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Exam 5: Accounting for Merchandising Businesses

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Question 71

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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.

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Question 72

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When merchandise that was sold is returned, a credit to sales returns and allowances is made.

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Question 73

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

Abbey Co. sold merchandise to Gomez Co. on account, $35,000, terms 2/15, net 45. The cost of the merchandise sold is $24,500. Abbey Co. issued a credit memo for $3,600 for merchandise returned that originally cost $1,700. Gomez Co. paid the invoice within the discount period. What is the amount of gross profit earned by Abbey Co. on the above transactions?

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

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

Under the periodic inventory system, the journal entry to record the cost of merchandise sold at the point of sale will include the following account

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

Calculate the gross profit for Jonas Company based on the data given below:

Construct a chart of accounts, assigning account numbers and arranging the accounts in balance sheet and income statement order. Each account number must have three digits, and the first digit should designate its classification ("1" for assets, "2" for liabilities, and so on). Contra accounts should be designated with a decimal (ex.: 100.1 for contra of account 100). Assets and liabilities should be arranged in the order of liquidity, and expenses should be arranged alphabetically.

Which account is not classified as a selling expense?

Merchandise is ordered on June 13; the merchandise is shipped by the seller and the invoice is prepared, dated, and mailed by the seller on June 16; the merchandise is received by the buyer on June 18; the entry is made in the buyer's accounts on June 19. The credit period begins with what date?

Merchandise with a list price of $4,700 is purchased on account, terms FOB shipping point, 1/10, n/30. The seller prepaid freight costs of $100. Prior to payment, $1,400 of the merchandise is returned. The correct amount is paid within the discount period. Record the foregoing transactions of the buyer in the sequence indicated below, assuming a perpetual inventory system is used.

Merchandise is sold for cash. The selling price of the merchandise is $3,000 and the sale is subject to a 7% state sales tax. The journal entry to record the sale would include

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

Cleary Company had total Sales of $550,000; Sales Discounts of $10,000; Sales Returns of $40,000 and Cost of Merchandise Sold of $200,000 during 2010. The total asset balance at the beginning of the year was $175,000 and at the end of the year was $167,000. Calculate the ratio of net sales to total assets (Round answer to 2 decimal points) .

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

Generally, the revenue account for a merchandising business is entitled

In the periodic inventory system, purchases of merchandise for resale are debited to the Purchases account.

Using the following information, what is the amount of net sales?