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Exam 5: Accounting for Merchandising Businesses

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Question 51

Multiple Choice

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When the three sections of a balance sheet are presented on a page in a downward sequence,it is called the

A) account form
B) comparative form
C) horizontal form
D) report form

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

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Question 52

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In the periodic inventory system,purchases of merchandise for resale are debited to the Purchases account.

A) True
B) False

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Question 53

Multiple Choice

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Generally,the revenue account for a merchandising business is entitled

When comparing a retail business to a service business,the financial statement that changes the most is the

Discuss the following statement: "Operating cycles for all merchandising businesses are the same,with similar profit margins." Include an examples to illustrate your explanation.

Which of the following is not a difference between a retail business and a service business?

For each of the following,calculate the cost of inventory reported on the balance sheet. a The total merchandise on hand at the end of the year as determined by taking a physical inventory is $62,000.Of the $62,000,$8,000 has been sold FOB destination and is awaiting pickup by the carrier. b The total merchandise inventory counted at the end of the year was $63,000.Excluded from the count were purchases of $6,000 in transit under FOB shipping point terms. c The total merchandise inventory counted at the end of the year was $75,000.Excluded from the count were purchases of $5,000 in transit under FOB destination terms.

The abbreviation FOB stands for "free on board."

In a perpetual inventory system,when merchandise is returned to the supplier,Cost of Merchandise Sold is debited as part of the transaction.

When goods are shipped FOB destination and the seller pays the freight charges,the buyer

Using the following data taken from Hsu's Imports Inc.which uses a periodic inventory system,prepare the cost of merchandise sold section of the income statement for the year ended March 31.

Sales are equal to the cost of merchandise sold less the gross profit.

Madison Company's perpetual inventory records indicate that $875,300 of merchandise should be on hand on October 31.The physical inventory indicates that $781,900 is actually on hand.Journalize the adjusting entry for the inventory shrinkage for Madison Company for the year ended October 31.

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

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

Marshall Supplies is a janitorial supply store that uses perpetual inventory.Journalize the following transactions: On July 4,Marshall purchases inventory for sale from Tidy Wholesalers for $8,500.00 with terms 1/10,n/30. On July 5,Marshall pays Express Transfer $45.00 for freight-in on the July 4 order. On July 7,Marshall buys an additional $11,985.00 in inventory from Tidy Wholesalers with terms 1/10,n/30. On July 13,Marshall pays Tidy Wholesalers the balance due on both invoices Journal

What type of company would normally offer trade discounts to its customers?

Customer Refunds Payable is an account used to record merchandise returns from customers.

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

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