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Exam 5: Accounting for Merchandising Businesses

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Question 41

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The accounts Purchases, Purchases Returns and Allowances, Purchases Discounts, and Freight In are found on the balance sheet.

A) True
B) False

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Question 42

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The following data for the current year ended June 30 were extracted from the accounting records of Excel Co.: Prepare a multiple-step income statement for the year ended June 30, 2011.

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Question 43

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Marshall Supplies is a janitorial supply store. Marshall Supplies uses perpetual inventory. Use a General Journal to journalize the following four transactions during the month of July:

When the three sections of a balance sheet are presented on a page in a downward sequence, it is called the

Maxi Company's perpetual inventory records indicate that $651,900 of merchandise should be on hand on October 31, 2010. The physical inventory indicates that $624,300 is actually on hand. Journalize the adjusting entry for the inventory shrinkage for Maxi Company for the year ended October 31, 2010.

The seller may prepay the freight costs even though the terms are FOB shipping point.

Purchases of merchandise are typically credited to the merchandise inventory account under the perpetual inventory system.

Details of invoices for purchases of merchandise are as follows: Determine the amount to be paid in full settlement of each of the invoices, assuming that credit for returns and allowances was received prior to payment and that all invoices were paid within the discount period.

Journalize the following transactions for both Abbott Co. (seller) and Dalton Co. (buyer).

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

Using the following information, what is the amount of gross profit?

Isaac Co. sells merchandise on credit to Sonar Co in the amount of $9,600. The invoice is dated on April 15 with terms of 1/15, net 45. What is the amount of the discount and up to what date must the invoice be paid in order for the buyer to take advantage of the discount?

Discounts taken by the buyer for early payment of an invoice are credited to Sales Discounts by the buyer.

Cost of merchandise sold is the amount that the merchandising company pays for the merchandise it intends to sell.

The adjusting entry to record inventory shrinkage would generally include a debit to Cost of Merchandise Sold.

Multiple-step income statements show

Selected accounts and amounts appear below. Journalize the closing entry, assuming a perpetual inventory system.

When purchases of merchandise are made for cash, the transaction may be recorded with the following entry

When merchandise is returned under the perpetual inventory system, the buyer would credit

Travis Company purchased merchandise on account from a supplier for $7,500, terms 2/10, net 30. Travis returned $1,350 of the merchandise and received full credit. Travis Company paid for the merchandise within the discount period. Under a perpetual inventory system, record all of the journal entries required for the above transactions.