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Exam 5: Accounting for Merchandising Businesses

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Question 1

True/False

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

A) True
B) False

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Question 2

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Which account is not classified as a selling expense?

A) Sales Salaries
B) Freight-Out
C) Freight-In
D) Advertising Expense

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

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Question 3

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Bargain Wholesalers sells pet supplies to retailers including Pet World Supplies.Bargain Wholesalers uses perpetual inventory.Use a General Journal to journalize the following three transactions during the month of May:

Calculate income from operations for Jonas Company based on the data given below:

On March 25,2014,Patton Company sold merchandise on account,$10,000.The applicable sales tax percentage is 8.5%.Record the transaction.

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

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

What is the major difference between a periodic and perpetual inventory system?

Cost of Merchandise Sold is often the largest expense on a merchandising company income statement.

Using a perpetual inventory system,the entry to record the return of merchandise purchased on account includes a

A retailer purchases merchandise with a catalog list price of $30,000.The retailer receives a 15% trade discount and credit terms of 2/10,n/30.How much cash will be needed to pay this invoice within the discount period?

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

If payment is due by the end of the month in which the sale is made,the invoice terms are expressed as n/30.

If the perpetual inventory system is used,an account entitled Cost of Merchandise Sold is included in the general ledger.

Journalize the following transactions for both Abbott Co.(seller)and Dalton Co.(buyer).Assume both the companies use the perpetual inventory system.

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

A seller may grant a buyer a reduction in selling price and this is called a sales allowance.

Generally,the revenue account for a merchandising business is entitled

Gross profit minus selling expenses equals net income.

Under a perpetual inventory system