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Exam 4: Reporting and Analyzing Merchandising Operations

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Question 61

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What are the steps of the operating cycle for a merchandiser with credit sales?

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The steps are: (1) cash purcha...

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Question 62

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All of the following statements regarding inventory shrinkage are true except:

A) Inventory shrinkage refers to the loss of inventory.
B) Inventory shrinkage is determined by comparing a physical count of inventory with recorded inventory amounts.
C) Inventory shrinkage is recognized by debiting an operating expense.
D) Inventory shrinkage is recognized by debiting Cost of Goods Sold.
E) Inventory shrinkage can be caused by theft or deterioration.

F) A) and E)
G) B) and C)

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Question 63

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On September 12, Jepson Company purchased merchandise in the amount of $5,800 from Vander Company, Inc. on credit with terms of 2/10, n/30. Jepson uses the gross method of accounting for purchases and a periodic inventory system. On September 14, Jepson returns some of the merchandise with a purchase price of $500. Jepson pays the invoice on September 18 and takes the appropriate discount. The journal entry that Jepson makes on September 18 is:

A ___________ inventory system updates the accounting records for merchandise transactions only at the end of an accounting period.

Explain the way in which costs flow through the merchandise inventory account to a merchandiser's income statement.

Under the ______________ inventory accounting system, each purchase, purchase return and allowance, purchase discount, and transportation-in transaction is recorded in a separate temporary account.

Cushman Company, Inc. had $800,000 in net sales, $350,000 in gross profit, and $200,000 in operating expenses. Cost of goods sold equals:

Besides the current ratio, the liquidity of a company can be measured using the ____________________, which only includes the most liquid current assets in its calculation.

Expenses that support the overall operations of a business and include the expenses relating to accounting, human resource management, and financial management are called:

Beginning inventory plus net purchases equals merchandise available for sale.

When a company has no reportable non-operating activities, its income from operations is reported as ___________________.

Inventory Returns Estimated, which reflects an adjustment to cost of goods sold for expected future returns, is a liability account reported in the balance sheet, usually under Current Liabilities.

FOB shipping point means that the buyer accepts ownership when the goods arrive at the buyer's place of business.

Juniper Company, Inc. uses the gross method of recording purchases and a perpetual inventory system. The company purchased $9,750 of merchandise on August 7 with terms 1/10, n/30. On August 11, it returned $1,500 worth of merchandise. On August 26, it paid the full amount due. The correct journal entry to record the merchandise return on August 11 is:

At its fiscal year-end of June 30, Kendall Wholesale's general ledger shows the following selected account balances. Kendall Wholesale uses the perpetual inventory system. A physical count of its June 30 year-end inventory discloses that the cost of the merchandise inventory still available is $58,160. Prepare the entry to record any inventory shrinkage.

Under the net method, when a company uses a perpetual inventory system, an invoice for $2,000 with terms of 2/10, n/30 should be recorded with a debit to Merchandise Inventory and a credit to Accounts Payable of $2,000. $2,000 * 0.98 = $1,960

A company purchases merchandise from a wholesaler that has a list price of $20,000. The company receives a 35% trade discount from the supplier and credit terms of 2/10, n/30. Assuming no returns were made and that payment was made within the discount period, what is the net cost of the merchandise?

A company reported the following information for the month of July: Required: Calculate this company's gross profit.

On August 25, Barrymore Co., which uses a perpetual inventory system, purchased $5,000 worth of merchandise on terms 2/10, n/30; on September 2, the amount due was paid. Using the gross method of recording purchases, prepare general journal entries to record (a) the purchase on August 25, and (b) the cash payment on September 2.

On September 12, Vander Company, Inc. sold merchandise in the amount of $5,800 to Jepson Company on credit with terms of 2/10, n/30. The cost of the items sold is $4,000. Vander uses the gross method of accounting for sales and a periodic inventory system. On September 14, Jepson returns some of the merchandise. The selling price of the returned merchandise is $500 and the cost of the merchandise returned is $350. The entry or entries that Vander must make on September 14 is: