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Exam 5: Accounting for Merchandising Operations

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Question 21

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A company purchased $1,800 of merchandise on July 5 with terms 2/10,n/30.On July 7,it returned $200 worth of merchandise.On July 28,it paid the full amount due.The correct journal entry to record the payment on July 28 is:

A) Debit Merchandise Inventory $1,600;credit Cash $1,600.
B) Debit Cash $1,600;credit Accounts Payable $1,600.
C) Debit Accounts Payable $1,600;credit Merchandise Inventory $32;credit Cash $1,568.
D) Debit Accounts Payable $1,800;credit Cash $1,800.
E) Debit Accounts Payable $1,600;credit Cash $1,600.

F) C) and E)
G) A) and B)

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Question 22

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The following statements regarding merchandise inventory are true except:

A) Merchandise inventory is reported on the balance sheet as a current asset.
B) Merchandise inventory refers to products a company owns and intends to sell.
C) Merchandise inventory may include the costs of freight in and making them ready for sale.
D) Merchandise inventory appears on the balance sheet of a service company.
E) Purchasing merchandise inventory is part of the operating cycle for a business.

F) D) and E)
G) C) and D)

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Question 23

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Using the following year-end information for Calvin's Clothing,calculate the current ratio and acid-test ratio for the business:

The following statements regarding gross profit are true except:

An income statement that includes cost of goods sold as another expense and shows only one subtotal for total expenses is a:

The liquidity of a company can be measured using the current ratio and the ____________________,which only includes the most liquid current assets in its calculation.

A ___________ is an intermediary that buys products from manufacturers and sells to retailers.

FOB _________________ means ownership of goods transfers to the buyer when the goods arrive at the buyer's place of business.The seller is responsible for paying shipping charges and bears the risk of damage or loss in transit.

At its fiscal year-end of June 30,Kendall Wholesale's general ledger shows the following selected account balances.Kendall Wholesale uses the perpetual inventory system. A physical count of its June 30 year-end inventory discloses that the cost of the merchandise inventory still available is $58,160.Prepare the entry to record any inventory shrinkage.

By borrowing the money on the last day of the discount period and repaying it on the last day of the credit period,the loan would be outstanding for 20 days (30-10).Interest on the loan is calculated at 9% for 20 days.The amount saved is the difference between the discount received for paying on time and the amount of interest expense that would be paid to the bank.

Under the ______________ inventory accounting system,each purchase,purchase return and allowance,purchase discount,and transportation-in transaction is recorded in a separate temporary account.

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

Prentice Company had cash sales of $94,275,credit sales of $83,450,sales returns and allowances of $1,700,and sales discounts of $3,475.Prentice's net sales for this period equal:

A company purchased $1,800 of merchandise on July 5 with terms 2/10,n/30.On July 7,it returned $200 worth of merchandise.On July 28,it paid the full amount due.The correct journal entry to record the purchase on July 5 is:

A company purchased $4,000 worth of merchandise.Transportation costs were an additional $350.The company later returned $275 worth of merchandise and paid the invoice within the 2% cash discount period.The total amount paid for this merchandise is:

Fill in the blanks (a)through (g)for the Morrison Company for each of the income statements for 2014,2015,and 2016.

Following is the year-end adjusted trial balance for Fred's Corner Grocery for the current year: Prepare the closing entries at December 31 for the current year.

Jasper Company is a wholesaler that buys merchandise in large quantities.Its supplier's catalog indicates a list price of $500 on merchandise Jasper intends to purchase,and offers a 30% trade discount for large quantity purchases.The cost of shipping for the merchandise is $7 per unit.Jasper's total purchase price per unit will be:

On May 1,Anders Company purchased merchandise in the amount of $5,800 from Shilling,with credit terms of 2/10,n/30.Anders uses the perpetual inventory system.The journal entry or entries that Anders will make on May 1 is:

Juniper Company uses a perpetual inventory system.The company purchased $9,750 of merchandise on August 7 with terms 1/10,n/30.On August 11,it returned $1,500 worth of merchandise.On August 16,it paid the full amount due.The correct journal entry to record the purchase on August 7 is: