Exam 6: The Operating Cycle and Merchandising Operations

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

On August 1, Phillips Industries purchased $12,000 of merchandise on credit. Terms of 1/10, n/30 are extended, and Phillips makes payment on August 9. a. In the journal provided, prepare Phillips's entries, assuming use of the periodic inventory system. b. Prepare the entry that would have been made had payment been made on August 17.

A trade discount is the same as a sales discount.

Using the following information, calculate for 2010 (a) net sales, (b) cost of goods sold, (c) gross margin, and (d) net income.

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

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?

Use this information to answer the following question. In addition, beginning merchandise inventory was $22,000 and ending merchandise inventory was $14,000. If beginning and ending merchandise inventories were ignored in computing net income, then net income would be

When customers pay with bank credit cards, sales are considered to have taken place on credit.

Terms of "n/10 eom" mean that payment is due 10 days after the end of the month.

Which of the following should not be included in the count of ending merchandise inventory?

For a company that takes an average of 50 days to sell inventory, takes an average of 110 days to collect for its sales, and has payment terms of 45 days on its purchases, what is the financing period? Show calculations.

From the following data, calculate the amount of gross margin and gross purchases.

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

Goods totaling $7,000 purchased February 2 on terms of 2/10, n/30 and on which returns of $1,000 were made on February 10 would be subject to which of the following discounts if paid for on February 12?

A company would be more likely to know the amount of inventory on hand if it used the periodic inventory system rather than the perpetual inventory system.

The income statement account balances on December 31, 2010, for Janice Company appear below. In addition, beginning merchandise inventory was $3,000 and ending merchandise inventory was $4,000. Prepare a 2010 income statement for the company.

Feathertouch Company sold merchandize worth $800 on credit, terms n/15 and on the next day the customer returned merchandize worth $50, which cost $30 for Feathertouch company. What is the required journal entry to record the merchandize returns under the perpetual inventory system?

Assuming the use of the periodic inventory system, use the data below to calculate the net cost of purchases and the cost of goods available for sale for the year ended December 31, 2010.

The entry to record a sales return from a customer would require a(n)

The periodic inventory system is used most commonly by companies that sell