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Exam 5: Accounting for Retail Businesses

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Question 31

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Merchandise with a list price of $4,200 and costing $2,300 is sold on account, subject to the following terms: FOB destination, 2/10, n/30. The seller prepays the freight costs of $85 (debit Delivery Expense for the freight costs). Prior to payment for the goods, the seller issues a credit memo for $750 to the customer for merchandise costing $425 that is returned. Payment is received within the discount period. The company uses a perpetual inventory system.Record the foregoing transactions of the seller in the sequence indicated below.(a)Sold the merchandise, recognizing the sale and cost of goods sold.(b)Paid the freight charges.(c)Issued the credit memo.(d)Received payment from the customer.

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Question 32

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Jacob Co. sells merchandise on credit to Isaiah Co. for $9,700. The invoice is dated May 1 with terms of 1/15, net 45. What is the amount of the discount and up to what date must the invoice be paid in order for the buyer to take advantage of the discount?

A) $194, May 15
B) $194, May 16
C) $97, May 15
D) $97, May 16

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

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Question 33

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The following selected accounts and their current balances appear in the ledger of Fernandez Co. at the end of its fiscal year. -What is the amount of gross profit for Fernandez Co.?

Using the letter preceding each account, arrange the following selected accounts in the order they would normally appear in a chart of accounts of a company that uses a multiple-step income statement.(a)Accounts Payable (b)Accounts Receivable (c)Inventory (d)Miscellaneous Selling Expense (e)Interest Expense (f)Misc. Admin. Expense (g)Freight Out

A sales discount encourages customers to pay accounts more quickly than if a discount were not available.

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

Based upon the following data for a business with a periodic inventory system, determine the cost of goods sold for August.

Buyers and sellers do not normally record the list prices of merchandise and the trade discounts in accounts.

The adjusting entry to account for estimated customer returns and allowances involves a

A physical inventory at the end of June was $882,000. Estimated Returns Inventory is expected to increase to $16,500. What is the amount of cost of goods sold for Cerelat Co. for the year? Use the list of accounts and their current balances given above for Cerelat Co.

Describe the major differences in preparing the financial statements for a service business and a merchandising business.

On March 25, Osgood Company sold merchandise on account, $10,000, terms n/30. The applicable sales tax percentage is 7.5%. Record the transaction.​

If the buyer bears the freight costs related to a purchase, the terms are said to be FOB destination.

During the current year, merchandise is sold for $147,500 cash and $381,750 on account. The cost of the goods sold is $242,000. What is the amount of the gross profit?

Pierce Company sold to Stanton Company merchandise on account FOB shipping point, 2/10, net 30, for $20,000. Pierce prepaid the $500 shipping charge. Which of the following entries does Pierce make to record this sale?

Using the list of accounts below, construct a chart of accounts for a merchandising business that rents out a portion of its building, and assign account numbers and arranging the accounts in balance sheet and income statement order ("1" for assets, and so on). Each account number should have three digits. Contra accounts should be designated with a decimal of the account (100.1 for contra of account 100). Assets and liabilities should be in order of liquidity, expenses should be in alphabetical order.

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

Which of the following items should not be included in the cost of ending inventory?

Record the following purchases and sales transactions for Manioc Corp. using the general journal form provided below. Assume Manioc uses a periodic inventory system. Omit transaction descriptions from entries.​

Prepare a multiple-step income statement for Fernandez Co. for the year ended December 31.