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Exam 4: Accounting for Merchandising Businesses

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Question 91

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If the buyer is to pay the transportation cost of delivering merchandise, were the goods shipped FOB destination or FOB shipping point?

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FOB shipping pointThe terms FOB shipping...

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Question 92

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Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter dollar amounts. If an event increases one account and decreases another account equally within the same element (such as an asset exchange event), record I/D. If an event has no impact on the element, record NA.Increase = I Decrease = D Not Affected = NAAfter a physical count of its inventory, Wetzel Company discovered that $400 of inventory is missing. Show how the adjustment for inventory shrinkage would affect Wetzel Company's statements.

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The adjustment to write off the invento...

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Question 93

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Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter dollar amounts. If an event increases one account and decreases another account equally within the same element (such as an asset exchange event), record I/D. If an event has no impact on the element, record NA.Increase = I Decrease = D Not Affected = NAWetzel Company paid $40 of freight cost to have merchandise shipped to one of its customers under terms FOB destination.

Middleton Company uses the perpetual inventory system. The company purchased an item of inventory for $150 and sold the item to a customer for $270. How will the sale affect the company's Inventory account?

JJ Company purchased on account merchandise with a list price of $10,000. Payment terms were 1/15, n/45. If payment occurs before the discount expires, what is the effect of the sales discount on the balance sheet?

Gross margin is reported on a

Taha Company purchased $9,000 of inventory under terms FOB destination. Freight cost amounted to $300. The cost of inventory and freight were paid with cash. Which of the following shows how the recognition of this purchase, including freight costs if applicable, will affect Taha's financial statements?

Sanchez Company engaged in the following transactions during Year 1:1) Started the business by issuing $42,000 of common stock for cash.2) The company paid cash to purchase $26,400 of inventory.3) The company sold inventory that cost $16,000 for $30,600 cash.4) Operating expenses incurred and paid during the year, $14,000.Sanchez Company engaged in the following transactions during Year 2:1) The company paid cash to purchase $35,200 of inventory.2) The company sold inventory that cost $32,800 for $57,000 cash.3) Operating expenses incurred and paid during the year, $18,000.Note: Sanchez uses the perpetual inventory system. What is Sanchez's gross margin for Year 2?

During the current year, Gomez Company had beginning inventory of $2,500 and ending inventory of $2,100. The cost of goods sold was $4,900. What is the amount of inventory purchased during the year?

Darlington Company entered into the following business events during its first month of operations. The company uses the perpetual inventory system.1) The company purchased $12,500 of merchandise on account under terms 2/10, n/30.2) The company returned $1,200 of merchandise to the supplier before payment was made.3) The liability was paid within the discount period.4) All of the merchandise purchased was sold for $18,800 cash.What is the net cash flow from operating activities as a result of the four transactions?

Assume the perpetual inventory system is used.1) Green Company purchased merchandise inventory that cost $64,000 under terms of 2/10, n/30 and FOB shipping point.2) Green Company paid freight cost of $2,400 to have the merchandise delivered.3) Payment was made to the supplier on the inventory within 10 days.4) All of the merchandise was sold to customers for $94,000 cash and delivered under terms FOB destination with freight cost amounting to $1,600.What is the amount of gross margin that results from these transactions?

Olly Company is a merchandising business that sells dog food. Based on the following information, what is the gross margin for Olly Company?

A company purchased inventory on account. If the perpetual inventory system is used, which of the following choices accurately reflects how the purchase affects the company's financial statements?

Jackson Medical Supply experienced the following events during June. The company uses the perpetual inventory system.1. Issued common stock for cash.2. Purchased inventory on account, terms 2/10, n/30, FOB shipping point.3. Paid the freight charges on the purchase in event #2.4. Sold merchandise to a customer on account, terms 2/10, n/30, FOB destination.(a)Recognized revenue from sale of merchandise.(b)Recognize cost of goods sold.5. Paid the freight charges on goods sold in event #4.6. Customer returned some of the merchandise sold in event #4.(a)Recognized the sales return.(b)Recognize the cost of the goods as a return to the inventory account.7. Recorded discount granted to the customer in event #4.8. Recorded payment received from the customer in event #4.9. Recorded discount received on purchase in event #2.10. Recorded payment of amount due on purchase in event #2.Required:Complete the financial statements model shown below. Identify each event as asset source (AS), asset use (AU), asset exchange (AX), or claims exchange (CX). Also explain how each event affects the financial statements by placing a "+" for increase, "−"for decrease, "+−" for increase and decrease, or "NA" for not affected under each of the components of the following statements model. Also, indicate in the cash column if the event would be recorded as an operating activity (OA), an investing activity (IA)or a financing activity (FA). The first event is recorded as an example.

Jake Company purchased on account merchandise with a list price of $90,000. Payment terms were 1/15, n/45. If payment occurs within 18 days, what discount will Jake Company recognize on the merchandise?

James Company experienced the following events during its first accounting period:(1) Purchased $10,000 of inventory for cash.(2) Returned $200 of the inventory purchased in Event 1. Inventory was returned for cash.Based on this information, which of the following shows how the recognition of the return will affect the Company's financial statements?

Foote Company was granted a purchase discount of $200 on merchandise the company had purchased a few days ago. Foote uses the perpetual inventory system. Which of the following reflects the effects of this event on the financial statements?

What is the term used to describe a firm that primarily sells merchandise to other businesses?

The following events apply to Deb's Dance Wholesalers.1)Sold merchandise to a customer. The goods were shipped FOB destination, with a freight cost of $50.2)Purchased merchandise with freight cost of $75, shipped with the terms FOB shipping point.3)Sold merchandise to a customer with freight cost of $40, shipped FOB shipping point. Required: a)What is the total amount of freight that will be paid by Deb's Dance Wholesalers?b)What is the amount of the expense that will be recorded with regards to freight costs paid by Deb's Dance Wholesalers?

A company's chart of accounts includes, in part, the following account numbers and corresponding account titles: Which accounts would affect gross margin?