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Exam 5: Accounting for Merchandising Businesses

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Question 51

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When a merchandising business is compared to a service business,the financial statement that is affected by that change is the Statement of Owner's Equity.

A) True
B) False

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Question 52

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When the seller offers a sales discount,even if borrowing has to be done,it is generally advantageous for the buyer to pay within the discount period.

A) True
B) False

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Question 53

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Retailers record all credit card sales as credit sales.

Sales to customers who use nonbank credit cards,such as American Express,are generally treated as credit sales.

One of the most important differences between a service business and a retail business is in what is sold.

A retailer purchases merchandise with a catalog list price of $25,000.The retailer receives a 30% trade discount and credit terms of 2/10,n/30.What amount should the retailer debit to the Merchandise Inventory account?

Who pays the freight cost when the terms are FOB destination?

Cost of merchandise sold is the amount that the merchandising company pays for the merchandise it intends to sell.

Merchandise inventory is classified on the balance sheet as a

Complete the following data taken from the condensed income statements for merchandising Companies A,B,& C.

Discounts taken by the buyer for early payment of an invoice are credited to Sales Discounts by the buyer.

A sales invoice included the following information: merchandise price,$10,000;freight,$900;terms 1/10,n/eom,FOB shipping point.Assuming that a credit for merchandise returned of $500 is granted prior to payment and that the invoice is paid within the discount period,what is the amount of cash that should be received by the seller?

Merchandise subject to terms 1/10,n/30,FOB shipping point,is sold on account to a customer for $25,000.The seller paid freight costs of $2,000 and issued a credit memo for $10,000 prior to payment.What is the amount of the cash discount allowable?

Which of the following accounts will not be found on the Cost of Merchandise Sold section on the Income Statement?

A company using the periodic inventory system has the following account balances: Merchandise Inventory at the beginning of the year,$3,600;Freight-In,$650;Purchases,$10,700;Purchases Returns and Allowances,$1,950;Purchases Discounts,$330.The cost of merchandise purchased is equal to

The ending merchandise inventory for 2010 is the same as the beginning merchandise inventory for 2011.

A business using the perpetual inventory system,with its detailed subsidiary records,does need to take a physical inventory.

If the buyer is to pay the freight costs of delivering merchandise,delivery terms are stated as

Using the following information,what is the amount of net sales?

Using a perpetual inventory system,the entry to record the purchase of $30,000 of merchandise on account would include a