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Exam 4: Accounting for Merchandising Operations

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Question 91

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On September 12,Ryan Company sold merchandise in the amount of $5,800 to Johnson Company,with credit terms of 2/10,n/30.The cost of the items sold is $4,000. -Johnson uses the periodic inventory system and the net method of accounting for purchases.Johnson pays the invoice on September 18,and takes the appropriate discount.The journal entry that Johnson makes on September 18 is:

A) $\begin{array} { | l | r | r | } \hline \text { Purchases } & 5,684 & \\\hline \text { Cash } & & 5,684 \\\hline\end{array}$
B) $\begin{array} { | l | r | r | } \hline \text { Accounts payable } & 4,000 & \\\hline \text { Merchandise inventory } & & 80 \\\hline \text { Cash } & & 3,920 \\\hline\end{array}$
C) $\begin{array} { | l | r | r | } \hline \text { Accounts payable } & 5,800 & \\\hline \text { Purchases discounts } & & 116 \\\hline \text { Cash } & & 5,684 \\\hline\end{array}$
D) $\begin{array} { | l | r | r | } \hline \text { Accounts payable } & 5,684 & \\\hline \text { Cash } & & 5,684 \\\hline\end{array}$
E) $\begin{array} { | l | r | r | } \hline \text { Cash } & 5,684 & \\\hline \text { Purchases discounts } & 116 & \\\hline \text { Accounts payable } & & 5,806 \\\hline\end{array}$

F) B) and E)
G) B) and D)

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Question 92

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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 amount of the cash paid on July 28 equals:

A) $200.
B) $1,564.
C) $1,568.
D) $1,600.
E) $1,800.

F) A) and E)
G) D) and E)

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Question 93

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Beginning inventory plus net purchases is:

Which of the following accounts is used in the periodic inventory system but not used in the perpetual inventory system?

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

Match the following definitions with the appropriate terms. -A given percent deducted from a list price often granted to customers purchasing large quantities of merchandise.

A service company earns net income by buying and selling merchandise.

A retailer buys products from manufacturers and sells them to wholesalers.

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

Match the following definitions with the appropriate terms. -An income statement format that shows detailed computations of net sales and other costs and expenses,and reports subtotals for various classes of items.

Cost of Goods Sold is debited to close the account during the closing process.

A company has net sales of $825,000 and cost of goods sold of $547,000.Its net income is $98,500.The company's gross margin and operating expenses,respectively,are:

Under both the periodic and perpetual inventory systems,the temporary account Purchases Returns and Allowances is used to accumulate the cost of all returns and allowances for a period.

On September 12,Vander Company sold merchandise in the amount of $5,800 to Jepson Company,with credit terms of 2/10,n/30.The cost of the items sold is $4,000. -Vander uses the periodic inventory system and the gross method of accounting for sales.On September 14,Jepson returns some of the non-defective merchandise,which is restored to inventory.The selling price of the returned merchandise is $500 and the cost of the merchandise returned is $350.The entry or entries that Vander must make on September 14 is:

Harley's Antique Shop had net sales of $772,000.The gross profit was $415,000.Calculate Harley's cost of goods sold.

The seller is responsible for paying shipping charges and bears the risk of damage or loss in transit if goods are shipped FOB destination.

The gross method requires a period-end adjusting entry to estimate future sales discounts.

Martin Corporation allows customers to return merchandise within 60 days of purchase.At year-end,Martin estimates that sales of $20,000,with a cost of $14,000 will be returned in the upcoming year.The unadjusted balance in Inventory Returns Estimated is a debit of $4,000,and the unadjusted balance in Sales Refund Payable is a credit of $2,500.Prepare the adjusting entries necessary to record the revenue side and cost side estimates for returns and allowances.

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 company had net sales of $340,500,its cost of goods sold was $257,000,and its net income was $13,750.The company's gross margin ratio equals 24.5%.