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Exam 5: Accounting for Merchandising Businesses

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Question 1

Multiple Choice

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Gross profit is equal to:

A) sales plus (sales discounts and sales returns and allowances) plus cost of merchandise sold
B) sales plus sales returns and allowances less sales discounts less cost of merchandise sold
C) sales plus sales discounts less sales returns and allowances less cost of merchandise sold
D) sales less (sales discounts and sales returns and allowances) less cost of merchandise sold

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

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Question 2

True/False

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The service fee that credit card companies charge retailers varies and is the primary reason why some businesses do not accept all credit cards.

A) True
B) False

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Question 3

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Based on the information below, journalize the entries for the Seller and the Buyer. Both use a perpetual inventory system.

When the perpetual inventory system is used, the inventory sold is debited to

Which of the following accounts should be closed to Income Summary at the end of the fiscal year?

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

On March 25, 2014, Patton Company sold merchandise on account,$10,000. The applicable sales tax percentage is 8.5%. Record the transaction.

Cost of Merchandise Sold is often the largest expense on a merchandising company income statement.

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

The form of the balance sheet in which assets, liabilities, and owner's equity are presented in a downward sequence is called the report form.

When a buyer returns merchandise purchased for cash, the buyer may record the transaction using the following entry

Using the following information, what is the amount of cost of merchandise sold?

When merchandise that was sold is returned, a credit to sales returns and allowances is made.

Merchandise is sold for $3,600, terms FOB destination, 2/10, n/30, with prepaid freight costs of $150. If $500 of the merchandise is returned prior to payment and the invoice is paid within the discount period, the amount of the sales discount is $65.

In a perpetual inventory system, the Merchandise Inventory account is only used to reflect the beginning inventory.

Net income plus operating expenses is equal to

Freight in is the amount paid by the company to deliver merchandise sold to a customer.

Which of the following accounts has a normal debit balance?

Prepare (a) a single-step income statement, (b) a statement of owner's equity, and (c) a balance sheet in report form from the following data for Kooper Co., taken from the ledger after adjustment on December 31, 2010 the end of the fiscal year.

Marshall Supplies is a janitorial supply store. Marshall Supplies uses perpetual inventory. Use a General Journal to journalize the following four transactions during the month of July: