Exam 6: Merchandising Operations and the Multi-Step Income Statement

In a perpetual inventory system,only one journal entry is required when goods are sold from inventory.

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

When a company makes a sale and accepts a credit card payment from a customer,the company:

Collins Merchandising Inc.sold two lawnmowers for $400 a piece,and replacement parts for the lawnmowers in the amount of $300 for the month.The company also sold $2000 worth of television sets,but offered a 2% discount on any sales.During the month,one of the lawnmowers was returned.The lawnmowers were previously recorded in inventory costing $300/each,while the costs of the televisions sets totalled $1,500.What is the gross profit percentage for Collins Merchandising Inc.?

The company returns $200 of damaged goods to the supplier.

Credit terms of "2/10,n/30" mean that if payment is made in two days,a 10% discount may be taken; if not paid within two days,the full invoice price will be due in thirty days.

Your company purchases $50,000 of inventory from a wholesaler that allows you 45 days to pay.In addition,the wholesaler offers a 3% discount if payment is made within 12 days.These payment terms would be expressed as:

An electronics retailer purchases $20,000 of computers for resale.The retailer spends $500 in transportation cost,$2,000 in labour and parts to upgrade the computers,and $300 to advertise them.At this point,what amount should appear in the Inventory account for these computers?

Intel makes microchips from raw materials acquired from suppliers.Intel is a:

At the beginning of the quarter Purrfect Pets has $30,000 in inventory.During the quarter the company purchases $7,900 of new inventory,has purchase returns of $700,and purchase discounts of $200.At the end of the quarter the balance in the Inventory account is $26,500.What is the cost of goods sold?

"Shrinkage" is another term for inventory loss due to theft,error,or fraud.

When a customer returns a defective product for credit,the seller would record the transaction using the Purchase Returns and Allowances account.

Central Company sold goods for $5,000 to Western Company on March 12 on credit.Terms of the sale were 2/10,n/30.At the time of the sale,Central recorded the transaction by debiting accounts receivable for $5,000 and crediting sales revenue for $5,000.Western paid the balance due,less the discount,on March 21.To record the March 21 transaction,Central would debit:

Gross profit is equivalent to

A company has gross profit of $58,300 and a gross profit percentage of 25%.What is the company's net sales?

Operating activities involve both inflows and outflows of cash.

Using a contra-revenue account for sales returns and allowances instead of directly reducing the sales account allows a retailer the following advantage:

Customers return $550 of goods in excellent condition to the company.

Purrfect Pets sells 6,000 bags of dog food this month for $10 each; 2,600 of these bags were sold to customers who took advantage of an 3% early payment discount.Twenty bags were returned by customers who had paid cash; their dogs did not like the dog food.Purrfect Pets had paid $5 a bag for this dog food and received a 2% purchase discount for early payment.Purrfect Pets also paid a trucking company $1,660 for shipping the 6,000 bags. Calculate the gross profit and the gross profit margin for Purrfect Pets,assuming dog food is the company's only product and that returned product was unopened so it was put back in inventory.

A retail chain sells 100 designer sheet sets for $199.99 a set; these sheet sets cost the company $69.95 a set to buy.The company also sells 1,000 basic sheet sets for $49.99 a set; these sheet sets cost the company $24.99 to buy.Other operating expenses total $10,000.Which of the following statements is true?