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Exam 5: Accounting for Merchandising Businesses

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Question 31

Multiple Choice

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The inventory system employing accounting records that continuously disclose the amount of inventory is called

A) retail
B) periodic
C) physical
D) perpetual

E) B) and C)
F) None of the above

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Question 32

Multiple Choice

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Merchandise inventory is classified on the balance sheet as a

A) Current Liability
B) Current Asset
C) Long-Term Asset
D) Long-Term Liability

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

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Question 33

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

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

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?

On March 15th Monroe Sales sells $9,525.00 on account to Garrison Brewer with terms of 2/10, n/30. The cost of merchandise sold was $6,905.00. (a) Journalize the sale and the recognition of the cost of the sale. (b) On March 20th a $125.00 credit memo is given to Garrison Brewer due to merchandise that was the wrong color. Journalize this event. The cost of the returned merchandise was $65. (c) On March 25th Garrison Brewer submits payment in full. Journalize this event.

Which of the following accounts would be included in the chart of accounts of a merchandising company using the: (a) periodic inventory system, (b) perpetual inventory system, or (c) both systems?

Which of the following accounts usually has a debit balance?

Other income and expenses are not items that are related to the primary operating activity.

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) :

The accounts Purchases, Purchases Returns and Allowances, Purchases Discounts, and Freight In are found on the balance sheet.

Emma Co. sold Isabella Co. merchandise on account FOB shipping point,, 2/10, net 30, for $15,000. Emma Co. prepaid the $750 shipping charge. Using the perpetual inventory method, which of the following entries will Isabella Co. make to record payment of the merchandise if Isabella Co. pays within the discount period?

Journalize the following transactions assuming a perpetual inventory system.: Journal

Which of the following accounts would be included in the chart of accounts of a merchandising company using the: periodic inventory system, perpetual inventory system, or both systems?

The records of Nevada Co. indicated that $420,000 of merchandise should be on hand on December 31, 2010. The physical inventory indicates that $370,000 of merchandise is actually on hand. Journalize the adjusting entry for the inventory shrinkage for the year ended December 31, 2010.

The abbreviation FOB stands for Free On Board.

There is no difference between the recording of cash sales and the recording of MasterCard or VISA sales.

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

On March 3rd, Blowout Sales makes $3,450.00 in cash sales of general merchandise which have a cost of $1,215.00. Blowout uses a perpetual inventory system. (a) Journalize the sale event.

Which account is not classified as a selling expense?