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Exam 5: Merchandising Operations

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Question 41

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Operating expenses are subtracted from revenue for a service company and from gross profit for a merchandising company.

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Question 42

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If a purchaser using a perpetual inventory system pays freight costs, then the

A) Inventory account is increased.
B) Inventory account is not affected.
C) Freight Out account is increased.
D) Freight In account is increased.

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Question 43

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When the terms of sale include a sales discount, it usually is advisable for the buyer to pay within the discount period.

Under a perpetual inventory system, the cost of goods sold is determined each time a sale occurs.

If a customer agrees to keep defective merchandise because the seller is willing to reduce the selling price, this transaction is known as a sales

Gia's Gymnastics Gear uses a perpetual inventory system. The following transactions occurred in July:Jul 6 Purchased $1,800 of merchandise on credit, terms 1/10, n/30.8 Because some of the items purchased on July 6 had a small defect, Gia's Gymnastics Gear received a purchase allowance of $175.9 Paid freight charges of $75 on the items purchased July 6.19 Sold merchandise on credit for $1,800, terms 2/10, n/30. The merchandise had a cost of $900.22 Of the merchandise sold on July 19, $200 of it was returned. The items had cost Gia's$100 and were returned to inventory.28 Received payment from the customer of July 19.31 Paid for the merchandise purchased on July 6.InstructionsRecord the July transactions for Gia's Gymnastics Gear.

A quantity discount is recorded separately, the same way as a purchase discount.

Inventory becomes part of the cost of goods sold when a company

Non-operating activities include revenues and expenses that are related to the company's main operations.

Sales revenues are usually considered earned when

For a company using a perpetual inventory system, the journal entry to record the purchase of $3,500 of goods on account, with terms of 4/10, n/30, would include a

The operating cycle of a merchandising company is

In a perpetual inventory system, cost of goods sold is recorded

Jun 4 Willem Corporation purchased $4,000 worth of merchandise, terms 2/10, n/30 from Cate Corporation. The cost of the merchandise to Cate was $2,600.10 Willem returned $700 worth of goods to Cate for full credit. The goods had a cost of $450 to Cate and were placed back into inventory.26 Willem paid the account.InstructionsPrepare the journal entries to record these transactions in a. Willem's records and b. Cate's records. Both companies use the perpetual inventory system.

Pacific Supply Corporation uses a periodic inventory system. During September, the following transactions occurred:Sep 3 Purchased 36 backpacks at $25 each from Scott Limited, terms 2/10, n/30.6 Received credit of $100 for the return of 4 backpacks purchased on Sept. 3 that were defective.9 Sold 20 backpacks for $45 each to Macklin Books, terms 2/10, n/30.13 Paid Scott account in full.InstructionsPrepare journal entries to record the above transactions.

Generally, the revenue account for a merchandising company is called

Which of the following is true about inventory systems?

The collection of a $2,000 account within the 2 percent discount period will result in a

Sales Discounts is a(n)

Under the perpetual inventory system, in addition to making the entry to record the sale, the seller would