Exam 5: Accounting for Merchandising Operations

A company purchased $10,000 of merchandise on June 15 with terms of 3/10,n/45,and FOB shipping point.The freight charge was $500.On June 20,it returned $800 of that merchandise.On June 24,it paid the balance owed for the merchandise taking any discount it is entitled to.The cash paid on June 24 equals:

Peg had net sales of $28,496 million,its cost of goods sold was $19,092 million,and its net income was $997 million.Its gross margin ratio equals:

A company had sales of $375,000 and its gross profit was $157,500.Its cost of goods sold equals:

Because sellers assume that their customers will pay within the discount period,the seller usually records the discount at the time of the sale.

Brig Company had $800,000 in sales,sales discounts of $12,000,sales returns and allowances of $18,000,cost of goods sold of $380,000,and $275,000 in operating expenses.Gross profit equals:

Describe how tracking inventory activities are necessary for a merchandising company.

A debit memorandum is:

A company purchased $4,000 worth of merchandise.Transportation costs were an additional $350.The company later returned $275 worth of merchandise and paid the invoice within the 2% cash discount period.The total amount paid for this merchandise is:

A perpetual inventory system continually updates accounting records for inventory transactions.

Liquidity problems are likely to exist when a company's acid-test ratio:

From the adjusted trial balance given below for the Mirror Company,prepare a multiple-step income statement in good form.Salaries expense and depreciation expense on the building are equally divided between selling activities and the general and administrative activities.

Sales Discounts is a contra revenue account,meaning that the Sales Discounts account is added to the Sales account when computing a company's net sales.

A perpetual inventory system requires updating of the inventory account only at the beginning of an accounting period.

Beginning inventory plus net purchases is:

The year-end adjusted trial balance of ABC Supply for the current year,is shown below: Prepare closing entries at December 31 for the current year.

Calculate the gross margin ratio for each of the following separate cases A through D: A B C D Net sales…………… $135,000 $623,500 $37,800 $259,600 Cost of goods sold… 83,600 249,200 3,230 127,204

FOB shipping point (or FOB factory)implies that ownership of goods transfers to the buyer at the buyer's place of business.

When a company has no reportable non-operating activities,its income from operations is simply labeled net income.

Describe the difference between wholesalers and retailers.

A debit to Sales Returns and Allowances and a credit to Accounts Receivable: