Exam 6: Internal Control and Financial Reporting for Cash and Merchandising Operations

BetterBuy purchases computers from companies like Hewlett Packard and IBM and sells them to consumers.BetterBuy is a:

Flynn Company uses a perpetual inventory system and had the following transactions during November: -November 6 - Purchased $5,800 of inventory on account, terms 2/10, n/30. -November 8 - Returned $800 of defective units and received full credit. -November 15 - Paid the amount due. -Use the information above to answer the following question.What journal entry will be recorded by Flynn Company on November 6?

If merchandise purchased on credit is returned to the seller for a full refund,what would be the effect on the accounts listed below?

The gross profit percentage is computed by dividing operating income by net sales.

Alpha Company bought inventory from Omega Company,FOB shipping point.On December 31,the last day of the accounting year,the goods were on a truck owned by Theta,Inc.,exactly halfway between Alpha and Omega.Which company should include these goods in its December 31 inventory?

Beginning inventory plus purchases minus ending inventory equals:

Which of the following is a correct statement?

Which of the following is an activity common to the operations of merchandising,manufacturing,and service companies?

Sales discounts are discounts that consumers get from buying clearance items at a reduced price.

Purrfect Pets uses the perpetual inventory system.At the beginning of the quarter,Purrfect Pets has $30,000 in inventory.During the quarter the company purchases $7,900 of new inventory from a vendor,returned $700 of inventory to the vendor,and took advantage of discounts from the vendor of $200.At the end of the quarter the balance in inventory is $26,500.What is the cost of goods sold?

Assume that sales discounts in the current year exceed sales discounts in the prior year.Assume that nothing else changes. Required: Determine the impact of an increase in sales discounts on the company's gross profit percentage (that is,whether it will increase,decrease,or not be affected).Include a simple example to prove your answer.

The perpetual inventory method of tracking inventory is considered superior to the periodic method because the perpetual method:

Which of the following costs should be added to the buyer's Inventory account?

Two different companies,Ripper and Berners,entered into the following inventory transactions during December.Both companies use a perpetual inventory system. -December 3 - Ripper Corporation sold inventory on account to Berners Corp.for $480,000,terms 2/10,n/30.This inventory originally cost Ripper $320,000. -December 8 - Berners Corp.returned inventory to Ripper Corporation for a credit of $30,000.Ripper returned this inventory to inventory at its original cost of $20,000. -December 12 - Berners Corp.paid Ripper Corporation for the amount owed. Required: Part a.Prepare the journal entries to record these transactions on the books of Ripper Corporation. Part b.What is the amount of net sales to be reported on Ripper Corporation's income statement? Part c.What is the Ripper Corporation's gross profit percentage?

On June 15,Oakley Inc.sells inventory on account to Sunglass Hut (SH)for $1,000,terms 2/10,n/30.On June 20,SH returns to Oakley inventory that SH had purchased for $300.On June 24,SH completely fulfills its obligation to Oakley by making a cash payment.What is the amount of cash paid by SH to Oakley?

Shockglass Company had a beginning inventory of $15,000.During the year,the company recorded inventory purchases of $45,000 and cost of goods sold of $50,000.The ending inventory must equal:

Which of the following statements regarding sales returns and allowances is correct?

Use the information above to answer the following question.What journal entry (entries)will Darin prepare on October 1 to record this sale?

FAD Company uses a periodic inventory system and its inventory records for the period contain the following information: -Use the information above to answer the following question.The journal entry necessary at the end of the period to adjust cost of goods sold for the ending inventory still on hand will include which of the following?

A company using a perpetual inventory system made the following entry: Debit Accounts Payable for $3,000,credit Inventory for $60,and credit Cash for $2,940.What does this entry reflect?