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Exam 4: Accounting for Merchandising Businesses

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Question 1

True/False

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Sales discounts is used in accounting for transactions with customers.

A) True
B) False

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Question 2

Multiple Choice

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Orange Co.sells merchandise on credit to Zea Co.in the amount of $9,000.The invoice is dated on September 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?

A) $180, September 30
B) $180, September 25
C) $90, September 30
D) $90, September 25

E) B) and D)
F) C) and D)

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C

Question 3

Multiple Choice

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Since merchandise inventory is normally sold within a year, how is it reported on the balance sheet?

Credit memorandum is issued by the seller to customers for return of damaged or defective merchandise.

​As a result of inventory shrinkage:

Prepare a multiple-step income statement for Surry Co.from the following data for the year ended December 31, 2016. ? Sales, $915,000; cost of merchandise sold, $670,000; administrative expenses, $30,000; interest expense, $12,000; rent revenue, $19,000; customer refunds and allowances, $55,000; selling expenses, $120,000.

The difference between sales and cost of goods sold for a retail business is:

If the seller is to pay the delivery expense of delivering merchandise, the delivery terms are stated as:

Which of the following refers to the arrangements between buyers and sellers regarding the payments for merchandise?

Discounts taken by the buyer for early payment of an invoice are called purchases discounts by the buyer.

Which of the following would not affect the operating activities section of the statement of cash flows, using the indirect method?

Which of the following is not considered when figuring net purchases?

To determine cash payments for operating expenses for the cash flow statement using the direct method, a decrease in prepaid expenses is added to operating expenses other than depreciation.

Repayments of bonds would be shown as a cash outflow in the investing section of the statement of cash flows.

Using a perpetual inventory system, the return of merchandise purchased on account includes a(n) :

If merchandise costing $2,500, terms FOB destination, 2/10, n/30, with prepaid transportation costs of $100, is paid within 10 days, the amount of the purchases discount is $48.

The following is a single-step income statement for the X.Bonds Company: $\begin{array} { c } \text { X. Bonds Company } \\\text { Income Statement } \\\text { For the Year Ended December 31, 2016 }\\\begin{array} { | l | r | r | } \hline \text { Revenues: } & & \\\hline \text { Net Sales } & \$ 300,000 & \\\hline \text { Interest Income } & 20,000 & \\\hline \text { Total Revenues } & & \$ 320,000 \\\hline \text { Expenses: } & & \\\hline \text { Cost of Goods Sold } & \$ 60,000 & \\\hline \text { Selling Expenses } & 25,000 & \\\hline \text { General and Administrative Expenses } & 30,000 & \\\hline \text { Interest Expense } & 14,000 & \\\hline \text { Income Tax Expense } & \underline { 45,000 } & \\\hline \text { Total Expenses } & & \underline { 174,000 } \\\hline \text { Net Income } & & \underline {\$146,000} \\\hline\end{array}\end{array}$ ? Refer to X.Bonds Company.If the income statement were prepared in a multiple-step format, gross profit would be:

Which of the following accounts is a contra account to Sales?

In credit terms of 1/10, n/30, the "10" represents the:

On January 1, a company made a sale of $87,500, on credit.If the credit terms were 2/10, n/30, what would be the amount of the sales discount be if the payment is received on January 9?