Construct a chart of accounts, assigning account numbers and arranging the accounts in balance sheet and income statement order ("1" for assets, and so on). Each account number is three digits. Contra accounts should designated with a decimal of the account (100.1 for contra of account 100). Assets and liabilities should be in order of liquidity, expenses should be in alphabetical order.

Sampson Co. sold merchandise to Batson Co. on account, $46,000, terms 2/15, net 45. The cost of the merchandise sold is $38,500. Sampson Co. issued a credit memo for $1,500 for merchandise returned that originally cost $950. The Batson Co. paid the invoice within the discount period. Prepare the entries that both Sampson and Batson Companies would record for the above. Assume both Sampson and Batson use a perpetual inventory system.

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

During the current year, merchandise is sold for $137,500 cash and $425,600 on account. The cost of the merchandise sold is $322,325. What is the amount of the gross profit?

Where are selling and administrative expenses found on the multiple-step income statement?

The ending merchandise inventory for 2010 is the same as the beginning merchandise inventory for 2011.

In the merchandising income statement, sales will be reduced by sales discounts and sales returns and allowances to arrive at net sales.

Which one of the following is not a difference between a retail business and a service business?