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Exam 4: Reporting and Analyzing Merchandising Operations

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Question 101

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A single-step income statement includes cost of goods sold as another expense and shows only one subtotal for total expenses.

A) True
B) False

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Question 102

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Sabor Company, Inc. uses the gross method of accounting for purchases and a perpetual inventory system. It purchased $17,800 of merchandise on April 7 with credit terms of 1/10, n/30. Merchandise with a cost of $1,800 was damaged and returned to the seller on April 10. On April 16 the company paid the amount due. Prepare the journal entries to record the transactions on all three dates.

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Question 103

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Under a periodic inventory system, transactions for purchases, purchase returns and allowances, purchase discounts, and transportation-in transactions are recorded in the Merchandise Inventory account.

A ______________________ income statement includes cost of goods sold as another expense and shows only one subtotal for total expenses.

Beginning inventory plus net purchases equals:

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

Match the following terms with the appropriate definitions.

An expense resulting from failing to take advantage of cash discounts when using the net method of recording purchases is called:

Multiple-step income statements:

_________________ are the amounts and timing of payment from a buyer to a seller stated on the invoice.

The operating cycle for a merchandiser that makes only cash sales moves from:

Cash sales shorten the operating cycle for a merchandiser; credit sales lengthen operating cycles.

A period's beginning inventory is equal to the prior period's ___________________.

Non-operating activities reported on the income statement that include interest, dividend, and rent revenues, and gains from asset disposals are called _____________________________.

Fill in the blanks (a) through (g) for the Morrison Company, Inc. for each of the income statements for 2015, 2016, and 2017.

Prentice Company, Inc. 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 journal entry with a debit to cash of $980, a debit to Sales Discounts of $20, and a credit to Accounts Receivable of $1,000 means that a customer has taken a 10% cash discount for early payment. $20/$1,000 = 2% discount

Purchase allowances refer to merchandise a buyer acquires but then returns to the seller.

Craig's Snowboards, Inc. uses the gross method of accounting for sales and a perpetual inventory system and had the following sales transactions during June: Prepare the journal entries to record these transactions.

Credit terms of 2/10, n/30 imply that the seller offers the purchaser a 2% cash discount if the amount is paid within 10 days of the invoice date. Otherwise, the full amount is due in 30 days.