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Exam 5: Accounting for Merchandising Businesses

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Question 91

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The following data for the current year ended June 30 were extracted from the accounting records of Excel Co.: Prepare a multiple-step income statement for the year ended June 30,2014.

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Question 92

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Merchandise with an invoice price of $3,000 is purchased on September 2 subject to terms of 2/10,n/30,FOB destination.Freight costs paid by the seller totaled $200.What is the cost of the merchandise if paid on September 12,assuming the discount is taken?

A) $3,140
B) $3,136
C) $2,744
D) $2,940

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

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Question 93

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Who pays the freight costs when the terms are FOB shipping point?

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

Merchandise Inventory normally has a debit balance.

In credit terms of 3/15,n/45,the "3" represents the

Merchandise with a sales price of $6,000 is sold on account with term 2/10,n/30.The journal entry to record the sale would include a

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

The abbreviation FOB stands for Free On Board.

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

When the terms of sale are FOB shipping point,the buyer should pay the freight charges.

When purchases of merchandise are made for cash,the transaction may be recorded with the following entry

A deduction allowed to wholesalers and retailers from the price of merchandise listed in catalogs is called cash discounts.

Selected data from the ledger of Morrison Co.after adjustment at September 30,2011 the end of the fiscal year,are listed as follows: Prepare an income statement,using the single-step form,and a statement of owner's equity.

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

Merchandise with a list price of $4,200 and costing $2,300 is sold on account,subject to the following terms: FOB destination,2/10,n/30.The seller prepays the freight costs of $85 (debit Freight Out for the freight costs).Prior to payment for the goods,the seller issues a credit memo for $750 to the customer for merchandise costing $425 that is returned.The correct amount is received within the discount period.The company uses a perpetual inventory system. Record the foregoing transactions of the seller in the sequence indicated below.

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

Complete the following data taken from the condensed income statements for merchandising Companies X,Y,& Z.

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

Under the periodic inventory system,the cost of merchandise sold is equal to the beginning merchandise inventory plus the cost of merchandise purchased plus the ending merchandise inventory.