Exam 4: Reporting and Analyzing Merchandising Operations

On May 1, Anders Company, Inc. purchased merchandise in the amount of $5,800 from Shilling, with credit terms of 1/10, n/30. Anders uses the gross method of recording purchases and a perpetual inventory system. The journal entry that Anders will make on May 1 is:

Which of the following accounts would be closed at the end of the accounting period with a debit?

Offering sales discounts on credit sales can benefit a seller by decreasing the delay in receiving cash and reducing future collections efforts.

Cushman Company, Inc. had $800,000 in sales, sales discounts of $12,000, sales returns and allowances of $18,000, cost of goods sold of $380,000, and $275,000 in operating expenses. Net income equals:

Kramer, Inc. uses a periodic inventory system. Kramer purchased $1,000 of merchandise on credit, with terms 1/10, n/30, FOB shipping point. The shipping cost of $150 was paid upon receipt of the goods. The journal entry to record the shipping cost includes a credit to Cash and a debit to:

A ________________ company's operating cycle begins with the purchase of merchandise and ends with the collection of cash from merchandise sales.

A _____________________ income statement format shows detailed computations of net sales and other costs and expenses, and reports subtotals for various classes of items.

Prepare journal entries to record the following merchandising transactions of Bradford Company, Inc., which uses the gross method of accounting for purchases and uses a perpetual inventory system.

A company that uses the gross method of recording purchases and a perpetual inventory system made a purchase of $400 with terms of 2/10, n/30. The entry to record the purchase would be:

The acid-test ratio is also called the quick ratio.

A debit to Sales Returns and Allowances and a credit to Accounts Receivable:

On June 3, Zhang Co., which uses a perpetual inventory system, received and recorded a $3,500 invoice for merchandise on which the terms were 2/10, n/60. The company uses the gross method to records invoices. On August 2, the company discovered that the invoice had been incorrectly filed and the discount lost. The company paid the invoice on August 2. Prepare the June 3 general journal entry to record the purchase and the August 2 entry to record payment of the invoice.

Zenith Company Inc.'s Merchandise Inventory account at the end of year 2015 has a balance of $91,820, but a physical count reveals that only $90,450 of inventory exists. The adjusting entry to record inventory shrinkage is:

A company's current assets are $23,420, its quick assets are $13,890 and its current liabilities are $12,220. Its acid-test ratio equals:

A trade discount is:

The current liability account credited when recording a seller's revenue-side adjusting entry for the estimated amount of current and future sales returns and allowances is ______________________.

A wholesaler is an intermediary that buys products from manufacturers or other wholesalers and sells them to consumers.

Vincent Company, Inc. purchased merchandise from Liu Company with an invoice price of $300,000 and credit terms of 2/10, n/30. Liu Company's cost for the merchandise was $200,000. Vincent Company, Inc. paid within the discount period. Assume that both buyer and seller use the gross method of accounting for purchases and sales and a perpetual inventory system. 1. Prepare entries that Vincent should record for (a) the purchase and (b) the cash payment. 2. Prepare entries that Liu should record for (a) the sale and (b) the cash collection.

Borden Corporation had sales this year of $2,450,000 and cost of goods sold of $1,100,000. Borden expects returns in the following year to equal 8% of sales. The adjusting entry or entries to record the expected sales returns is(are):

Kerry Corporation has an unadjusted Accounts Receivable balance of $27,500 on December 31, the end of its fiscal year. Of that amount, $14,350 are within a 2% discount period that the company expects the buyers to take. Record the adjusting entry for the allowance for sales discounts.