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Exam 5: Accounting for Merchandising Operations

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Question 21

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Which of the following accounts would be closed with a debit?

A) Sales Discounts.
B) Sales Returns and Allowances.
C) Cost of Goods Sold.
D) Operating Expenses.
E) Sales.

F) A) and E)
G) A) and D)

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Question 22

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The amounts and timing of payment from a buyer to a seller are the _______________.

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Question 23

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On October 1,Courtland Company sold merchandise in the amount of $5,800 to Carter Company,with credit terms of 2/10,n/30.The cost of the items sold is $4,000.Courtland uses the periodic inventory system.On October 4,Carter returns some of the merchandise.The selling price of the merchandise is $500 and the cost of the merchandise returned is $350.Carter pays the invoice on October 8,and takes the appropriate discount.The journal entry that Courtland makes on October 8 is:

___________ expenses are those expenses that support a company's overall operations and include expenses related to accounting,human resource management,and financial management.

In a perpetual inventory system,the merchandise inventory account must be closed at the end of the accounting period.

The periodic inventory system requires updating the inventory account only at the end of the period to reflect the quantity and cost of both the goods available and the goods sold.

Prepare journal entries to record the following merchandise transactions of Geo Company,which applies the perpetual inventory system.

List the steps of the operating cycle for a merchandiser with credit sales.

ABC Corporation's total quick assets were $5,888,000,its current assets were $11,700,000 and its current liabilities were $8,000,000.Its acid-test ratio equals:

Under a periodic inventory system,purchases,purchases returns and allowances,purchase discounts,and transportation in transactions are recorded in separate temporary accounts.

Sales Discounts and Sales Returns and Allowances are credited to close the accounts during the closing process.

FOB _________________ means ownership of goods transfers to the buyer when the goods arrive at the buyer's place of business.The seller is responsible for paying shipping charges and bears the risk of damage or loss in transit.

A period's ___________________ becomes the next period's beginning inventory.

Credit terms for a purchase include the amounts and timing of payments from a buyer to a seller.

Beginning inventory plus the net cost of purchases is the _____________________.

A buyer did not take advantage of a supplier's credit terms of 2/10,n/30,and instead paid the invoice in full at the end of 30 days.By not taking the discount the buyer lost the equivalent of 18% annual interest on the amount of the purchase.

Describe the recording process (including costs)for purchasing merchandise inventory using a perpetual inventory system.

Using the following year-end information for Breanna Boutique,calculate the current ratio and acid-test ratio for the boutique: Cash…………………………………… $ 52,000 Short-term investments………………... 12,000 Accounts receivable…………………… 54,000 Inventory……………………………… 325,000 Prepaid expenses……………………… 17,500 Accounts payable……………………... 106,500 Other current payables………………… 25,000

Describe the key attributes of inventory for a merchandising company.

Credit terms of 2/10,n/30 imply that the seller offers the purchaser a 2% cash discount if the amount is paid within 10 days of the invoice date.Otherwise,the full amount is due in 30 days.