ACCT 211 Read & Interact Chapter 4 Accounting for Merchandising Operations solutions complete answer

ACCT 211 Read & Interact Chapter 4 Accounting for Merchandising Operations solutions complete answers 

 

The formula for the acid-test ratio is computed as (  + cash equivalents + short-term investments + current receivables)/current liabilities.

 

The formula for the acid-test ratio is computed as (cash + short-term investments + current receivables)/__________.

 

Determine which of the definitions on the right go with the entity on the left.

 

The Discounts Lost account is used under the ___ method for inventory.

 

Assume that X-Men has an unadjusted Accounts Receivable balance of $10,000 and Allowance for Sales Discounts balance of $0. $1,000 of accounts receivable are within the 2% discount period and X-Men expects that buyers will take $20 in future-period discounts arising from this period's sales. The adjusting entry for sales discounts is:

 

Which of the following items are included in a merchandising company's income statement but are not included in a service company's income statement? (Check all that apply.)

 

Define the Discounts lost account by selecting the statements below that correctly describe this account. (Check all that apply).

 

The Allowance for Sales Discounts account:

 

Q-mart uses the periodic inventory system. A physical count of inventory revealed it had $6,000 of inventory remaining at year end. Given the partial list of accounts below, the entry to close the temporary credit balance accounts and update the Merchandise Inventory account would include all of the following. (Check all that apply.)

 

 

X-Mart uses the periodic inventory system to account for its merchandise. On May 1, it sold $1,400 of merchandise on credit. The original cost of the merchandise to X-Mart was $500. Demonstrate the required journal entry to record the sale by selecting all of the correct actions below. (Check all that apply.)

 

Under a periodic inventory system, purchases are

 

XYZ Company uses the periodic inventory system to account for its merchandise purchases. A physical count of inventory at year end revealed that $6,000 of inventory was on hand. Given the partial list of accounts below, show your understanding of the entry to close the temporary debit balance accounts and update the Merchandise Inventory account by selecting all of the correct answers below. (Check all that apply.)

 

 

Identify the items or sub-headings below that would appear on a multiple-step income statement. (Check all that apply.)

 

Under the periodic inventory system, a sale on account will result in the following journal entry:

 

Name the temporary accounts used to record the costs of merchandise purchased in a periodic inventory system. (Check all that apply.)

 

Summarize a periodic inventory system by selecting all of the correct statements below. (Check all that apply.)

 

Given the following information, analyze XYZ Company's liquidity. (Check all that apply.)

 

 

Under a periodic inventory system:

 

True or false: Merchandise inventory is generally converted to cash more quickly than accounts receivable.

 

A single-step income statement can be identified by which of the following formats?

 

Which of the statements below summarizes what the acid-test ratio measures?

 

Identify the statements below that are correct regarding the closing entries for a merchandiser using the perpetual inventory system. (Check all that apply.)

 

True or false: A single-step income statement shows only one subtotal for expenses.

 

Which of the following are the three main parts of a multiple-step income statement? (Check all that apply.)

 

A merchandiser has four closing journal entries at the end of an accounting cycle. Select the correct entries below. (Check all that apply.)

 

The balance sheet of a merchandiser and a service business have one major difference. Select the item below that would appear only on a merchandiser's balance sheet.

 

Sticky Company’s merchandise inventory balance at year end is $15,050, but a physical count reveals that only $15,000 of inventory exists. The adjusting entry to record the shrinkage includes: (Select all that apply).

 

Select the statements below that correctly describe the flow of costs in a merchandiser's accounting cycle. (Check all that apply.)

 

Identify the financial statements of a merchandiser. (Check all that apply.) 

 

Jo's Market makes a credit sale for $1,000 with terms of 2/10,n/30. The cost of the merchandise is $400. The required journal entry to record the sale and cost of the sale is:

 

Identify the statement below that is the correct definition of "shrinkage".

Shrinkage is the term used to refer to the loss of inventory due to theft, breakage or deterioration.

 

Sales is a(n) ______ account.

 

Gross profit is computed as net       minus cost of goods sold.

 

Which of the following equations correctly identify the cost flow of a merchandising company?

 

Jan's Jams makes a credit sale for $300 with terms of 2/10,n/30. The cost of the merchandise is $200. The required journal entry to record the sale and the cost of the sale is:

 

X-Mart purchased $300 of merchandise and paid immediately. Demonstrate the journal entry to record this transaction, assuming the perpetual inventory system is used.

 

Determine which statements below are correct regarding merchandise available for sale during a period.(Check all that apply.)

 

Sales Discounts is a contra-    account and is increased with a    .

 

XYZ Co. purchased merchandise on June 10 at a $5,000 invoice price with terms of 2/10,n/30 and paid for the merchandise on June 25. Illustrate the required entries to record and pay for this purchase under both the gross method and the net method by matching the action on the left with the method on the right. (Assume a perpetual inventory system is used.)

 

Show your understanding of a merchandiser by completing the following statement. Merchandisers earn net income by (buying/manufacturing)      and (selling/purchasing)      merchandise.

 

LOL Music Store uses the perpetual inventory system to account for its merchandise. On November 17, it purchased $1,000 of merchandise with terms of 2/5,n/60. If payment is made on November 21, demonstrate the required journal entry to record the payment by selecting all of the correct actions below.

 

Sticky Co. sold merchandise on August 5 at a $1,000 invoice price, net $980, with terms of 2/10,n/30 and received cash payment on August 14, within the discount period.

 

Determine its entry to record this sale and the subsequent receipt of cash under both the gross method and the net method by matching the action on the left with the method on the right. (Assume a perpetual inventory system.)

 

The discount period is the time     the invoice date and a specified date on which the payment amount owed can be     because of early payment.

 

Jello's Market purchased $1,000 of goods on account with terms of 2/10,n/30. They returned $200 of the goods due to defect the next day. If the company pays for the purchase within the discount period and uses the perpetual inventory system, the required journal entry to record the payment would:

 

Jo’s Market sold $1,000 of goods on credit with terms of 2/10,n/30. The original cost of the goods was $400. The required journal entry to record the sale and cost of the sale would be:

 

Review the following statements and select the one that best describes a discount period.



Merchandise Inventory can be described as: 

 

A sales return refers to merchandise that     return to the     after a sale for a refund of the purchase price or reduction in the amount owed.

 

Sticky Co. purchased merchandise on August 5 at a $1,000 invoice price with terms of 2/10,n/30 and paid for the merchandise on August 14. Determine its entry to record this purchase and the subsequent payment under both the gross method and the net method by matching the action on the left with the method on the right. (Assume a perpetual inventory system.)

 

Gross profit is calculated by taking the net __________ of a product and __________ the cost of goods sold.

 

X-Mart uses the perpetual Inventory system to account for its merchandise. On May 1, it sold $1,400 of merchandise on credit with terms of 1/10,n/40. Demonstrate the required journal entry to record the receipt of payment on May 25 by selecting all of the correct actions below. (Check all that apply.)

 

Merchandise consists of __________ that a company acquires to resell to __________.

 

Determine which of the following statements below regarding a merchandiser are correct.

 

On June 5, X-Mart purchased $400 of merchandise with the terms 2/10,n/30. If payment is made on June 11, calculate the purchase discount that may be taken by X-Mart.

 

If the seller is responsible for the shipping costs of merchandise sold, the shipping terms will be specified as:



Sales Discounts is a __________ account.



Sales is a(n)     account and is reported on the        .

 

Dogs R US uses the perpetual inventory system to account for its merchandise. On May 1, it returned $50 of the merchandise due to a defect. Assuming that the purchase was originally bought on credit, demonstrate the required journal entry to record by selecting all of the correct actions below.

 

Cost of goods sold is characterized by which of the following statements? (Check all that apply.)



ABC Co. purchased merchandise on August 5 at a $1,000 invoice price with terms of 2/10,n/30 and paid for the merchandise on August 14. Determine its entry to record this purchase and the subsequent payment under both the gross method and the net method by matching the action on the left with the method on the right. (Assume a perpetual inventory system.)

 

A cash discount can be summarized as a discount given to     to encourage them to pay    .

 

What is a purchase return?

 

Toys R Fun purchased $4,000 of merchandise and paid immediately. To record this transaction, Toys R Fun's accountant would debit the     account and credit the      account.

 

Explain what the credit terms of 2/10,n/30 mean.



On June 5, Jo’s Market sold $1,000 of goods on credit with terms of 2/10,n/30. How will Jo’s Market record the customer’s payment on June 8?

 

The components of a merchandiser’s multi-step income statement are shown below. In which order would they appear on the statement?

 

The buyer and seller must agree on who is responsible for paying freight terms. Selecting all of the correct statements



Which statement below correctly explains what merchandise inventory is?



Dos R US uses the perpetual inventory system to account for its merchandise. On May 1, it returned $50 of merchandise due to a defect. Assuming that the purchase was originally bought on credit, demonstrate the require journal entry to record the return by select all actions



On Dec. 7, Toys R Fun purchased $1,000 of merchandise with terms of 2/10, n/30. If payment is made on December 16, demonstrate the required journal entry for Toys R Fun to record the payment under the perpetual inventory system



X-mart purchased $300 of merchandise on account for resale. Demonstrate the journal entry to record this transaction, assuming the perpetual inventory system is used



The discount period is the time between  invoice date and a specified date on which the payment amount owed can be reduced because of early payment



A company uses the perpetual inventory system to account for its merchandise. A customer returns merchandise. Assuming that the purchase was originally bought on credit for $400 with a cost to company of 100. 



A factory uses the perpetual inventory system to account for its merchandise. On Nov. 2, it sold $700 of merchandise on credit with terms of 2/15, n/30. (receipt payment from customer on Nov. 13)

 

A purchase return refers to merchandise a buyer purchased, but then returns to the seller for a refund of the purchase price or reduction in the amount owed



What is a sales return?



X-mart uses the perpetual inventory system to account for its merchandise. On May. 1, it purchased $400 of merchandise on account with terms of 2/15, n/40. On May 3, it returned $50 of merchandise due to defect. Assuming that the purchase was paid for within the discount period



Demonstrate how to prepare a multiple-step income statement by ranking the items below in the order they would appear on a multiple-step income statement of a merchandiser



On May. 14, x-mart purchased $500 of merchandise with terms of 3/15, n/40. If payment is made on May 28, calculate the purchase discount that may be taken by x-mart



On Jan 5, a customer returned merchandise that had been purchased earlier on credit. The original sale was for $500, and the cost to the seller was $150. Demonstrate the required journal entry to record the return on the books of the seller, assuming the goods can be sold to another customer.

 

On Dec. 20, X-mart received a $100 allowance because the merchandise it purchased earlier in the month was of poor quality.

 

A merchandiser has four closing journal entries at the end of an accounting cycle



A periodic inventory system can be described as an inventory system that updates the inventory account only at the end of the period



Which of the statements below are correct regarding cost of goods sold?



To compute net income for a merchandiser, you will start with the net sales, subtract cost of goods sold and subtract other expenses



X- Mart uses the perpetual inventory system to account for its merchandise. On May. 1, it sold $1,400 of merchandise on credit. The original cost of the merchandise to X-Mart was $500



Identify the item below that would be added to the book balance?

 

The bank reconciliation of XYZ Co. is provided below. Demonstrate the entries needed to update the cash account in the general ledger by selecting the correct answers below?

 

Describe what a petty cash fund is by completing the following sentence. A petty cash fund is used for small(large/small) payments in order to avoid(increase/avoid) the time and cost of writing checks for small(large/small) amounts.

 

In preparing a monthly bank reconciliation, a business follows several steps. Place the selected steps below in the correct order of occurrence.

 

Identify the factors that cause the bank statement balance to differ from the depositor's book balance by matching each to its definition on the right?

 

Calculate the adiusted cash balance per the books of >NZ Co.given the following information. Balance per bank statement $600

 

Which of the following are correct regarding why management uses internal controls? (Check all that apply.)

 

Show your understanding of what a bank reconciliation is by completing the following sentence. A bank reconciliation is a(n) report( entry/charge/report,) explaining any differences between the checking (checking/subsidiary/sales) account balance according to the depositor's records and the balance reported on the bank (income/financial/bank) statement

 

Determine which of the statements below is true regarding the adjusted bank balance and the adjusted book balance on a bank reconciliation.

 

Review the following statements regarding a petty cash fund used in a business. Select the one that is correct.

 

Determine which of the statements below is correct regarding information reflected on a monthly bank statement?

 

A cash register tape reflected total sales equaling $100, but the cash In the cash register drawer equaled $105. Review the statements below and determine which Is correct regarding this discrepancy. (Check all that apply.)

 

Determine which of the items below would appear in the Checks and Debits column of a bank statement and would cause an increase in the account's balance. (Check all that apply.)

 

Summarize the document flow or steps In a voucher system by placing the following actions in their correct order of occurrence?

 

Gummy Co. purchased merchandise on June 10 at a $9,000 Invoice price with terms of 2/10,n/30 and paid for the merchandise on June 30. Illustrate the required entries to record and pay for this purchase under the gross method and net methods by matching the action on the left with the method on the right (Assume a perpetual Inventory system Is used.)

 

XYZ Co. decided to create a petty cash fund. They estimated that $100 would be needed in the fund. Demonstrate the correct journal entry to create the account by choosing the correct action from those below

 

Given the bank reconciliation below, show what the effect on the Cash balance in the general ledger will be by selecting the all of the correct answers below

 

Describe the internal control principle of separating record keeping from custody of assets by completing the following sentence. A person who controls (identifies/controls/recommends) or has access to an asset must not (always/not/) keep that asset's accounting records.

 

Choose the statement below which is correct regarding which bank reconciliation Items require adjusting journal entries.

 

Jackson Co. needs to replenish its petty cash fund. Currently, it contains $5 in cash and receipts for supplies of $40 and delivery expenses of $49. The fund was initially established with $100. Demonstrate the journal entry to replenish the account and recognize the cash shortage by choosing the correct actions from those given below. (Check all that apply.)

 

Review the items below and determine which would cause an increase in the monthly bank statement balance.

 

Review the items below and determine which would cause an decrease in the monthly bank statement balance.

 

Choose the Items below that would be subtracted from the book balance on a bank reconciliation. (Check all that apply.)

 

At the end of the month, Brown Co.'s petty cash fund contains $4 in cash and receipts for postage of $50 and delivery expenses of $46. It started out with $100 in the fund at the beginning of the month. Demonstrate the journal entry to replenish the account by choosing the correct action from those given below.

 

Liquidity refers to a company’s ability to pay for

 

Match the bankfngtenn on the left with its definition on the right.

 

Internal control policies and procedures have limitations that arise from many elements. Match the limitation on the left with Its definition on the right.

 

Determine which of the items below would appear in the Checks and Debits column of a bank statement and would cause a decline in the account's balance. (Check all that apply.)

 

Summarize the internal control principle of establishiing responsibility by completing the following sentence. Proper internal control means that responsibility for a task (task/shortage/sale) is clearly established (posted/established/compensated) and assigned to one person.

 

jackson brothers established a petty cash fun of 200 at the beginning of the year, but it decides to reduce the amount in the fund to 130 deomonstrate the correct journal entry to reduce the amount in the account

 

Explain how depositors can check for errors by completing the following sentence. Error testing includes (a) comparing deposits on the bank statement with deposits in the accounting (accounting/sales/customer) records and (b) comparing canceled(outstanding/canceled) checks on the bank statement with checks( checks/deposits) recorded in the accounting records.

 

Identify the examples of i<>od Internal controls deslO>ed to protect cash received In the mal. (Check all Iha! apply,)

 

Contrast how a depositor's account is classified by a bank compared to how It is classified by the account owner by completing the following sentence. A depositor's account is a(n) liability (liability/asset;expense) on the bank's records, but it is a(n) asset(liability/asset;expense) on the books of the account owner. Because of this, every time the account owner makes a deposit, the bank credits (debits/credits) the account owner's account.

 

Describe what a voucher system is by selecting the correct statement below.

 

Review the statements below to determine the correct definition of a debit memorandum.

 

Given the choices below, choose the examples of internal controls designed to control cash disbursements. (Check all that apply.)

 

Define what a voucher is by completing the following sentence. A voucher is an internal (internaljexternal) document (or file) used to accumulate information to control (reduce/control) cash disbursements and to ensure t hat a transaction is properly recorded.

 

 

2.
The components of a merchandiser's multi-step income statement are shown below. In which order would they appear on the statement?
 
 
3.
Costs of Goods Sold
 
 
4.
Discount Period
 
 
5.
Dogs R US uses the perpetual inventory system to account for its merchandise. A customer returned merchandise. Assuming that the purchase was originally bought on credit for $400 with a cost to Dogs R US of $100, demonstrate required journal entry of Dogs R US to record the return.
 
 
7.
Explain what the credit terms of 2/10,n/30 mean.
 
 
12.
Merchandiser
 
 
13.
Merchandiser
 
 
16.
A purchase return refers to merchandise a (buyer/seller/creditor) purchased, but then returns to the (buyer/seller/creditor) for a refund of the purchase price or reduction in the amount owed.
 
 
17.
Retailer
 
 
21.
Sally Beauty Warehouse uses the perpetual inventory system to account for its merchandise. On Nov. 2, it sold $700 of merchandise on credit with terms of 2/15,n/30. Demonstrate the required journal entry to record the receipt of payment from the customer on Nov 13.
 
 
23.
Wholesaler
 
 
24.
X-Mart uses the perpetual inventory system to account for its merchandise. On May 1, it sold $1400 of merchandise on credit. The original cost of the merchandise to X-Mart was $500. Demonstrate the required journal entry to record the sale and the cost of the sale.
 
 
 
 
 
 
 
 
 
 
 
 

1.
 
 
Multiple-Step Income Statement: put these items below in the order that they would appear
-Income from operations
-Other revenues and expenses
-Gross profit
-Cost of goods sold
-Sales
-Operating expenses
2.
 
 
On May 14, X-Mart purchased $500 of merchandise with terms of 3/15, n/40. If payment is made on May 28, calculate the purchase discount that may be taken by X-Mart.
a. $15
b. $70
c. $20
d. $75
3.
 
 
Calculate the total cost of merchandise purchased using the information in the following table:
Invoice cost of merchandise purchases: $40,000
Purchase discounts received: $3,000
Cost of transportation-in (shipping): $500
Costs of purchase returns and allowances: $100

a. $37,400
b. $37,600
c. $40,000
d. $36,500
6.
 
 
Identify the statements below which summarize what cash discounts are. (Check all that apply).
a. Cash discounts are described in credit terms
b. A seller views a cash discount as a sales discount
c. A reduced payment applies to the discount period
d. A reduced payment applies to the credit period
e. A buyer views a cash discount as a purchase discount
f. Sellers can grant a cash discount to encourage buyers to pay earlier
g. A seller views a cash discount as a purchase discount
7.
 
 
A merchandiser has four closing journal entries at the end of an accounting cycle. Select the correct entries below.
a. Close the income summary account
b. Close revenue accounts
c. Close the merchandise inventory account
d. Close asset accounts
e. Close the withdrawals account
f. Close expense accounts
8.
 
 
Given the following information, analyze XYZ Company's gross margin ratio. (Check all that apply.)
Gross margin: $3,200 (2014); $3,210 (2013)
Net sales: $10,400 (2014); $11,200 (2013)
Gross margin ratio: 30.7% (2014); 28.7% (2013)

a. In 2014, they have approximately 30.7 cents of every dollar of sales to help cover other expenses of running the business
b. They are not making any profit on the sales of their merchandise
c. Their gross margin ratio has improved since 2013
d. Their gross margin has decreased since last year
10.
 
 
Which of the statements below summarize why a seller would give a sales allowance? (Check all that apply.)
a. In order to entice a customer to keep damaged or defective merchandise, the seller is willing to decrease the selling price
b. The buyer purchased a large amount of merchandise and was eligible for a reduced purchase price
c. Sold merchandise was defective or unacceptable
d. The buyer could no pay within the discount period
e. The seller wants to avoid future lost sales
f. The seller wants to keep a customer happy
11.
 
 
X-Mart uses the perpetual inventory system to account for its merchandise. On May 1, it sold $1,400 of merchandise on credit. The original cost of the merchandise to X-Mart was $500. Demonstrate the required journal entry to record the sale and the cost of the sale by selecting all of the correct actions below. (Check all that apply)
a. Debit Cost of Goods Sold $500
b. Credit Cost of Goods Sold $500
c. Debit Accounts Receivable $1,400
d. Credit Accounts Receivable $1,400
e. Debit Sales $1,400
f. Credit Merchandise Inventory $500
g. Credit Sales $1,400
h. Debit Merchandise Inventory $500
12.
 
 
Equation for Acid-test ratio
 
 
 
 
 
 
 
 
 
 

17.
 
 
 
19.
 
 
 
20.
 
 
Given the partial list of accounts below, the entry to close the temporary credit balance accounts would include a:
Sales - Cr. $20,000
Sales Discounts - Dr. $500
Cost of Goods Sold - Dr. $1,900
Merchandise Inventory - Dr. $5,000
Accounts Payable - Cr. $500
Owner, Capital - Cr. $10,000

a. credit to Income Summary, $30,000
b. credit to Income Summary, $20,000
c. credit to Income Summary, $30,500
d. credit to Income Summary, $19,500
23.
 
 
How do you compute net income for a merchandiser.
a. Revenues - expenses
b. Net sales - cost of goods sold - other expenses
c. Cost of goods sold - other expenses
d. Net sales - cost of goods sold
 
 
 
 
 
 
 

24.
 
 
A purchase return refers to merchandise a __________ purchased, but then returns to the __________ for a refund of the purchase price or reduction in the amount owed.
25.
 
 
Explain what a debit memorandum is by completing the following sentence.

When a buyer returns or takes an allowance on merchandise, the __________ issues a debit memorandum to inform the __________ of a debit made to the seller's account in the buyer's records.
27.
 
 
Merchandisers earn net income by __________ and __________ merchandise.
28.
 
 
A sales allowance can be described as:
a. the implied interest paid when not taking advantage of a sales discount
b. the reduction in the sales price of an item because of the quantity purchased
c. a reduction in the selling price of defective or unacceptable merchandise sold to customers
d. a discount given by the seller of merchandise for early payment
29.
 
 
Which statement describes a perpetual inventory system?
a. automatically order inventory from suppliers when it reaches a certain level
b. maintains a continuous level of inventory on the shelves of a merchandiser
c. continually updates accounting records for merchandise transactions
d. updates the accounting records for merchandise transactions only at the end of the period
31.
 
 
Which of the statements below are correct regarding cost of goods sold?
a. Cost of goods sold can be determined by subtracting the cost of merchandise sold from its sales price
b. Cost of goods sold is an asset account reported on the balance sheet
c. Cost of goods sold is the expense of buying and preparing merchandise
d. Cost of goods sold is the price received from selling a product
32.
 
 
On Dec. 7, Toys R Fun purchased $1,000 of merchandise with terms of 2/10, n/30. If payment is made on December 16, demonstrate the required journal entry for Toys R Fun to record the payment under the perpetual inventory system.
a. Debit Accounts Payable $1,000; credit Cash $1,000
b. Debit Merchandise Inventory $20; debit Cash $980; credit Accounts Payable $1,000
c. Debit Accounts Payable $1,000; credit Cash $980; credit Merchandise Inventory $20
d. Debit Accounts Payable $1,000; credit Cash $1,000; credit Purchase Discounts $20
33.
 
 
Jerry's Flowers sold and shipped merchandise across the country to a buyer. The terms were FOB destination. Assuming it paid the bill immediately, demonstrate the journal entry required by Jerry's Flowers under the perpetual inventory system to record the freight charges.
a. Debit Merchandise Inventory; credit Cash
b. Debit Sales; credit Cash
c. Debit Delivery Expense, credit Cash
d. Debit Merchandise Inventory; credit Freight-Out
 
 
 
 
 
 
 

34.
 
 
Which statement below correctly explains what merchandise inventory is?
a. Merchandise Inventory is an expense account reported on the income statement and contains the cost of products purchased for sale
b. Merchandise Inventory is increased when products are sold to customers
c. Merchandise Inventory is an asset reported on the balance sheet and contains the cost of products purchased for sale
d. Merchandise Inventory is subtracted from net sales on the income statement to determine gross profit for the period
35.
 
 
Recall that Merchandise Inventory is considered a(n) (current/plant/intangible)      asset on the (balance/income)       (sheet/statement)      of a merchandiser using the periodic inventory system.
36.
 
 
Review the following credit terms and identify the one that states that the buyer will receive a 3% discount if the payment is made within 15 days. Otherwise, full payment is expected within 45 days of the invoice date.
a. 3/45, n/15
b. 3/15, eom/45
c. 3/10, n/45
d. 3/15, n/45
37.
 
 
A purchase allowance can be described as:
a. the implied interest paid when not taking advantage of a purchase discount
b. a discount given by the seller of merchandise for early payment
c. the reduction in the sales price of an item because of the quantity purchased
d. a reduction in the cost of defective or unacceptable merchandise that a buyer acquires
38.
 
 
ABC Mart received a $20 freight bill for merchandise it purchased with freight terms of FOB shipping point. ABC Mart uses a perpetual inventory system. Assuming it paid the bill immediately, demonstrate the journal entry required to record the freight charges
a. Debit Freight In $20; credit Cash $20
b. Debit Freight In $20; credit Merchandise Inventory $20
c. Debit Transportation In $20; credit Cash $20
d. Debit Merchandise Inventory $20; credit Cash $20
41.
 
 
X-Mart uses the perpetual inventory system to account for its merchandise. A customer who purchased merchandise on account requested an allowance on a merchandise purchase due to its poor quality, but he did not return the goods back to X-Mart. Assuming that X-mart gives an allowance of $50 on the merchandise, demonstrate the required journal entry on X-Mart's books to record the allowance.
43.
 
 
Equation for Gross margin ratio
 
 
 
 
 
 
 

44.
 
 
Toys R Fun purchased $4,000 of merchandise for resale and paid immediately. To record this transaction, Toys R Fun's accountant would debit the __________ account and credit the __________ account.
45.
 
 
Earns net income by buying and selling products
46.
 
 
The components of a merchandiser's multi-step income statement are shown below. In which order would they appear on the statement?
-Expenses
-Net Sales
-Gross Profit
-Net Income
-Cost of goods sold
47.
 
 
A __________ inventory system can be described as an inventory system that updates the inventory account only at the end of the __________.
49.
 
 
An intermediary that buys products from manufacturers or wholesalers and sells them to consumers
51.
 
 
When a seller grants an allowance on a previous sale, the __________ issues a credit memorandum to inform the __________ of a credit made to the buyer's Account Receivable in the seller's records.
52.
 
 
Under which method of accounting are current assets listed in order from most liquid to least liquid required?
53.
 
 
An intermediary that buys products from manufacturers and sells them to retailers or wholesalers
 

1.
ABC Mart received a $20 freight bill for merchandise it purchased with freight terms of FOB shipping point. ABC Mart uses a perpetual inventory system. Assuming it paid the bill immediately, demonstrate the journal entry required to record the freight charges.
 
 
2.
The buyer and seller of merchandise must agree on who is responsible for paying freight terms. Show your understanding of freight by selecting all of the correct statements below. (Check all that apply.)
 
 
3.
A cash discount can be summarized as a discount given to (Buyers/Creditors/Sellers) to encourage them to pay (earlier/later/less/more).
 
 
4.
Cost of goods sold is characterized by which of the following statements? (Check all that apply.)
 
 
5.
Determine which of the definitions below describes gross profit
 
 
6.
Determine which of the following statements about merchandise is correct.
 
 
8.
Dogs R US uses the perpetual Inventory system to account for its merchandise. A customer returned merchandise due to a defect. Assuming that the purchase was originally bought on credit for $400 with a cost to Dogs R US of $100, and tile defective, returned merchandise Is only estimated to be worth $30, demonstrate the required journal entry to record the return and to write down the defective merchandise by selecting all of tile correct actions below. (Check all that apply.)
 
 
9.
Dogs R US uses the perpetual Inventory system to account for its merchandise. A customer returned merchandise due to a defect. Assuming that the purchase was originally bought on credit for $400 with a cost to Dogs R US of $100, and tile defective, returned merchandise Is only estimated to be worth $30, demonstrate the required journal entry to record the return and to write down the defective merchandise by selecting all of tile correct actions below. (Check all that apply.)
 
 
10.
Dogs R US uses the perpetual Inventory system to account for its merchandise. A customer returned merchandise due to a defect. Assuming that the purchase was originally bought on credit for $400 with a cost to Dogs R US of $100, and tile defective, returned merchandise Is only estimated to be worth $30, demonstrate the required journal entry to record the return and to write down the defective merchandise by selecting all of tile correct actions below. (Check all that apply.)
 
 
 
 
 
 
 
 
 
 
 
 

11.
Dogs R US uses the perpetual inventory system to account for its merchandise. On May 1, it returned $50 of merchandise due to a defect. Assuming that the purchase was originally bought on credit, demonstrate the required journal entry to record the return by selecting all of the correct actions below. (Check all that apply.)
 
 
12.
Explain what a credit memorandum is by completing the following sentence.
 
 
13.
Explain what the credit terms of 2/10, n/30 mean. (Check all that apply.)
 
 
14.
Given the partial list of accounts below, the entry to close the temporary debit balance account would include is:
 
 
15.
Identify the statements below which are correct regarding a merchandiser's multi-step income statement.
 
 
16.
If the seller is responsible for the shipping costs of merchandise sold, the shipping terms will be specified as:
 
 
17.
Jerry's Flowers sold and shipped merchandise across the county to a buyer. The terms were FOB destination. Assuming It paid the bill immediately, demonstrate the Journal entry required by Jerry's Flowers under the perpetual Inventory system to record the freight charges.
 
 
18.
LOL Music Store uses the periodic inventory system to account for its merchandise. On November 17, it purchased $ 1,000 of merchandise with terms of 2/5,n/60. If payment is made on November 21, demonstrate the required journal entry to record the payment by selecting a/I of the correct actions below. (Check all that apply.)
 
 
19.
LOL Music Store uses the periodic inventory system to account for its merchandise. On November 17, it purchased $ 1,000 of merchandise with terms of 2/5,n/60. If payment is made on November 21, demonstrate the required journal entry to record the payment by selecting a/I of the correct actions below. (Check all that apply.)
 
 
21.
A merchandiser has four closing journal entries at the end of an accounting cycle. (Select all that apply.)
 
 
22.
On June 5, Jo's Market sold $1,000 of goods on credit with terms of 2/10, n/30. The required journal entry to record Jo's Market customer's payment on July 6 would be:
 
 
23.
On May 14, X-Mart purchased $500 of merchandise with terms of 3/15, n/40. If payment is made on May 28, calculate the purchase discount that may be taken by X-Mart.
 
 
 
 
 
 
 
 
 

24.
A (periodic/perpetual) inventory system can be described as an inventory system that updates the inventory account only at the end of the period (purchase/period)
 
 
25.
A purchase return refers to merchandise a (buyer/seller/creditor) purchased, but then returns to the (buyer/seller/creditor) for a refund of the purchase price or reduction in the amount owed.
 
 
26.
Review the following statements and select the ones that best describe a discount period.
 
 
27.
Review the statements below and select the one that accurately describes a periodic inventory system.
 
 
28.
Review the statements below and select the one that explains the purpose of a sales discount.
 
 
29.
A sales allowance can be described as:
 
 
30.
Sales Discount is a
 
 
31.
Sales is a(n) (expense/revenue/asset) account and is reported on the (income/balance) (Statement/Sheet).
 
 
32.
A sales return refers to merchandise that (customers/seller/creditors) return to the (Customer/Seller/Creditor)
 
 
33.
Sally Beauty Warehouse uses the perpetual inventory system to account for its merchandise. On Nov 2, It sold $700 of merchandise on credit with terms of 2/15,n/30. Demonstrate the required journal entry to record the receipt of payment from the customer on Nov 13, by selecting all of the correct actions below. (Check all that apply.)
 
 
34.
To compute net Income for a merchandiser, you will start with net sales, subtract cost of goods sold and subtract other?
 
 
35.
Toys R Fun purchased $4,000 of merchandise for resale and paid immediately. To record this transaction, Toys R Fun's accountant would debit the (Merchandise Inventory/Accounts Payable/Cash) account and credit the (Cash/Merchandise Inventory/Accounts Payable) account.
 
 
36.
Which statements below correctly explains what merchandise inventory is?
 
 
37.
X-Mart uses the perpetual inventory system to account for its merchandise. A customer who purchased merchandise on account requested an allowance on merchandise purchase due to its poor quality, but did not return the goods back to X-Mart. Assuming that X-Mart gives an allowance of $50 on the merchandise, demonstrate the required journal entry on X-Mart's books to record the allowance by selecting all of the correct actions below. (Check all that apply.)
 
 
38.
X-Mart uses the perpetual inventory system to account for its merchandise. On June 1, it sold $7,000 of merchandise for cash. The original cost of the merchandise t o X-Mart was $500. Demonstrate the required journal entry to record the sale and the cost of the sale by selecting all of the correct actions below. (Check all that apply.)
 
 
39.
X-Mart uses the perpetual inventory system to account for its merchandise. On May 1, it sold $1,400 of merchandise on credit. The original cost of the merchandise to X-Mart was $500. Demonstrate the required journal entry to record the sale and the cost of the sale by selecting all of the correct actions below. (Check all that apply.)
 
 
 
 
 
 
 
 
 

41.
XYZ Company uses a periodic inventory system to account for its merchandise purchases. A physical count of inventory at year end revealed that $6,000 of inventory was on hand
 
 
 

1.
The balance sheet of a merchandiser and a service business have one major difference. What is one item that would appear only on a merchandiser's balance sheet.
 
 
4.
Cost of goods sold is characterized by:
 
 
7.
Credit terms of n/15 EOM were printed on an invoice. Explain what this means.
 
 
8.
Demonstrate how t prepare a multiple-step income statement by ranking the items in the order they would appear on a multi-step income statement of a merchandiser.
 
 
9.
Describe good cash management practices involving inventory purchases.
 
 
11.
Dogs R US uses the perpetual inventory system to account for its merchandise. A customer returned this merchandise due to a defect. Assuming that the purchase was originally bought on credit for $400 with a cost to Dogs R US of $100, and the defective, returned merchandise is only estimated to be worth $30, demonstrate the required journal entry to record the return and to write down the defective merchandise.
 
 
15.
Jerry's Flowers sold and shipped merchandise across the country to a buyer. The terms were FOB destination. Assuming it paid the bill immediately, demonstrate the journal entry required by Jerry's Flowers under the perpetual inventory system to record the freight charges.
 
 
19.
The merchandise inventory account on a classified balance sheet is reported in the:
 
 
20.
Merchandise inventory is an _______ reported on the _____________ ______ and contains the cost of products purchased for sale.
 
 
21.
Complete the following statement. Merchandise inventory that is still available for sale is considered a(n) ________ (asset/expense/revenue) and is reported on the ____________ (balance sheet/income statement) and merchandise that is sold during the period is considered a(n) _______ (asset/expense/liability) and reported on the ____________ (balance sheet/income statement).
 
 
23.
A merchandiser has four closing journal entries at the end of an accounting cycle. What are they?
 
 
24.
Merchandisers earn net income by (buying/manufacturing) and (selling/purchasing) merchandise.
 
 
25.
On Dec. 20, X-Mart received a $100 allowance because the merchandise it purchased earlier in the month was of poor quality. Demonstrate the required journal entry for the return assuming the perpetual inventory method, to record the allowance on X-Mart's books--assuming the purchase was made on account.
 
 
 
 
 
 
 
 
 
 
 

28.
A (periodic/perpetual) inventory system can be described as an inventory system that updates the inventory account only at the end of the (purchase/period).
 
 
29.
Perpetual Inventory System
 
 
33.
A single-step income statement can be identified by which format?
 
 
34.
Sticky Company's merchandise inventory balance at year end is $15050, but a physical count reveals that only $15,000 of inventory exists. The adjusting entry to record the shrinkage includes a debit to __________________ for $_____ and a credit to ___________________ for $_____.
 
 
35.
To compute net income for a merchandiser, you will start with net sales, subtract cost of goods sold and subtract other ___________.
 
 
36.
What is included in Merchandise Inventory?
 
 
37.
What is the purpose of a sales discount?
 
 
38.
What items are included in ta merchandising company's income statement but are not included in a service company's income statement?
 
 
39.
What sub-headings would appear on a multiple-step income statement?
 
 
40.
When a company, using the periodic inventory system completes a worksheet.....
 
 
41.
Which are the two classifications of operating expenses on a multiple-step income statement?
 
 
42.
Which Inventory System is described; Net Income will be reported when the credit column total is larger than the debit column total of the Income Statement columns. The cost of goods sold will be reported in the debit column of the Income Statement columns. The sales Discounts account will appear in the debit column of the Income Statement columns. The depreciated Expense will be reported in the debit column of the income Statement columns.
 
 
43.
Which order would a merchandisers multi-step income statement appear?
 
 
 
 
 
 
 
 
 

45.
Why is perpetual inventory systems becoming more popular?
 
 
46.
X-Mart uses the perpetual inventory system to account for its merchandise. A customer who purchased merchandise on account requested an allowance on merchandise purchase due to its poor quality, but did not return the goods back to X-Mart. Assuming that X-Mart gives an allowance of $50 on the merchandise, demonstrate the required journal entry on X-Mart's books to record the allowance.
 
 
47.
X-Mart uses the perpetual inventory system to account for its merchandise. On June 1, it sold $7000 of merchandise for cash. The original cost of the merchandise to X-Mart was $500. Demonstrate the required journal entry to record the sale and the cost of the sale.
 
 
48.
X-Mart uses the perpetual inventory system to account for its merchandise. On May 1, it purchased $400 of merchandise on account with terms 2/15, n/40. On May 3, X-Mart returned $50 of merchandise due to defect. Assuming that the purchase was paid for within the discount period, demonstrate the required journal entry for X-Mart to record the payment.
 
 
49.
X-Mart uses the perpetual inventory system to account for its merchandise. On May 1, it sold $1400 of merchandise for cash. The original cost of the merchandise to X-Mart was $500. Demonstrate the required journal entry to record the sale and the cost of the sale.