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Exam 5: Accounting for Merchandising Businesses

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Question 81

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If the physical count of the inventory revealed $72,000 of merchandise on hand and the inventory records reported $73,200, what would be the necessary adjusting entry to record inventory shortage?

A) Merchandise inventory debit $72,000; Cost of Merchandise Sold credit $72,000.
B) Merchandise inventory debit $1,200; Cost of Merchandise Sold credit $1,200.
C) Cost of Merchandise Sold debit $73,200; Merchandise Inventory credit $72,000.
D) Cost of Merchandise Sold debit $1,200; Merchandise Inventory credit $1,200.

E) A) and B)
F) All of the above

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Question 82

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Conquest Company uses a perpetual inventory system. Conquest purchased $1,500 of merchandise on account and payment was made within the discount period. The credit terms were 2/10,n/30. Journalize Conquest's purchase and payment.

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Question 83

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During the current year, merchandise is sold for $86,000 cash and for $93,950 on account. The cost of the merchandise sold is $76,240. What is the amount of the gross profit?

A sales invoice included the following information: merchandise price, $5,000; freight, $900; terms 1/10, n/eom, FOB shipping point. Assuming that a credit for merchandise returned of $700 is granted prior to payment and that the invoice is paid within the discount period, what is the amount of cash that should be received by the seller?

When the terms of sale are FOB shipping point, the buyer should pay the freight charges.

Under a periodic inventory system, the merchandise on hand at the end of the year is determined by a physical count of the inventory.

When a merchandising business is compared to a service business, the financial statement that is affected by that change is the retained earnings statement.

The effect of a sales return and allowance is a reduction in sales revenue and a decrease in cash or accounts receivable.

Based upon the following data, determine the cost of merchandise sold for August.

Journalize the following transactions for Sparky's Pet Shop. Assume Sparky's uses a perpetual inventory system. Omit explanations.

Under the perpetual inventory system, when a sale is made, both the sale and cost of merchandise sold are recorded.

Based on the information below, journalize the entries for the Seller and the Buyer. Both use a perpetual inventory system.

In credit terms of 3/15, n/45, the "3" represents the

Emma Co. sold Isabella Co. merchandise on account FOB shipping point, 2/10, net 30, for $25,000. Emma Co. prepaid the $500 shipping charge. Using the perpetual inventory method, which of the following entries will Isabella Co. make to record payment of the merchandise if Isabella Co. pays within the discount period?

When merchandise is sold for $600 plus 6% sales tax, the Sales account should be credited for $636.

What is the term applied to the excess of net revenue from sales over the cost of merchandise sold?

When a buyer returns merchandise purchased for cash, the buyer may record the transaction using the following entry

Which one of the following is not a difference between a retail business and a service business?

If the buyer bears the freight costs related to a purchase, the terms are said to be FOB destination.

The cost of merchandise inventory is limited to the purchase price less any purchase discounts.