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Exam 4: Accounting for Merchandising Operations

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Question 131

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Credit terms for a purchase include the amounts and timing of payments from a buyer to a seller.

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Question 132

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Tahoe Ski Company uses the perpetual inventory system and the gross method of accounting for purchases.The company had the following transactions during January: January 6: $\quad$ Purchased $\$ 4,000$ of inventory. The seller's credit terms are $2 / 10 , n / 30$ January 8: $\quad$ Returned $\$ 200$ worth of defective units and received full credit January 15: Paid the amount due,less the returned items. Prepare journal entries to record each of the preceding transactions.

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January 6: Merchandise Invento...

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Question 133

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Prepare journal entries to record the following merchandising transactions of Margin Company,which applies the perpetual inventory system and the gross method of recording invoices.Margin Company offers all of its credit customers credit terms of 2/10,n/30. \begin{array}{|l|l|} \hline& \text { Purchased merchandise from Craft Company for } \$ 7,800 \text { under credit terms of } \\\text { May 1 } & 1 / 10, \mathrm{n} / 30, \mathrm{FOB} \text { shipping point, invoice dated May } 1 . \\\hline & \text { Purchased merchandise from Bow Company for } \$ 10,600 \text { under credit terms } \\\text { May 2 } & \text { Lo5, n/20, FOB destination. } \\\hline&\text { Sold merchandise to Sting Company for } \$ 5,600, \mathrm{FOB} \text { shipping point, invoice } \\\text { May 3 }&\text { dated May 4. The merchandise had cost } \$ 3,000 .\\\hline\text { May } 4 & \text { Paid } \$ 300 \text { cash for the freight charges on the May } 1 \text { purchase of merchandise. } \\\hline\text { May 5 } & \text { Received an } \$ 800 \text { credit memorandum from Craft Company for the return of } \\\hline\text { May 6 } & \text { Paid Bow Company the balance due within the discount period. }\\\hline&\text {Sold merchandise to Skeet Company for \$ 3,300, \mathrm{FOB} shipping point, invoice }\\\text {May 8 }&\text {dated May 8. The merchandise had a cost of \( \$ 1,500 \).}\\\hline\text {May 11 }&\text {Paid Craft Company the balance due within the discount period.}\\\hline\text {May 13}&\text { Received the balance due from Sting Company within the discount period.}\\\hline&\text { Issued a credit } \$ 300 \text { credit memorandum to Skeet Company for an allowance }\\\text {May 14}&\text { on defective merchandise.}\\\hline\text {May 17}&\text { Received the balance due from Skeet Company within the discount period.}\\\hline\end{array}

Describe the difference between wholesalers and retailers.

KLM Corporation's quick assets are $5,888,000,its current assets are $11,700,000 and its current liabilities are $8,000,000.Its acid-test ratio equals:

All of the following statements regarding sales returns and allowances are true except:

Merchandise inventory:

The following statements regarding gross profit are true except:

Offering sales discounts on credit sales can benefit a seller by decreasing the delay in receiving cash and reducing future collections efforts.

A merchandiser's classified balance sheet reports merchandise inventory as a current asset.

What are the steps of the operating cycle for a merchandiser with credit sales?

When a company has no reportable nonoperating activities,its income from operations is reported as ________.

A perpetual inventory system continually updates accounting records for merchandising transactions.

A merchandiser:

Prentice Company had cash sales of $94,275,credit sales of $83,450,sales returns and allowances of $1,700,and sales discounts of $3,475.Prentice's net sales for this period equal:

________ can benefit a seller by decreasing the delay in receiving cash and reducing future collection efforts.

A periodic inventory system requires updating of the inventory account only at the beginning of an accounting period.

________ expenses are those costs that support a company's overall operations and include expenses related to accounting,human resource management,and financial management.

Following is the year-end adjusted trial balance for Fred's Corner Grocery for the current year: Prepare the closing entries at December 31 for the current year.

Each sales transaction for a seller that uses a perpetual inventory system involves recognizing both revenue and cost of merchandise sold.