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Exam 5: Accounting for Merchandising Businesses

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Question 81

Multiple Choice

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When merchandise purchased on account is returned under the perpetual inventory system, the buyer would debit

A) Merchandise Inventory
B) Purchases Returns and Allowances
C) Accounts Payable
D) Accounts Receivable

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

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Question 82

Multiple Choice

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The entry to record the return of merchandise from a customer would include a

A) debit to Sales
B) credit to Sales
C) debit to Customer Refunds Payable
D) debit to Estimated Returns Inventory

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

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Question 83

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Match each of the following items a-h) with the appropriate definition below. -Account used to record merchandise on hand under a perpetual inventory system.

Income that cannot be associated definitely with operations, such as a gain from the sale of a fixed asset, is listed as Other Income on the multiple-step income statement.

Most retailers record all credit card sales as credit sales.

On March 5, Blowout Sales makes $22,500 in sales on the company's own credit cards. The cost of merchandise sold is $16,825. Journalize the sales and recognition of the cost of merchandise sold.

Determine the amount to be paid in full settlement of each invoice, assuming that credit for returns and allowances was received prior to payment and that all invoices were paid within the discount period.

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? 1) Purchases 2) Merchandise Inventory 3) Sales 4) Purchases Discounts 5) Cost of Merchandise Sold 6) Freight-In 7) Delivery Expense

Estimated Returns Inventory is an account used when adjusting for expected merchandise sales in the next period.

Bradford Company had $700,000 in sales for the year. 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 sales to total assets is round answer to 2 decimal places)

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

Match each of the following terms a-h) with the correct definition below. -Inventory system that updates the merchandise inventory account only at the end of the accounting period based on a physical count of merchandise on hand.

Which of the following accounts has a normal debit balance?

The arrangements between buyer and seller as to when payments for merchandise are to be made are called

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

Merchandise with a sales price of $5,000 is sold on account with terms 2/10, n/30. The journal entry to record the sale would include a

The records of Penny Co. indicated that $415,000 of merchandise should be on hand on December 31. 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. $\begin{array}{l}\text { Journal }\\\begin{array} { | l | l | l | l | l | } \hline \text { Date } & \text { Description } & \begin{array} { l } \text { Post. } \\\text { Ref. }\end{array} & \text { Debit } & \text { Credit } \\\hline & & & & \\\hline & & & & \\\hline\end{array}\end{array}$

Merchandise subject to terms 2/10, n/30, FOB shipping point, is sold on account to a customer for $25,000. What is the amount of the sales discount allowable?

A customer discount encourages customers to pay accounts more quickly than if a discount were not available.

Using a perpetual inventory system, the entry to record the return from a customer of merchandise sold on account includes a