Question 1

An American company makes a credit purchase of goods from a company in London for 1,000 British pounds.On the date of purchase,the exchange rate was $1.65 per pound.However,on the date of payment,the rate had declined to $1.60 per pound.As a result,the American company would record

Accepted Answer

The American company would record an exchange gain of $50 because on the date of purchase, the cost was 1,000 pounds * $1.65/pound = $1,650. On the date of payment, with the rate at $1.60/pound, the cost would be 1,000 pounds * $1.60/pound = $1,600. The difference ($1,650 - $1,600) is a $50 gain.

Question 2

Brendan Company sold merchandise worth $1,600 on credit,terms n/15 and on the next day the customer returned merchandise worth $100,which cost $60 for Brendan Company.What is the required journal entry to record the merchandise returns under the perpetual inventory system?

Accepted Answer

Under the perpetual inventory system, merchandise returns are recorded using the Sales Returns and Allowances account, which is a contra revenue account. The following journal entry is required to record the merchandise returns:

Sales Returns and Allowances 100
Accounts Receivables 100

The above journal entry reduces the sales revenue by $100, which is the amount of merchandise returned by the customer. The allowance account is offset against the sales account to reduce the effect of the original sale.

In addition, the inventory needs to be adjusted by the cost of the merchandise returned:

Merchandise Inventory 60
Cost of Goods Sold 60

This entry would decrease the inventory by the cost of merchandise returned, and it also increases the cost of goods sold by the same amount.

Question 3

Assume a company uses the periodic inventory system and has a beginning merchandise inventory balance of $10,000,purchases of $150,000,and sales of $250,000.The company closes its records once a year on December 31.In the accounting records,the merchandise inventory account would be expected to have a balance on December 31 prior to adjusting and closing entries that was

Accepted Answer

The answer of Assume a company uses the periodic inventory...

Question 4

Use this information to answer the following question.  In addition,beginning merchandise inventory was $22,000 and ending merchandise inventory was $14,000.
Net income for the period was

Accepted Answer

The answer of Use this information to answer the following...

Question 5

Assuming that net cost of purchases was $39,000 during the year and that ending merchandise inventory was $1,000 less than the beginning merchandise inventory of $12,500,how much was cost of goods sold?

Accepted Answer

The answer of Assuming that net cost of purchases was...

Question 6

Use this information to answer the following question.  In addition,beginning merchandise inventory was $11,000 and ending merchandise inventory was $7,000.
If beginning and ending merchandise inventories were ignored in computing net income,then net income would be

Accepted Answer

The answer of Use this information to answer the following...

Question 7

Which of the following is not considered in computing net cost of purchases?

Accepted Answer

Freight-out expenses are not included in computing net cost of purchases as they are expenses incurred on delivery of goods to customers, while net cost of purchases refers to the actual cost of the merchandise purchased.

Question 8

Use this information to answer the following question.  In addition,beginning merchandise inventory was $22,000 and ending merchandise inventory was $14,000.
Net sales for the period were

Accepted Answer

To calculate net sales, we need to subtract the value of ending merchandise inventory from the sum of beginning inventory and cost of goods sold. 
Beginning merchandise inventory = $22,000 
Ending merchandise inventory = $14,000

Cost of goods sold = $220,000 (given)

Therefore, 
Net sales = Beginning inventory + Cost of goods sold -Ending inventory 
Net sales = $22,000 + $220,000 - $14,000 = $228,000

Thus, the correct option is C, $295,000.

Question 9

If creditors' payment terms are 60 days,financing period is 20 days,and it takes 30 days to collect the amount from customers.What time does it take to sell the inventory?

Accepted Answer

To calculate the time it takes to sell inventory, we need to add up the time it takes to collect the amount from customers (30 days), financing period (20 days), and creditor's payment terms (60 days):
30 days (collection period) + 20 days (financing period) + 60 days (creditor's payment terms) = 110 days
Therefore, it takes 110 days to sell the inventory. Option D is the closest to this answer with 50 days, which is the sum of the financing period (20 days) and the time it takes to collect the amount (30 days). However, it does not account for the time it takes for creditors' payment terms.

Question 10

The amount of cost of goods available for sale during the year depends on the amounts of

Accepted Answer

The cost of goods available for sale during the year is determined by the sum of the beginning merchandise inventory and the net cost of purchases. It does not directly include the ending merchandise inventory or the cost of goods sold, as these figures are used in different parts of the inventory and cost of goods sold calculation process.

Question 11

The last step in the operating cycle is the

Accepted Answer

The last step in the operating cycle is the collection of cash from credit sales, as this completes the cycle of purchasing inventory, selling it, and finally collecting the proceeds from sales.

Question 12

Use this information to answer the following question.  In addition,beginning merchandise inventory was $11,000 and ending merchandise inventory was $7,000.
Cost of goods sold for the period was

Accepted Answer

The answer of Use this information to answer the following...

Question 13

Under the perpetual inventory system,in addition to making the entry to record a sales return,a company would

Accepted Answer

When a company records a sales return under the perpetual inventory system, it increases Merchandise Inventory and decreases Cost of Goods Sold to reflect the return of goods to inventory and the reversal of the cost associated with the sale.

Question 14

Under the perpetual inventory system,which of the following accounts would not be used?

Accepted Answer

Under the perpetual inventory system, the "Purchases" account is not used. Instead, inventory purchases are directly recorded in the "Merchandise Inventory" account, which is continuously updated to reflect purchases and sales.

Question 15

The entry to record a sales return from a customer would require a(n)

Accepted Answer

When a customer returns a product, it is considered a sales return or allowance, which is a reduction in sales revenue. As such, the entry would require an increase to the Sales Returns and Allowances account, indicating a decrease in sales revenue.

Question 16

Under the perpetual inventory system,the entry to record a purchase return would include a credit to which account?

Accepted Answer

Under the perpetual inventory system, when a purchase return occurs, the Merchandise Inventory account is credited to reduce the inventory balance because the goods are no longer in inventory.

Question 17

Which of the following is necessary for computing cost of goods sold but not necessary for computing the cost of goods available for sale?

Accepted Answer

Cost of goods sold is calculated by subtracting ending merchandise inventory from cost of goods available for sale. Beginning merchandise inventory is used in the calculation of cost of goods available for sale, but it is not necessary for calculating the cost of goods sold. Freight-in and purchases are also necessary for calculating the cost of goods available for sale.

Question 18

Use this information to answer the following question. The selected accounts and balances for Keystone Market appear as follows:
 Cost of goods available for sale would appear on the income statement as

Accepted Answer

Cost of goods available for sale is calculated by adding the beginning inventory and the cost of goods purchased during the period. Therefore, Cost of goods available for sale = Beginning inventory + Purchases = $61,000 + $70,000 = $131,000. This amount will appear on the income statement as part of the Cost of Goods Sold section.

Question 19

Use this information to answer the following question.  In addition,beginning merchandise inventory was $11,000 and ending merchandise inventory was $7,000.
Net cost of purchases for the period were

Accepted Answer

Net cost of purchases = Cost of Goods Sold +(Ending Inventory - Beginning Inventory)
Given,
Beginning Inventory = $11,000
Ending Inventory = $7,000
Cost of Goods Sold = $52,000 (calculated as Sales - Gross Profit)
Sales = $80,000
Gross Profit = 35% of Sales = $28,000
Therefore,
Net cost of purchases = $52,000 + ($7,000 - $11,000) = $52,000 - $4,000 = $48,000
Hence, the answer is option C.

Question 20

Under the perpetual inventory system,in addition to making the entry to record a sale,a company would

Accepted Answer

Under the perpetual inventory system, the company needs to keep track of inventory on a continuous basis. Therefore, in addition to recording a sale, the company would also need to record a decrease in inventory and an increase in cost of goods sold for the cost of the merchandise sold. This ensures that the inventory and cost of goods sold accounts are updated on a real-time basis. Option A is incorrect as an increase in inventory would not correspond to a sale, rather it would correspond to a purchase. Option C is incorrect as the increase in inventory would correspond to the cost of the inventory, not the sale. Option D is incorrect as making no additional entry until the end of the period would not reflect real-time updates of inventory and cost of goods sold.

Quiz 6: Accounting for Merchandising Operations

An American company makes a credit purchase of goods from a company in London for 1,000 British pounds.On the date of purchase,the exchange rate was $1.65 per pound.However,on the date of payment,the rate had declined to $1.60 per pound.As a result,the American company would record

Brendan Company sold merchandise worth $1,600 on credit,terms n/15 and on the next day the customer returned merchandise worth $100,which cost $60 for Brendan Company.What is the required journal entry to record the merchandise returns under the perpetual inventory system?

Use this information to answer the following question. In addition,beginning merchandise inventory was $22,000 and ending merchandise inventory was $14,000. Net income for the period was

Assuming that net cost of purchases was $39,000 during the year and that ending merchandise inventory was $1,000 less than the beginning merchandise inventory of $12,500,how much was cost of goods sold?

Use this information to answer the following question. In addition,beginning merchandise inventory was $11,000 and ending merchandise inventory was $7,000. If beginning and ending merchandise inventories were ignored in computing net income,then net income would be

Which of the following is not considered in computing net cost of purchases?

Use this information to answer the following question. In addition,beginning merchandise inventory was $22,000 and ending merchandise inventory was $14,000. Net sales for the period were

If creditors' payment terms are 60 days,financing period is 20 days,and it takes 30 days to collect the amount from customers.What time does it take to sell the inventory?

The amount of cost of goods available for sale during the year depends on the amounts of

The last step in the operating cycle is the

Use this information to answer the following question. In addition,beginning merchandise inventory was $11,000 and ending merchandise inventory was $7,000. Cost of goods sold for the period was

Under the perpetual inventory system,in addition to making the entry to record a sales return,a company would

Under the perpetual inventory system,which of the following accounts would not be used?

The entry to record a sales return from a customer would require a(n)

Under the perpetual inventory system,the entry to record a purchase return would include a credit to which account?

Which of the following is necessary for computing cost of goods sold but not necessary for computing the cost of goods available for sale?

Use this information to answer the following question. The selected accounts and balances for Keystone Market appear as follows: Cost of goods available for sale would appear on the income statement as

Use this information to answer the following question. In addition,beginning merchandise inventory was $11,000 and ending merchandise inventory was $7,000. Net cost of purchases for the period were

Under the perpetual inventory system,in addition to making the entry to record a sale,a company would