Exam 5: Merchandising Operations

A company purchased inventory for $100,000 on account and recorded it as follows: Merchandise Inventory 100,000 Accounts Payable 100,000 The vendor's invoice showed terms of 3/10,net 30.Prepare the journal entry for the purchaser for the payment of the invoice seven days after the invoice date,assuming that the purchaser uses the perpetual inventory system.

Smaller businesses invest in a periodic inventory system because of the ability to determine quantities of inventory on hand after each purchase and sale of merchandise inventory.

Operating income equals gross profit minus operating expenses.

Rally Auto Supplies Company uses a perpetual inventory system.Journalize the following sales transactions for this company.Explanations are not required. June 10 Sold \ 14,800 of merchandise on account, 17/30 . Cost of goods is \ 6,200. June 14 \ 400. Received a \ 900 sales return from the customer. Cost of the goods is June 20 due from the June 10 sale.

The Merchandise Inventory account of a company shows a balance of $50,000 but a physical count of inventory shows $41,000 Which of the following entries is required to record the shrinkage? (Assume a perpetual inventory system.)

The Merchandise Inventory account balance is $56,000.A physical count of inventory reveals that the actual inventory balance is $39,000.Which of the following would be included in the adjusting entry? (Assume a perpetual inventory system.)

Statewide Computers purchased $280,000 of inventory.Goods of $20,000 were returned.Statewide received an early discount of $15,000 and paid freight in of $1,000.The net cost of inventory purchased is $245,000.

Under the terms FOB destination,title to the merchandise will pass to the purchaser when the goods are received by the purchaser.

Which of the following is the correct journal entry for freight paid on goods purchased by a merchandiser using the periodic inventory system?

An adjusted trial balance for a merchandiser is given below. Debit Credit Cash \ 12,600 Accounts Receivable 2,400 Prepaid Rent 800 Merchandise Inventory 30,000 Accounts Payable \ 4,200 Salaries Payable 1,000 Notes Payable 800 Black, Capital 13,800 Black, Withdrawals 1,000 Sales Revenue 96,000 Sales Discounts Forfeited 400 Cost of Goods Sold 23,000 Insurance Expense 2,400 Salaries Expense 21,000 Rent Expense 14,000 Selling Expense 8,500 Supplies Expense Total \ 116,200 \ 116,200 Provide journal entries to close the Income Summary account and the Black,Withdrawals account.Omit explanations.

The key difference in the closing process under the periodic and perpetual inventory systems is how merchandise inventory is handled.

Office Supplies Company uses a perpetual inventory system.Journalize the following sales transactions for this company.Explanations are not required. July 3: Sold $15,400 of merchandise on account,credit terms are n/30.Cost of goods is $9,300. July 7: Received a $750 sales return from the customer.Cost of the goods is $435. July 20: Received payment from the customer.

List the three steps,in order of occurrence,of the operating cycle of a merchandising business.

An adjusted trial balance of Anders Retailers as of December 31,2019 is given below.Prepare a single-step income statement for the year for the company. Debit Credit Cash \ 15,000 Accounts Receivable 42,000 Merchandise Inventory 60,000 Supplies 15,000 Land 300,000 Accounts Payable \ 3,000 Notes Payable 25,000 Anders, Capital 326,000 Anders, Withdrawals 3,000 Sales Revenue 465,000 Cost of Goods Sold 240,000 Salaries Expense 15,000 Utilities Expense 69,000 Rent Expense 54,000 Interest Expense Totals \ 819,000 \ 819,000

Provide definitions for the following: Item Definition Cost of Goods Sold Gross Profit Operating Expenses

High Quality Jewelers uses the perpetual inventory system.On March 3,High Quality sold merchandise for $50,000 to a customer on account with terms 4/15,n/30.The cost of goods sold was $20,000.On March 18,High Quality received payment from the customer.Calculate the amount of gross profit.

Regarding the inventory system used by small retailers,which of the following statements is incorrect?

In a perpetual inventory system,multiple performance obligations ________.

If a customer does not pay within the discount period,the seller records the discount lost as in increase in Sales Revenue.

Cafeteria Supply returned 2 cases of defective warming trays to the vendor for an amount of $600.Prepare the journal entry for this transaction.Cafeteria Supply uses a perpetual inventory system and purchased the cases on account.Omit explanation.