FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 4: Accounting for Merchandising Businesses

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 41

Multiple Choice

Review LaterAdd Note

Review Later

Llewelyn Company paid the balance due on an account payable. Llewelyn uses the perpetual inventory system. Which of the following reflects the effect of the payment on the financial statements?

A) Option A
B) Option B
C) Option C
D) Option D

E) B) and C)
F) C) and D)

Correct Answer

verified

Show Answer

Question 42

Multiple Choice

Review LaterAdd Note

Review Later

Ballard Company uses the perpetual inventory system. The company purchased $8,600 of merchandise from Andes Company under the terms 2/10, net/30. Ballard paid for the merchandise within 10 days and also paid $310 freight to obtain the goods under terms FOB shipping point. All of the merchandise purchased was sold for $16,200 cash. What is the amount of gross margin that resulted from these business events?

A) $8,600
B) $7,600
C) $7,462
D) $7,290

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

Correct Answer

verified

Show Answer

Question 43

True/False

Review LaterAdd Note

Like product costs, selling and administrative costs cannot be recognized as an expense until inventory has been sold.

Patty's Pet Shop experienced the following business events during its first year of operation:1)Borrowed $50,000 from the bank.2)Purchased merchandise on account, $44,000, terms 1/10, n/30.3)Paid for the merchandise purchased within the discount period.4)Sold merchandise on account for $51,000. The inventory sold had a cost of $28,000.5)Collected $41,500 on the merchandise sold on account.6)Paid operating expense of $17,000.7)Recognized accrued interest expense of $2,000.Required:a)What is the balance of the cash account at the end of Year 1?b)What are total assets at the end of Year 1?c)What is gross margin for Year 1?d)What is operating income for Year 1?e)What is net income for Year 1?f)What are total liabilities at the end of Year 1?g)What is total retained earnings at the end of Year 1?

At the beginning of the year, Superior Sales had $7,500 of merchandise inventory. During the year, the company purchased $72,000 of inventory. At the end of the year, a count of the inventory revealed that the business had $11,640 of inventory on hand. Superior uses the periodic inventory system.Required:a)What is cost of goods sold for the year?b)What is the amount of goods available for sale?c)What is the amount of inventory that will be shown on the year-end balance sheet?

Indicate whether each of the following statements is true or false. (Assume a perpetual inventory system.)________ a)The freight terms FOB shipping point increase the cost of inventory to the buyer.________ b)The term FOB means that goods are shipped free of charge to buyer and seller.________ c)FOB shipping point means that the purchaser's responsibility ends at freight point.________ d)FOB destination means that the seller's responsibility ends at destination.________ e)When goods are sold FOB shipping point, the seller will record transportation-out costs.

Butte Company recognized $24,000 of revenue on the cash sale of merchandise that cost $11,000. How will the sale be reported on the statement of cash flows?

On April 6, Year 1, Gringotts Company purchased $140,000 of merchandise inventory. Terms of the purchase included a discount of 3/20, n/30 and the freight terms were FOB destination. Freight costs amounted to $4,600. Gringotts paid the account payable on April 24. Gringotts sold all inventory for $189,500.Required:What is the amount of gross margin that will be shown on the income statement?

Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter dollar amounts. If an event increases one account and decreases another account equally within the same element (such as an asset exchange event), record I/D. If an event has no impact on the element, record NA.Increase = I Decrease = D Not Affected = NAWetzel Company paid $100 cash to a freight company for delivering inventory that Wetzel had purchased from Jacobs Company with freight terms FOB shipping point.

Mattress Warehouse experienced the following business events during December, its first month of operation. The company uses the perpetual inventory system. 1. Issued common stock for cash.2. Borrowed money from the Star City Bank issuing a note payable.3. Purchased inventory on account, terms 2/10, n/30, FOB shipping point.4. Returned part of the merchandise purchased in event #3.5. Paid freight costs on merchandise purchased in event #3.6. Sold merchandise for cash.(a)Recognized cash revenue from sale of merchandise.(b)Recognize cost of goods sold.7. Paid freight costs to deliver goods sold in event #6.8. Recorded the discount allowed in event #3.9. Recorded the payment for goods purchased in event #3.10. Accrued interest on the note payable issued in event #2. (The note is not due for several months.)Required:Complete the financial statements model shown below. Identify each event as asset source (AS), asset use (AU), asset exchange (AX), or claims exchange (CX). Also explain how each event affects the financial statements by placing a "+" for increase, "−" for decrease, "+−" for increase and decrease, or "NA" for not affected under each of the components of the following statements model. Also, indicate in the cash flow column if the event would be recorded as an operating activity (OA), an investing activity (IA)or a financing activity (FA). The first event is recorded as an example.

The write-off to record the amount of inventory shrinkage affects both the balance sheet and the income statement.

The following data is from the income statement of Ralston Company: What is the company's gross margin percentage? (Round your answers to three decimal places.) :

A company's chart of accounts includes, in part, the following account numbers and corresponding account titles: Which accounts would appear on the income statement?

Sales discounts affect net sales, but purchase discounts do not.

Which of the following statements regarding a multistep income statement is true?

Sanchez Company engaged in the following transactions during Year 1:1) Started the business by issuing $42,000 of common stock for cash.2) The company paid cash to purchase $26,400 of inventory.3) The company sold inventory that cost $16,000 for $30,600 cash.4) Operating expenses incurred and paid during the year, $14,000.Sanchez Company engaged in the following transactions during Year 2:1) The company paid cash to purchase $35,200 of inventory.2) The company sold inventory that cost $32,800 for $57,000 cash.3) Operating expenses incurred and paid during the year, $18,000.Note: Sanchez uses the perpetual inventory system. What is the amount of inventory that will be shown on the balance sheet at December 31, Year 2?

Indicate whether each of the following statements is true or false. (Assume a perpetual inventory system.)________ a)Transportation-out cost is a part of selling and administrative costs.________ b)When transportation-out cost is incurred, the balance in the inventory account increases.________ c)When transportation-in cost is incurred, the balance in the inventory account increases.________ d)When the transportation-out cost is incurred, the balance in the cost of goods sold account increases.________ e. Transportation-in cost is a part of selling and administrative costs.

SX Company sold merchandise on account for $16,000. The merchandise had cost the company $6,000. What is the effect of the sale on the income statement?

Indicate whether each of the following statements is true or false.________ a)A cash discount is extended to reward the buyer for purchasing large quantities of goods.________ b)A purchase discount refers to a cash discount as seen from the seller's viewpoint.________ c)A sales discount refers to a cash discount as seen from the buyer's view.________ d)In a perpetual inventory system, a sales discount is recorded as a reduction of sales revenue.________ e)In a perpetual inventory system, a purchase discount is recorded as a reduction of merchandise inventory.

James Company experienced the following events during its first accounting period:(1) Purchased $10,000 of inventory on account.(2) Returned $100 of inventory purchased in Event 1.(3) Sold the inventory for $12,000 cash.Based on this information, which of the following shows how the recognition of the return will affect the Company's financial statements?