Question 1

Net sales is sales less

Accepted Answer

Net sales is calculated by subtracting both sales discounts and sales returns and allowances from total sales.

Question 2

The income statement for Guinn Company for the year ended December 31, 2010 is as follows:
Prepare the entries to close the revenue and expense accounts at December 31, 2010. You may omit explanations for the transactions.

Accepted Answer

The answer of The income statement for Guinn Company for...

Question 3

On October 4, 2010, Terry Corporation had credit sales transactions of $2,800 from merchandise having cost $1,900. The entries to record the day's credit transactions include a

Accepted Answer

The correct entry for recording credit sales is to credit the Sales account for the sales amount, which is $2,800 in this case.

Question 4

The respective normal account balances of Purchases, Purchase Discounts, and Freight-in are

Accepted Answer

Purchases and Freight-in are usually classified as cost of goods sold accounts, which have debit balances because they represent an expense. Purchase discounts, on the other hand, is a contra-purchases account and has a credit balance because it represents a reduction in the cost of goods purchased. Therefore, the respective normal account balances of Purchases, Purchase Discounts, and Freight-in are debit, credit, and debit, making choice (C) the correct answer.

Question 5

Richter Company sells merchandise on account for $2,000 to Lynch Company with credit terms of 3/10, n/60. Lynch Company returns $200 of merchandise that was damaged, along with a check to settle the account within the discount period. What entry does Richter Company make upon receipt of the check and the damaged merchandise?

Accepted Answer

The answer of Richter Company sells merchandise on account for...

Question 6

Cartier Company purchased inventory from Pissaro Company. The shipping costs were $400 and the terms of the shipment were FOB shipping point. Cartier would have the following entry regarding the shipping charges:

Accepted Answer

The answer of Cartier Company purchased inventory from Pissaro Company....

Question 7

Which of the following accounts is not closed to Income Summary?

Accepted Answer

Merchandise Inventory is a balance sheet account and is not closed to Income Summary. The other three accounts are all income statement accounts that are closed to Income Summary at the end of the period.

Question 8

In the balance sheet, ending merchandise inventory is reported

Accepted Answer

Ending merchandise inventory is a current asset and is typically reported immediately following accounts receivable in the balance sheet.

Question 9

Cole Company has sales revenue of $39,000, cost of goods sold of $24,000 and operating expenses of $9,000 for the year ended December 31. Cole's gross profit is

Accepted Answer

Gross profit is calculated by subtracting the cost of goods sold from the sales revenue. Therefore, Cole Company's gross profit is $39,000 - $24,000 = $15,000.

Question 10

In a perpetual inventory system, a return of defective merchandise by a purchaser is recorded by crediting

Accepted Answer

In a perpetual inventory system, returns of defective merchandise are recorded by crediting Merchandise Inventory to reflect the decrease in inventory.

Question 11

In the Clark Company, sales were $480,000, sales returns and allowances were $30,000, and cost of goods sold was $288,000. The gross profit rate was

Accepted Answer

Gross profit is calculated as sales minus sales returns and allowances, then subtracting the cost of goods sold. Gross profit rate is gross profit divided by net sales. Here, net sales are $450,000 ($480,000 - $30,000), and gross profit is $162,000 ($450,000 - $288,000). The gross profit rate is 36% ($162,000 / $450,000).

Question 12

Bryant Company sold goods on account to Kolmer Enterprises with terms of 2/10, n/30. The goods had a cost of $600 and a selling price of $900. Both Bryant and Kolmer use a perpetual inventory system. Record the sale on the books of Bryant and the purchase on the books of Kolmer.

Accepted Answer

The answer of Bryant Company sold goods on account to...

Question 13

Prepare the necessary journal entries on the books of Jayhawk Carpet Company to record the following transactions, assuming a perpetual inventory system (you may omit explanations):
(a) Jayhawk purchased $40,000 of merchandise on account, terms 2/10, n/30.
(b) Returned $4,000 of damaged merchandise for credit.
(c) Paid for the merchandise purchased within 10 days.

Accepted Answer

The answer of Prepare the necessary journal entries on the...

Question 14

Presented here are the components in Ferrell Company's income statement. Determine the missing amounts.

Accepted Answer

The answer of Presented here are the components in Ferrell...

Question 15

Which of the following accounts has a normal credit balance?

Accepted Answer

Purchase Discounts is a contra-expense account and has a normal credit balance.

Question 16

Logan Company made a purchase of merchandise on credit from Claude Corporation on August 3, for $6,000, terms 2/10, n/45. On August 10, Logan makes the appropriate payment to Claude. The entry on August 10 for Logan Company is

Accepted Answer

The answer of Logan Company made a purchase of merchandise...

Question 17

Cost of goods available for sale is computed by adding

Accepted Answer

The answer of Cost of goods available for sale is...

Question 18

Nen Company uses a perpetual inventory system. During May, the following transactions and events occurred.  
Instructions
Journalize the May transactions for Nen Company (seller) assuming that Nen uses a perpetual inventory system. You may omit explanations.

Accepted Answer

The answer of Nen Company uses a perpetual inventory system....

Question 19

The Merchandise Inventory account balance appearing in a worksheet represents the

Accepted Answer

The Merchandise Inventory account balance appearing in a worksheet represents the ending inventory, or the value of inventory that remains at the end of an accounting period after any sales have been recorded. It does not represent the beginning inventory, cost of merchandise purchased, or cost of merchandise sold.

Question 20

In a worksheet for a merchandising company, Merchandise Inventory would appear in the

Accepted Answer

Merchandise Inventory is an asset and therefore should appear in the trial balance, adjusted trial balance, and balance sheet columns. It is not a revenue or expense account, so it would not appear in the income statement column.

Quiz 5: Accounting for Merchandising Operations