Exam 4: Reporting and Analyzing Merchandising Operations

On July 1,Ferguson Company sold merchandise in the amount of $5,800 to Tracey Company,with credit terms of 2/10,n/30.The cost of the items sold is $4,000.Ferguson uses the perpetual inventory system and the gross method.On July 5,Tracey returns some of the merchandise,which is not defective.The selling price of the merchandise is $500 and the cost of the merchandise returned is $350.The entry or entries that Ferguson must make on July 5 is:

The gross margin ratio equals net sales less ________ divided by net sales.

The ________ inventory system continually updates accounting records for merchandise transactions for the amounts of inventory available for sale and inventory sold.

Fill in the blanks (a)through (g)for the Corman Company for each of the income statements for years 1 and 2

Net income or loss reported in a multiple-step income statement format is always the same as net income or loss reported in a single-step income statement format.

A single-step income statement includes cost of goods sold as another expense and shows only one subtotal for total expenses.

What is inventory shrinkage? How do managers account for shrinkage?

FOB ________ means the buyer accepts ownership when the goods depart the seller's place of business.The buyer is responsible for paying shipping costs and bears the risk of damage or loss when goods are in transit.

On February 3,Smart Company sold merchandise in the amount of $5,800 to Truman Company,with credit terms of 2/10,n/30.The cost of the items sold is $4,000.Smart uses the perpetual inventory system and the gross method.Truman pays the invoice on February 18,and takes the appropriate discount.The journal entry that Smart makes on February 18 is:

Explain the way in which costs flow through the merchandise inventory account to a merchandiser's income statement.

On March 12,Klein Company sold merchandise in the amount of $7,800 to Babson Company,with credit terms of 2/10,n/30.The cost of the items sold is $4,500.Klein uses the perpetual inventory system and the gross method of accounting for sales.The journal entry or entries that Klein will make on March 12 is:

Merchandise that customers return to the seller after a sale is referred to as________.

A multiple-step income statement format shows detailed computations of net sales and other costs and expenses,and reports subtotals for various classes of items.

On September 12,Vander Company sold merchandise in the amount of $5,800 to Jepson Company,with credit terms of 2/10,n/30.The cost of the items sold is $4,000.Vander uses the periodic inventory system and the gross method of accounting for sales.On September 14,Jepson returns some of the merchandise.The selling price of the merchandise is $500 and the cost of the merchandise returned is $350.Jepson pays the invoice on September 18,and takes the appropriate discount.The journal entry that Vander makes on September 18 is:

In a perpetual inventory system,Cost of Goods Sold is credited during the closing process.

In its first year of business,Borden Corporation had sales of $2,000,000 and cost of goods sold of $1,200,000.Borden expects returns in the following year to equal 8% of sales.The adjusting entry or entries to record the expected sales returns is (are):

What are the steps of the operating cycle for a merchandiser with credit sales?

A ________company's operating cycle begins with the purchase of merchandise and ends with the collection of cash from merchandise sales.

Cash sales shorten the operating cycle for a merchandiser; credit sales lengthen operating cycles.

A company reported the following information for the month of July: Net Sales \ 57,500 Cost of goods sold 33,200 Required: Calculate this company's gross margin ratio.