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Exam 6: Accounting for Merchandising Businesses

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Question 51

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Sales to customers who use bank credit cards such as MasterCard and VISA are usually recorded by a

A) debit to Bank Credit Card Sales, a debit to Credit Card Expense, and a credit to Sales
B) debit to Cash and a credit to Sales
C) debit to Cash, a credit to Credit Card Expense, and a credit to Sales
D) debit to Sales, a debit to Credit Card Expense, and a credit to Cash

E) C) and D)
F) A) and C)

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Question 52

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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 not readily available.

A) True
B) False

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Question 53

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Title to merchandise shipped FOB shipping point passes to the buyer upon delivery of the merchandise to the buyer's place of business.

The chart of accounts for a merchandising business would include an account called Delivery Expense.

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

$\text { Match each of the following terms } ( a - h ) \text { with the correct definition below. }$ -Statement where net income is determined by deducting all expenses from all revenues. 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

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

Under the periodic inventory system, the cost of merchandise sold is recorded when sales are made.

Customer Refunds Payable is an account used to record merchandise returns from customers.

Using the following information, what is the amount of net income??? $\begin{array} { | l | r | l | l | r | } \hline \text { Purchases } & \$ 32,000 && \text { Selling expenses } & \$ 960 \\\hline \begin{array} { l } \text { Merchandise inventory, } \\\text { September 1 }\end{array} & 5,700 & & \begin{array} { l } \text { Merchandise inventory, } \\\text { September 30 }\end{array} & 6,370 \\\hline \text { Administrative expenses } & 910 & & \text { Sales } & 63,000 \\\hline \text { Rent revenue } & 1,200 & & \text { Interest expense } & 1,040 \\\hline\end{array}$

Corbit Corp. sold merchandise for $10,000 cash. The cost of merchandise sold was $7,590. The journal entries to record this transaction under the perpetual inventory system would be

When merchandise is sold for $600 plus a 6% sales tax, the sales account should be credited for $636.

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

Purchased goods in transit, shipped FOB destination, should be excluded from ending inventory of the buyer.

Dollar Co. sold merchandise to Pound Co. on account, $25,500, terms 2/15, net 45. Pound Co. paid the invoice within the discount period. What is the amount of sales from the above transactions?

Multiple-step income statements show

On March 4, Micro Sales makes $4,850 in sales on bank credit cards that 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 as a single journal entry.

Under a perpetual inventory system,

A sale of $750 on account subject to a sales tax of 6% would be recorded as an account receivable of $750.

Abbey Co. sold merchandise to Gomez Co. on account, $35,000, terms 2/15, net 45. The cost of the merchandise 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?