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Exam 5: Accounting for Retail Businesses

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Question 131

True/False

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Cost of goods sold is often the largest expense on a merchandising company income statement.

A) True
B) False

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Question 132

Multiple Choice

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Match each of the following items (a-h) with the appropriate definition below. -Discount taken by the buyer for early payment of invoice.

A) Freight
B) Delivery Expense
C) Inventory
D) Sales discount
E) Purchases Returns and Allowances
F) Debit memo
G) Purchases discount
H) Trade discount

I) E) and F)
J) B) and F)

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Question 133

Multiple Choice

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Using a perpetual inventory system, the entry to record the return of merchandise purchased on account includes a

When the perpetual inventory system is used, the inventory sold is shown on the income statement as

Expenses that are incurred directly or entirely in connection with the selling of merchandise are classified as

If the seller is to pay the freight costs of delivering merchandise, the delivery terms are stated as

Determine the amount to be paid in full settlement of each invoice, assuming that credit for returns and allowances was received prior to payment and that all invoices were paid within the discount period.

The following data were extracted from the accounting records of Dana Designs for the year ended March 31. ​ Prepare the gross profit and cost of goods sold section of the income statement for the year ended March 31, using the periodic method. ​

In the merchandising income statement, sales will be reduced by administrative expenses to arrive at operating income.

select the following accounts would be included in the chart of accounts of a merchandising company using the (a) periodic inventory system, (b) perpetual inventory system, or (c) both systems?

Madison Company's perpetual inventory records indicate that $875,300 of merchandise should be on hand on October 31. The physical inventory indicates that $781,900 is actually on hand. Journalize the adjusting entry for the inventory shrinkage for Madison Company for the year ended October 31.

In a multiple-step income statement, the dollar amount for income from operations is always the same as net income.

When purchases of merchandise are made on account with a perpetual inventory system, the transaction is recorded with which entry?

Which of the following accounts usually has a debit balance?

On April 3, Villa Corp. returned merchandise that had a selling price of $1,200 for a cash refund. The merchandise originally cost $720. What is the effect on the accounting equation of the following entries for this return? ​ ​

If title to merchandise purchases passes to the buyer when the goods are shipped from the seller, the terms are

Using the following data taken from Payton Inc., which uses a periodic inventory system, determine the gross profit to be reported on the income statement for the year ended May 31. ​

Discuss the following statement: ​ "Operating cycles for all merchandising businesses are the same, with similar profit margins." ​ Include an example(s) to illustrate your explanation.

The following accounts and their current balances appear in the ledger of Cerelat Co. at the end of its fiscal year, June 30. Cerelat uses a periodic inventory system. ​ ​ ​ -A physical inventory at the end of June was $882,000. Estimated Returns Inventory is expected to increase to $16,500. What is Cerelat Co.'s income from operations for the year?

When comparing a retail business to a service business, the financial statement that changes the most is the