Exam 4: Accounting for Merchandising Operations

Following is the year-end adjusted trial balance for Yakima's Sporting Goods for the current year: Prepare the closing entries at December 31 for the current year.

Describe the difference between wholesalers and retailers.

A company has sales of $2,530,000, sales discounts of $200,000, sales returns and allowances of $323,000, shipping charges of $115,000, sales commissions of $234,000, net income totaled $863,500, and cost of goods sold of $1,012,000. What is the gross profit/margin ratio?

Under the perpetual inventory system, the cost of merchandise purchased is accumulated in the Merchandise Inventory account.

A service company earns net income by buying and selling merchandise.

The gross margin ratio is defined as gross margin divided by net sales.

Sales less sales discounts less sales returns and allowances equals:

A trade discount is:

Harriet's Toy Shop had net sales of $852,000. The gross profit was $230,000. Calculate Harriet's cost of goods sold.

A debit memorandum is:

_______________________ are non-operating activities that include interest, dividend and rent revenues and gains from asset disposals.

A perpetual inventory system continually updates accounting records for inventory transactions.

Explain the difference between the single-step and multiple-step income statements.

A company purchased $7,500 worth of merchandise. Transportation costs were an additional $80. The company later returned $900 worth of merchandise and paid the invoice within the 3% cash discount period. The total amount paid for this merchandise is:

What are the differences between the periodic and the perpetual inventory systems?

Distinguish between selling expenses and general and administrative expenses.

On October 1, Robertson Company sold merchandise in the amount of $5,800 to Alberts, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Robertson uses the periodic inventory system. On October 4, Alberts returns some of the merchandise. The selling price of the merchandise is $500 and the cost of the merchandise returned is $350. The entry or entries that Robertson must make on October 4 is:

A company had: net sales of $82,000; cost of goods sold of $70,000; and other expenses of $2,000. Its gross margin ratio equals:

Merchandise inventory:

What is the acid-test ratio? How does it measure a company's liquidity?