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Exam 5: Accounting for Merchandising Businesses

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Question 1

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Based upon the following data for a business with a periodic inventory system,determine the cost of merchandise sold for August.

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Question 2

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If title to merchandise purchases passes to the buyer when the goods are delivered to the buyer,the terms are

A) consigned
B) n/30
C) FOB shipping point
D) FOB destination

E) A) and C)
F) A) and D)

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Question 3

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

A seller may grant a buyer a reduction in selling price and this is called a customer discount.

The journal entry to record the receipt of inventory purchased for cash in a perpetual inventory system would be

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

Using a perpetual inventory system,the entry to record the purchase of $30,000 of merchandise on account would include a

There is no difference between the recording of cash sales and the recording of MasterCard or VISA sales.

Gadget Palace is a retailer selling unique hardware.Gadget Palace uses a perpetual inventory system.Journalize the following transactions: On July 5,Gadget Palace purchases inventory for sale from Turbo Tools for $11,400.00 with terms 2/10,n/30. On July 6,Gadget Palace pays Fast Truck Transport $75.00 for freight-in on the July 5 order. On July 8,Gadget Palace receives a credit memo from Turbo Tools for $215.00 for damaged merchandise. On July 15,Gadget Palace pays Turbo Tools the balance due.

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

The proper journal entry to record the receipt of inventory purchased on account in a periodic inventory system would be

Sales to customers who use bank credit cards,such as MasterCard and Visa,are generally treated as

The form of the balance sheet in which assets,liabilities,and stockholders' equity are presented in a downward sequence is called the report form.

Which of the following items would not affect the cost of merchandise inventory acquired during the period?

Freight-in is considered a cost of purchasing inventory.

Merchandise subject to terms 2/10,n/30,FOB shipping point,is sold on account to a customer for $25,000.What is the amount of the sales discount allowable?

Merchandise is sold for cash.The selling price of the merchandise is $6,000 and the sale is subject to a 7% state sales tax.The journal entry to record the sale would include a credit to

Which of the following accounts has a normal credit balance?

Prepare a multiple-step income statement for Armstrong Co.from the following data for the year ended December 31. Sales,$755,000; cost of merchandise sold,$330,000; administrative expenses,$35,000; interest expense,$30,000; rent revenue,$25,000; selling expenses,$50,000.

On the income statement in the single-step form,the total of all expenses is deducted from the total of all revenues.