Exam 5: Merchandising Operations and the Accounting Cycle

Under a periodic inventory system, the entries to record a $2,600 sales return of undamaged goods for a sale originally made on account, when the merchandise had a cost of $1,200, include a:

Romeo Merchandising had the following transactions in June. Prepare journal entries for these transactions assuming Romeo uses a perpetual inventory system. June 2 Romeo received an $18,000 invoice from one of its suppliers. Terms were 2/10 n/30, FOB shipping point. Romeo paid the freight bill amounting to $2,000. 4 Romeo returned $2,500 of the merchandise billed on June 2 because it was defective. 5 Romeo sold $8,000 of merchandise on account, terms 3/15 n/30. The cost of the merchandise sold was $5,100. 10 Romeo paid the invoice dated June 2, less the return and the discount. 15 A customer returned $2,500 of merchandise sold on June 5. The cost of the returned merchandise that was placed back in inventory was $1,450. 19 Romeo received payment on the remaining amount due from the sale of June 5, less the return and the discount.

The preparation of the income statement for a merchandising company that is following international financial reporting standards (IFRS)is not significantly different from the approach used by companies following accounting standards for private enterprises (ASPE).

A merchandiser received payment in full within the discount period on a $5,000 sales invoice, terms 2/15 n/30. The journal entry would include a:

Table 5-2 Sales revenue \ 382,000 Net sales revenue \ 360,000 Gross margin 255,000 Operating expenses 132,000 Interest expense 30,000 Interest revenue 60,000 -Referring to Table 5-2, if sales discounts amount to $15,000, the balance in Sales Returns and Allowances must be:

A seller requesting payment will send the purchaser a purchase order.

Details of a purchase invoice, credit terms, and a purchase return are shown below. Assume the credit memo was received and payment made within the discount period. Cost of merchandise as shown on purchase invoice \ 9,200 Cost of merchandise returned 3,700 Transportation charges, terms FOB shipping point 500 Credit terms 2/10/30 Compute the following: a)amount of discount b)amount paid by purchaser, within the discount period, including freight, if applicable c)amount paid by purchaser if paid after expiration of discount including freight, if applicable

Describe single-step and multi-step formats for income statements.

Inventory turnover indicates how:

Define gross margin and operating income. Explain how they are used in evaluating a company.

Table 5-3 Sales revenue \ 750,000 Interest revenue 18,000 Freight in 44,000 Beginning inventory 75,000 Purchases discounts 20,000 Sales returns and allowances 44,000 Operating expenses 99,000 Interest expense 15,000 Ending inventory 72,000 Purchases 415,000 Sales discounts 25,000 William Browning, Withdrawals 61,000 Purchase reburns and allowances 36,000 -Refer to Table 5-3. The total cost of goods available for sale is:

Table 5-5 The following items were taken from the December 31, 2019, records of Speedy Boat Company, which uses a periodic inventory system: Salary payable \ 1,100 Sales revenue 480,000 Interest revenue 3,000 Freight in 20,000 Beginning inventory 35,000 Sales discounts 18,000 Purchases of inventory 240,000 Purchase retarns and allowances 35,000 Purchase discounts 10,000 Sales returns and allowances 35,000 Ending inventory 80,000 Operating expenses 85,000 Interest expense 7,000 Owner withdrawals 12,000 -Refer to Table 5-5. Cost of goods available for sale for Speedy Boat Company is:

Day Company purchased $3,000 of merchandise on credit, terms 3/15 n/30. The entry to record payment for the merchandise within the discount period under a periodic inventory system would include a:

Avery Supplies uses a periodic inventory system. Avery purchased $10,000 of inventory on account. The terms were 3/10, n/30. The purchase was made on February 1. On February 2, Avery returned $400 of damaged goods to the supplier and was granted an allowance. How should Avery properly record the allowance?

The entry to record the purchase of inventory on account in a periodic inventory system includes a debit to the Purchases account.

Table 5-1 Sales revenue \ 480,000 Cost of goods sold 300,000 Sales discounts 20,000 Sales retums and allowances 15,000 Operating expenses 85,000 Interest revenue 5,000 -Referring to Table 5-1, what is net sales revenue?

Inventory is a current liability on the balance sheet.

Cost of goods sold is an operating expense.

Which accounts are affected in the closing process under a perpetual inventory system?

When the seller accepts a return of undamaged goods from the purchaser, the seller's journal entries would include two sets of entries, if they are using a periodic inventory system.