Exam 5: Merchandising Operations and the Accounting Cycle

In a periodic inventory system, cost of goods sold is determined by subtracting the ending inventory from the cost of goods available for sale.

Under a perpetual inventory system, which accounts would be closed to Income Summary with credits?

When a discount is taken for prompt payment under a periodic inventory system, the purchaser would credit:

Gross margin minus operating expenses equals income from operations on a multi-step income statement.

The buyer is responsible for the shipping costs when the shipping terms are:

Inventory for a business using the periodic inventory system appears on the:

When goods are shipped FOB destination and a periodic inventory system is used, the buyer would:

Green Company purchased $3,600 of merchandise on account, terms 2/10 n/30. If payment was made after the expiration of the discount period and a perpetual inventory system is used, the entry to record the payment would include a:

When the buyer pays the freight costs, the entry to record the payment under a perpetual inventory system would include a debit to:

Details of purchase invoices including shipping terms, credit terms, and returns appear below. Compute the total amount to be paid in full settlement of each invoice, assuming that credit for returns is granted before the expiration of the discount period and payment is made within the discount period. Invoice Freight and Credit Terms Transportation Charges Returns and Allowances a) \ 2,000 FOB destination, 3/10/45 \ 55 \ 200 FOB shipping point, 2/10 b) \ 5,500 /30 \ 100 \ 50 FOB shipping point, 2/10 c) \ 6,700 /45 \ 200 \ 350 d) \ 9,300 FOB destination, 2/10/60 \ 150 \ 550

Inventory held by a business is a(n)________ and when sold becomes a(n)________.

A merchandiser purchases inventory on account under a periodic inventory system with terms of 2/10 n/30. The merchandiser would:

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. The operating income for Speedy Boat Company is:

The seller is responsible for the shipping costs when the shipping terms are:

The adjusting entry to record inventory shrinkage would include a debit to the cost of goods sold account in a perpetual inventory system.

A company makes a purchase of $2,000 of inventory, subject to credit terms of 3/10 n/45 and returns $500 of inventory prior to payment. What is the amount of the payment assuming payment is made within the discount period?

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 gross margin?

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

Underwater Adventures has the following account balances on August 31, 2019: Accounts payable \ 8,800 Accounts receivable 9,600 Accumulated amortization - equipment 30,300 Cash 2,200 Cost of goods sold 341,500 Jacobson, capital 190,700 Jacobson, withdrawals 44,000 Equipment 88,000 Interest earned 2,000 Inventory 71,500 Operating expenses 175,500 Sales discounts 3,100 Sales returns and allowances 14,400 Sales revenue 520,600 Supplies 7,100 Unearned sales revenue 4,500 The following information as at August 31, 2019 was also available: a. A physical count of items showed $1,200 of supplies on hand. b. An inventory count showed inventory on hand of $66,400. c. The equipment has an estimated useful life of eight years and is expected to have no salvage value. d. Unearned sales revenue of $1,000 was earned. Required: 1. Prepare the necessary adjusting journal entries at August 31, 2019. For simplicity all operating expenses are combined into a single operating expense account for financial statement purposes. Use the normal account name for the adjusting journal entries. 2. Prepare a classified balance sheet based on adjusted account balances.