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Exam 6: Accounting for Merchandising Businesses

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Question 51

Multiple Choice

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When the three sections of a balance sheet are presented on a page in a downward sequence, it is called the

A) account form
B) comparative form
C) horizontal form
D) report form

E) B) and C)
F) A) and C)

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Question 52

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 53

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The single-step income statement is easier to prepare, but a criticism of this format is that gross profit and income from operations are readily available.

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

Sales Discounts is a revenue account with a credit balance.

If the physical count of the inventory revealed $158,000 of merchandise on hand and the inventory records reported $163,000, what would be the necessary adjusting entry to record inventory shortage?

Using the perpetual inventory system, journalize the entries for the following selected transactions:

Who pays the freight cost when the terms are FOB destination?

In a perpetual inventory system, merchandise returned to vendors reduces the merchandise inventory account.

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

Merchandise is ordered on December 1; the merchandise is shipped by the seller and the invoice is prepared, dated, and mailed by the seller on December 3; the merchandise is received by the buyer on December 8; the entry is made in the buyer's accounts on December 10. The credit period begins with what date?

When comparing a retail business to a service business, the financial statement that changes the least is the

Merchandise is sold for $3,600, terms FOB destination, 2/10, n/30, with prepaid freight costs of $150. If $500 of the merchandise is returned prior to payment and the invoice is paid within the discount period, the amount of the sales discount is $65.

Isaac Co. sells merchandise on credit to Sonar Co in the amount of $9,600. The invoice is dated on April 15 with terms of 1/15, net 45. If Sonar Co. chooses not to take the discount, by when should the payment be made?

Closing entries for a merchandising business are similar to those for a service business.

Calculate the gross profit for Jonas Company based on the data given below:

When companies use a perpetual inventory system, the recording of the purchase of inventory will include a debit to purchases.

During the current year, merchandise is sold for $86,000 cash and for $93,950 on account. The cost of the merchandise sold is $76,240. What is the amount of the gross profit?

If the buyer is to pay the freight costs of delivering merchandise, delivery terms are stated as

Ramone Company had $600,000 in Net Sales for the year 2010. The total assets at the beginning of the year were $240,000 and total assets at the end of the year were $280,000. The ratio of net sales to total assets is (round answer to 2 decimal places) :