Exam 5: The Operating Cycle and Merchandising Operations

Given the following information,prepare in good form the cost of goods sold section of an income statement for 2010. Freight-In \ 24,000 Merchandise Inventory. December 31, 2009 90,000 Merchandise Inventory. December 31, 2010 102,000 Purchases 228,000 Purchases Returns and Allowances 8,400

Which of the following documents remains within the originating company in a purchase transaction?

Freight-in is considered a cost of merchandise purchased.

Internal control is weakened by all of the following except

Use this information to answer the following question. Chupka Company experienced the following events during the period: 1. A tabulation of invoices at the end of the day showed \$800 in Mastercard invaice5, which were deposited in a bank account at full value less a 5 percent discount. 2. Made a sale on American Eaxiess card for 400 and mailed invaice to American Eagress for payment. The discount charged by American Eagaress is 4 percent. The entry to record transaction 2 would include a(n)

Chancellor Company purchased merchandize worth $900 on credit,terms n/30.What is the required journal entry to record the transaction under the periodic inventory system?

Under the perpetual inventory system,the entry to record a purchase return would include a credit to which account?

On June 3,Maryland Company purchased merchandize worth $800 on credit,terms 2/10,n/30.The amount paid on June 10.What is the required journal entry to record the payment under the periodic inventory system?

Which of the following is not a goal of a system of internal control over merchandising transactions?

A large discount chain,like Wal-Mart or Target,most likely would use the periodic inventory system to maintain control of its inventory.

Colton,Inc.,a specialty retailer of customized audio systems for automobiles,installed a perpetual inventory system in the second quarter of 20x7.The new system allowed the firm to adjust its merchandise inventories to sales patterns more effectively and to prepare monthly financial statements.Although the system led to an improvement in sales and income,the gross margin on the monthly income statements was falling below both management's expectations and the industry average.At the end of 20x8,a physical inventory revealed that actual merchandise inventory was considerably lower than the perpetual inventory records indicated.The merchandise inventories of some stores were off more than others,but all had deficiencies.What probably caused these losses and what steps could be taken to prevent them in the future?

Good internal control dictates that key employees be rotated among different jobs.

Ending merchandise inventory is included in the calculation of goods available for sale.

Upon making a credit card sale,a business should record the sale as an accounts receivable until the customer pays his or her credit card bill.

When payment is received by mail,a detailed list of such receipts would not be retained by the

Compute the dollar amount of the items indicated by letters a through f in the table below.

The treasurer should prepare and sign a check only after a proper check authorization has been provided.

The terms "2/10,n/30" mean that a 2 percent discount is allowed on payments made over 10 but before 30 days after the invoice date.

Assume that the $5,509 sales made by Exotic Corporation for the month ended December 31,20xx,were made to customers using credit cards.Prepare one journal entry to record these sales assuming that all of the credit card companies charge Exotic a 2 percent discount fee.(Omit date.)Round to the nearest whole dollar.

Scuilli Corporation purchased $5,000 worth of merchandise,terms n/30,from the Zupcic Corporation on June 4.The cost of the merchandise to Zupcic was $3,600.On June 10,Scuilli returned $700 worth of goods to Zupcic for full credit.The goods had a cost of $450 to Zupcic.On June 12,the account was paid in full.Prepare journal entries without explanations to record these transactions in (a)Scuilli's records and (b)Zupcic's records.Assume use of the perpetual inventory system by both companies. a. Scuilli's records: b. Zupcic's records: