Question 1

The income statement for a merchandising company presents five amounts not shown on a service company's income statement. Identify and briefly explain the five unique amounts.

Accepted Answer

The answer of The income statement for a merchandising company...

Question 2

Gross profit is obtained by subtracting ________________ from ________________.

Accepted Answer

The answer of Gross profit is obtained by subtracting ________________...

Question 3

Cost of goods sold is deducted from net sales revenue for the period in order to arrive at ________________.

Accepted Answer

The answer of Cost of goods sold is deducted from...

Question 4

A ________________ buys and sells goods rather than performing services to earn a profit.

Accepted Answer

The answer of A ________________ buys and sells goods rather...

Question 5

Distinguish between FOB shipping point and FOB destination. Identify the freight terms that will result in a debit to Inventory by the purchaser and a debit to Freight-Out by the seller.

Accepted Answer

The answer of Distinguish between FOB shipping point and FOB...

Question 6

Prepare the necessary journal entries to record the following transactions, assuming a periodic inventory system:
(a) Purchased $520,000 of merchandise on account, terms 2/10, n/30.
(b) Returned $40,000 of damaged merchandise for credit.
(c) Paid for the merchandise purchased within 10 days.

Accepted Answer

The answer of Prepare the necessary journal entries to record...

Question 7

Holmes Corporation manufactures electronic components for use in many consumer products. Their raw materials are purchased literally from all over the world. Depending on the country involved, purchase terms vary widely. Some suppliers, for example, require full prepayment, while others are content to receive payment within six months of receipt of the goods.
Because of this situation, Holmes never closes its books until at least ten days after month end. In this way, it can sort out ownership of goods in transit, and document which goods were received by month end, and which were not.
Ann Cook, a new accountant, was asked to record about $50,000 in inventory as having been received before month end. She argued that the shipping documents clearly showed that the goods were actually received on the 8th of the current month. Her boss, busy with month-end reports, curtly tells Ann to check the shipping terms. She did so, and found the notation "FOB shipper's dock" on the document. She hadn't seen that particular notation before, but she reasoned that if the selling company considered it shipped when it reached their dock, Holmes should consider it received when it reached Holmes's dock. She did not record the purchase until after month end.
Required:
1. Why are accountants concerned with the timing in the recording of purchases?
2. Was there a violation of ethical standards here? Explain.

Accepted Answer

The answer of Holmes Corporation manufactures electronic components for use...

Question 8

Mary Bolton believes revenues from credit sales may be recognized before they are collected in cash. Do you agree? Explain.

Accepted Answer

The answer of Mary Bolton believes revenues from credit sales...

Question 9

Income from operations is determined by subtracting total operating expenses from ________________.

Accepted Answer

The answer of Income from operations is determined by subtracting...

Question 10

You are at a company picnic and the company president starts a conversation with you. The president says "Since we use the perpetual inventory system, there is no reason to take a physical count of our inventory." What is your response to the president's remarks?

Accepted Answer

The answer of You are at a company picnic and...

Question 11

A merchandiser frequently has a need to use contra accounts related to the sale of goods. Identify the contra accounts that have normal debit balances and explain why they are not considered expenses.

Accepted Answer

The answer of A merchandiser frequently has a need to...

Question 12

The acquisition of inventory is debited to the ____________ account when a perpetual inventory system is used.

Accepted Answer

The answer of The acquisition of inventory is debited to...

Question 13

The freight cost incurred by a seller to deliver goods sold to a customer is called ________________.

Accepted Answer

The answer of The freight cost incurred by a seller...

Question 14

The following information is available for Hopkins Company:  Instructions
Compute each of the following:
(a) Net purchases
(b) Cost of goods purchased
(c) Cost of goods sold

Accepted Answer

The answer of The following information is available for Hopkins...

Question 15

The adjusted trial balance of Dailey Music Company appears below. Dailey Music Company prepares monthly financial statements and uses the perpetual inventory method.
Instructions
Complete the worksheet below.

Accepted Answer

The answer of The adjusted trial balance of Dailey Music...

Question 16

Lori Brown and Jill Kane, two salespersons in adjoining territories, regularly compete for bonuses. During the last month, their dollar volume of sales, on which the bonuses are based, was nearly equal. On the last day of the month, both made a large sale. Both orders were shipped on the last day of the month and both were received by the customer on the fifth of the following month. Lori's sale was FOB shipping point, and Jill's was FOB destination. The company "counts" sales for purposes of calculating bonuses on the date that ownership passes to the purchaser. Lori's sale was therefore counted in her monthly total of sales, Jill's was not. Jill is quite upset. She has asked you to just include it, or to take Lori's off as well. She also has told you that you are being unethical for allowing Lori to get a bonus just for choosing a particular shipping method.
Write a memo to Jill. Explain your position.

Accepted Answer

The answer of Lori Brown and Jill Kane, two salespersons...

Question 17

Inventory on hand can be obtained from detailed inventory records when a ________________ inventory system is maintained.

Accepted Answer

The answer of Inventory on hand can be obtained from...

Question 18

When a customer returns merchandise previously purchased on credit, the entry the seller makes to record the return requires a debit to the ________________ account and a credit to the ________________ account.

Accepted Answer

The answer of When a customer returns merchandise previously purchased...

Question 19

Sales Returns and Allowances and Sales Discounts are both ______________ accounts and have _______________ normal balances.

Accepted Answer

The answer of Sales Returns and Allowances and Sales Discounts...

Question 20

Every sales transaction should be supported by a ________________ that provides written evidence of the sale.

Accepted Answer

The answer of Every sales transaction should be supported by...

Quiz 5: Accounting for Merchandising Operations

The income statement for a merchandising company presents five amounts not shown on a service company's income statement. Identify and briefly explain the five unique amounts.

Gross profit is obtained by subtracting from .

Cost of goods sold is deducted from net sales revenue for the period in order to arrive at ________________.

A ________________ buys and sells goods rather than performing services to earn a profit.

Distinguish between FOB shipping point and FOB destination. Identify the freight terms that will result in a debit to Inventory by the purchaser and a debit to Freight-Out by the seller.

Prepare the necessary journal entries to record the following transactions, assuming a periodic inventory system: (a) Purchased $520,000 of merchandise on account, terms 2/10, n/30. (b) Returned $40,000 of damaged merchandise for credit. (c) Paid for the merchandise purchased within 10 days.

Mary Bolton believes revenues from credit sales may be recognized before they are collected in cash. Do you agree? Explain.

Income from operations is determined by subtracting total operating expenses from ________________.

You are at a company picnic and the company president starts a conversation with you. The president says "Since we use the perpetual inventory system, there is no reason to take a physical count of our inventory." What is your response to the president's remarks?

A merchandiser frequently has a need to use contra accounts related to the sale of goods. Identify the contra accounts that have normal debit balances and explain why they are not considered expenses.

The acquisition of inventory is debited to the ____________ account when a perpetual inventory system is used.

The freight cost incurred by a seller to deliver goods sold to a customer is called ________________.

The following information is available for Hopkins Company: Instructions Compute each of the following: (a) Net purchases (b) Cost of goods purchased (c) Cost of goods sold

The adjusted trial balance of Dailey Music Company appears below. Dailey Music Company prepares monthly financial statements and uses the perpetual inventory method. Instructions Complete the worksheet below.

Inventory on hand can be obtained from detailed inventory records when a ________________ inventory system is maintained.

When a customer returns merchandise previously purchased on credit, the entry the seller makes to record the return requires a debit to the account and a credit to the account.

Sales Returns and Allowances and Sales Discounts are both accounts and have _ normal balances.

Every sales transaction should be supported by a ________________ that provides written evidence of the sale.