Exam 5: Accounting for Merchandising Activities

Evenflow had the following transactions for October: Prepare journal entries to record each of the preceding transactions.Assume a perpetual inventory system.

Cost of goods sold represents the cost of buying and preparing merchandise for sale.

Credit terms are the listing of the amounts and timing of payments between a buyer and a seller.

A wholesaler is a company that buys products from manufacturers and sells them to consumers.

A perpetual inventory system:

In a perpetual inventory system,the net cost of purchases is accumulated in the Inventory account.

A business sold some inventory on credit for $5,000 before taxes.The sale is subject to 5% goods and services tax (GST)and 7% provincial sales tax (PST).The business uses a perpetual inventory system.What is the amount of the accounts receivable that was recorded as a result of this sale?

The adjustment to reflect shrinkage is a debit to Income Summary and a credit to Shrinkage Expense.

Under the _______________ system,each purchase,purchase return and allowance,purchase discount,and transportation-in transaction is recorded in the _______________ account.

Describe the difference between wholesalers and retailers.

For a merchandiser,each sales transaction involves:

The terms 2/10,n/30 means that the seller offers the purchaser a 2% cash discount if the amount is paid in full within 10 days.Otherwise,the full amount is due in 30 days.

A credit memorandum informs a customer of a credit to its Accounts Payable account from a sales return or allowance.

A business sold some inventory that had cost $5,000 before taxes.The sale is subject to 5% goods and services tax (GST)and 7% provincial sales tax (PST).The business uses a perpetual inventory system.How much will be credited to the Merchandise Inventory account as a result of this sale?

Y-Mart had net sales of $645,000.Its cost of goods was $445,000.Its gross margin was $200,000.

Discuss the difference between the periodic and perpetual inventory systems.

The Merchandise Inventory account balance at the end of one period is the amount of beginning inventory in the next period.

Shrinkage:

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

A retailer is a middleman that buys products from manufacturers and sells them to wholesalers.