Exam 5: Merchandising Operations and the Multiple-Step Income Statement

Under the perpetual inventory system, which of the following accounts would not be used?

The income statement for a merchandising company presents only two amounts not shown on a service company income statement.

Under the perpetual system, cash freight costs incurred by the buyer for the transporting of goods is recorded in which account?

Merchandise is sold for $5,000 with terms 1/10, n/30. If $1,000 of the merchandise is returned prior to payment and the invoice is paid within the discount period, the amount of the sales discount is $40.

Which of the following activities is not a component of the operating cycle?

What is the term applied to the excess of net sales over the cost of goods sold?

The credit terms offered to a customer by a business firm were 2/10, n/30, which means

Generally, the revenue account for a merchandising enterprise is called

An advantage of the single-step income statement over the multiple-step form is

Menke Company is a furniture retailer and uses the perpetual inventory system. On January 14, 2014, Menke purchased merchandise inventory at a cost of $45,000. Credit terms were 2/10, n/30. The inventory was sold on account for $60,000 on January 21, 2014. Credit terms were 1/10, n/30. The accounts payable was settled on January 23, 2014, and the accounts receivables were settled on January 30, 2014. Prepare journal entries to record each of these transactions.

Purchased merchandise from Wild Corporation for $8,000, terms 1/10, n/30. 4 Purchased merchandise from Ryan Company for $1,000, n/30. 10 Received payment from Mann Company for purchase of April 1 less appropriate discount. 11 Paid Wild Corporation for April 2 purchase. Instructions Journalize the April transactions for Leiss Company.

When using a perpetual inventory system, why are discounts credited to Inventory?

The sales section of an income statement for a retailer would not include

Merchandising companies that sell to retailers are known as

When sales of merchandise are made for cash, the transaction may be recorded by the following entry:

Sales Discounts is a contra revenue account to Sales Revenue.

Multiple-step income statements show

The trial balance of Rachel Company at the end of its fiscal year, August 31, 2014, includes these accounts: Inventory $29,200; Purchases $144,000; Sales Revenue $190,000; Freight-In $8,000; Sales Returns and Allowances $3,000; Freight-Out $1,000; and Purchases Returns and Allowances $5,000. The ending inventory is $25,000. Instructions Prepare a cost of goods sold section for the year ending August 31.

As the president of Harter Company, you notice that no discounts have been taken when settling accounts payables. What would be an acceptable explanation?

The following information is available for Quayle Company: Sales revenue \ 618,000 Sales returns and allowances 20,000 Cost of goods sold 398,000 Operating expenses 114,000 Interest expense 19,000 Interest revenue 20,000 Instructions 1. Use the above information to prepare a multiple-step income statement for the year ended December 31, 2014. 2. Compute the profit margin.