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Exam 5: Merchandising Operations

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Question 101

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A company purchased inventory for $2,200 on account, and recorded the following journal entry: $\begin{array} { | c | r | r | } \hline \text { Merchandise Inventory } & 2,200 & \\\hline \text { Accounts Payable } & & 2,200 \\\hline\end{array}$ The vendor's invoice showed terms of 3/10, n/30. Prepare the journal entry for the purchaser for the payment of the invoice 17 days after the invoice date. Omit explanation.

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\[\begin{array} { | c | r | r ...

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Question 102

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High Quality Jewelers uses the perpetual inventory system. On March 3, High Quality sold merchandise for $55,000 to a customer on account with terms 4/15, n/30. The cost of goods sold was $22,000. On March 18, High Quality received payment from the customer. Calculate the amount of gross profit.

A) $52,800
B) $33,000
C) $30,800
D) $22,000

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Question 103

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On a multi-step income statement, merchandisers report operating expenses in two categories-selling expenses and administrative expenses.

Both wholesalers and retailers are merchandisers.

In a periodic inventory system, accounting for sales discounts is the same as in a perpetual inventory system, except there is no entry for merchandise inventory.

There is a discount on freight in, thus purchase discounts are computed on transportation costs.

Gross profit represents the mark-up on ________.

A company purchased inventory for $74,000 from a vendor on account, FOB shipping point, with terms of 3/10, n/30. The company paid the shipper $1,600 cash for freight in. The company paid the vendor nine days after the invoice date. If there was no beginning inventory, the cost of inventory would be ________. (Assume a perpetual inventory system.)

When a sale is made on account, Accounts Receivable is debited.

A purchase discount is the amount offered to the purchaser for delaying the payment to the seller.

When a periodic inventory system is used, ________.

In a periodic inventory system, businesses must obtain a physical count of inventory to determine quantities on hand.

Calculate the cost of goods sold for a merchandiser using the periodic inventory system from the following details. $\begin{array} { | l | r | } \hline \text { Purchases } & \$ 540,000 \\\hline \text { Beginning Merchandise Inventory } & 185,000 \\\hline \text { Purchase Returns and Allowances } & 50,000 \\\hline \text { Purchase Discounts } & 14,000 \\\hline \text { Freight In } & 18,000 \\\hline \text { Ending Merchandise Inventory } & 150,000 \\\hline\end{array}$

Under the periodic inventory system, which of the following statements is correct?

The gross profit percentage measures the profitability of each sales dollar above the cost of goods sold.

Cost of goods available for sale represents beginning merchandise inventory plus net purchases less freight in.

Journalize the following purchase transactions for Main Street Office Supplies using the periodic inventory system. Explanations are not required. $\begin{array} { | l | l | } \hline \text { May } 12 & \begin{array} { l } \text { Main Street buys } \$ 167,500 \text { worth of merchandise } \\\text { inventory on account with credit terms of } 2 / 10 , \mathrm { n } / 30 .\end{array} \\\hline & \text { Main Street returns } \$ 18,600 \text { of the merchandise to the } \\\text { May } 16 & \text { vendor due to damage during shipment. } \\\hline \text { May 21 } & \text { Main Street pays the amount due. } \\\hline\end{array}$

Regarding the Cost of Goods Sold account, which of the following statements is incorrect?

In a periodic inventory system, the Cost of Goods Sold account is continuously updated as and when sales occur.

An invoice is a request for payment from the purchaser.