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Exam 5: Accounting for Retail Businesses

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Question 121

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Abbey Co. sold merchandise to Gomez Co. on account, $35,000, terms 2/15, net 45. The cost of the goods sold was $24,500. Abbey Co. issued a credit memo for $3,600 for merchandise returned that originally cost $1,700. Gomez Co. paid the invoice within the discount period. What is the amount of gross profit earned by Abbey Co. on the above transactions?

A) $10,500
B) $30,772
C) $7,972
D) $31,400

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

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Question 122

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Sales is equal to the cost of goods sold less the gross profit.

A) True
B) False

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Question 123

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Conquest Company uses a perpetual inventory system. Conquest purchased $1,500 of merchandise on account and payment was made within the discount period. The credit terms were 2/10, n/30. Journalize Conquest's purchase and payment.

Under a periodic inventory system, the accounts Purchases, Purchases Returns and Allowances, Purchases Discounts, and Freight In are found on the balance sheet.

Using the following data taken from Payton Inc. which uses a periodic inventory system, prepare the cost of goods sold section of the income statement for the year ended May 31.​

Assume that the total inventory counted at the end of the year was $75,000. Excluded from the count were purchases of $5,000 in transit under FOB destination terms. What is the cost of inventory reported on the balance sheet?

Because many companies use computerized accounting systems, periodic inventory is widely used.

Purchases of merchandise are typically credited to the inventory account under the perpetual inventory system.

Selected data from the ledger of Beck Co., after adjustments, on September 30, the end of the fiscal year, are listed as follows: Prepare a single-step income statement and a statement of stockholders' equity. No stock was issued during the year.

Match each of the following terms (a-h) with the correct definition below. -Statement that includes subtotals for sales, gross profit, and income from operations in determining net income. A)Credit terms B)FOB destination C)FOB shipping point D)Periodic inventory system E)Perpetual inventory system F)Inventory shrinkage G)Single-step income statement H)Multiple-step income statement

Record the following transactions for Sparky's Pet Shop using the general journal form provided below. Assume Sparky's uses a perpetual inventory system. Omit transaction descriptions from entries:

A business using the perpetual inventory system, with its detailed subsidiary records, does not need to take a physical inventory.

On March 4, Micro Sales makes $4,850 in sales on bank credit cards which charge a 2.5% service charge and deposits the funds into Micro Sales' bank accounts at the end of the business day. Journalize the sales and recognition of expense.

In a periodic inventory system, the cost of merchandise purchased includes the cost of freight in.

Who is responsible for the freight cost when the terms are FOB destination?

In retail businesses, inventory is reported as a current asset.

A physical inventory at the end of June was $882,000. Estimated Returns Inventory is expected to increase to $16,500. Prepare a multiple-step income statement for Cerelat Co. showing how cost of goods sold was calculated for the year ended June 30.

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

In recording the cost of goods sold for cash, based on data available from perpetual inventory records, the journal entry is

Merchandise is ordered on November 10; the merchandise is shipped by the seller and the invoice is prepared, dated, and mailed by the seller on November 13; the merchandise is received by the buyer on November 18; the entry is made in the buyer's accounts on November 20. The credit period begins with what date?