Exam 5: The Operating Cycle and Merchandising Operations

Under the periodic inventory system,the Purchases account is used to accumulate all purchases of merchandise for resale.

Which of the following goods would not be included in merchandise inventory for a purchasing company?

Which of the following documents would be sent to the treasurer?

The operating cycle involves the purchase and sale of merchandise inventory as well as the subsequent collection of cash from credit sales.

The computerization has helped taking physical inventory to a great extent under the periodic inventory system.

On June 3,Win-Tel Company sold merchandize worth $800 on credit,terms 2/10,n/30.The merchandize sold had cost $550.The customer paid the amount on June 15. What is the required journal entry to record the payment received under the periodic inventory system?

The calculation of goods available for sale during the year is not affected by the previous year's ending merchandise inventory.

Sandy's Supply Store,Inc.,entered into the transactions listed below.In the journal provided,prepare Sandy's entries,assuming use of the perpetual inventory system.Omit explanations.

The bonding of employees is an example of which feature of a good system of internal control?

When the buyer bears the transportation charge,it is called freight-out.

Demmler Corporation entered into the transactions listed below.In the journal provided,prepare Demmler's journal entries,assuming use of the periodic inventory system.Omit explanations. Oct. $\quad$ 3 $\quad$ Purchased $1,500 of merchandies on credit terms $\mathrm { n } / 15$ . $\quad$$\quad$$\quad$ 6 $\quad$ Returned 300 of the goods purchased on Octaber 3. $\quad$$\quad$$\quad$ 7 $\quad$ Paid freight charges of $\$ 150$ on goods purchased on October 3. $\quad$$\quad$$\quad$ 12 $\quad$ Paid for the goods purchased on October 3. $\quad$$\quad$$\quad$ 13 $\quad$ Sold goods on credit for $\$ 1,000$ , terms $\mathrm { n } / 30$ . $\quad$$\quad$$\quad$ 14 $\quad$ The customer of Octaber 13 returned \$200 of the goods. $\quad$$\quad$$\quad$ 23 $\quad$ Received payment from the customer of Octaber 13. $\quad$$\quad$$\quad$ 25 $\quad$ Purchased office supplies for $450.

One example of a periodic independent verification is the bank reconciliation.

When a U.S.company does business with a British company and payment is in British pounds,an exchange gain or loss occurs if the exchange rate between dollars and pounds changes between the date of sale and the date of payment.

Assume a company uses the periodic inventory system and has a beginning merchandise inventory balance of $5,000,purchases of $75,000,and sales of $125,000.The company closes its records once a year on December 31.In the accounting records,the merchandise inventory account would be expected to have a balance on December 31 prior to adjusting and closing entries that was

Using the following information,calculate for 20xx (a)net sales,(b)beginning merchandise inventory,(c)gross margin,and (d)net income. Sales staff Salaries Expense \ 7,000 Sales 90,000 Ending Merchandise Inventory 16,000 Purchases Returns and Allowances 500 General and Administrative Expenses 11,000 Sales Returns and Allowances 1,200 Freight-In 1,500 Purchases 30,000 Cost of Goods Sold 47,000

A retailer accepted Visa charge sales totaling $500 and deposited the charge slips in the bank.Assuming a credit card discount expense of 4 percent,what would be the increase to Cash and the increase to Sales,respectively?

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?

A purchase on account with an invoice price of $750 has been made.The entry to record the payment after the 2 percent discount period would include a(n)

Freight-in is considered a cost of merchandise purchased.

Feathertouch Company sold merchandize worth $800 on credit,terms n/15.The merchandize sold had cost $550.What is the required journal entry to record the transaction under the perpetual inventory system?