Exam 6: The Operating Cycle and Merchandising Operations

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

Given the following information, prepare in good form the cost of goods sold section of an income statement for 2010.

Terms of "2/10, n/30" are an example of a trade discount.

Under the perpetual inventory system, the return of goods from a customer would increase Merchandise Inventory and decrease Cost of Goods Sold.

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.

Scuilli Company purchased $5,000 worth of merchandise, terms n/30, from Zupcic Company 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 entries in journal form 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:

Sales Discounts and Sales Returns and Allowances have normal credit balances.

Adding together the ending merchandise inventory and cost of goods sold gives the cost of goods available for sale.

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?

Adding freight-out expenses to net purchases gives net cost of purchases.

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.

Which of the following is not considered in computing net cost of purchases?

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

Under the perpetual inventory system, the return of goods to the supplier is recorded with a credit to Merchandise Inventory.

The fee paid by a retailer to a credit card company is considered a contra-revenue account by the retailer.

The operating cycle is the average days' inventory on hand minus the average number of days to collect credit sales.

Which of the following is necessary for computing cost of goods sold but not necessary for computing the cost of goods available for sale?

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

An American company makes a credit purchase of goods from a company in London for 1,000 British pounds. On the date of purchase, the exchange rate was $1.65 per pound. However, on the date of payment, the rate had declined to $1.60 per pound. As a result, the American company would record

Computerization has led to a large increase in the use of the perpetual inventory system.