Question 1

Prepare journals entries for the following,assuming the company uses a perpetual inventory method and records purchases at their net amounts.

Accepted Answer

The answer of Prepare journals entries for the following,assuming the...

Question 2

If cost of goods sold is $360,000 and the gross profit rate is 40%,what is the gross profit?

Accepted Answer

Gross profit is calculated as the difference between the cost of goods sold and the revenue generated from those goods. 
Gross profit = Revenue - Cost of Goods Sold
Since the gross profit rate is 40%, it means that the revenue generated from those goods is 140% of the cost of goods sold.
Revenue = 140% of Cost of Goods Sold
Revenue = 1.4 x $360,000
Revenue = $504,000
Therefore, Gross profit = $504,000 - $360,000 = $144,000
Hence, the closest answer is option A: $240,000.

Question 3

Perpetual inventory system: transactions and closing entries
Danny's Wholesale Company uses a perpetual inventory system.A partial chart of accounts is shown below,followed by a series of merchandising transactions.Indicate the accounts that should be debited and credited in recording each transaction.(Ignore sales taxes.)

Accepted Answer

The answer of Perpetual inventory system: transactions and closing entries
Danny's...

Question 4

Periodic inventory system
Soundview Centre uses a periodic inventory system.At the end of 2015,the accounting records include the following information:  Compute the following for 2015:

Accepted Answer

The answer of Periodic inventory system
Soundview Centre uses a periodic...

Question 5

Effects of transactions upon the accounting equation
Listed below are selected transactions of Simon's,a retail store which uses a perpetual inventory system:
(a)Purchased merchandise on account.
(b)Made an entry to recognize the revenue from a sale of merchandise on account.(Ignore the cost of goods sold.)
(c)Recognized the cost of goods sold relating to the sale in Transaction b.
(d)Collected in cash the account receivable from the customer in Transaction b.
(e)Following the taking of a physical inventory at year-end,made an adjusting entry to record a normal amount of inventory shrinkage.
Indicate the effects of each of these transactions upon the elements of the company's financial statements.Organize your answer in tabular form,using the column headings shown below.(Notice that the cost of goods sold is shown separately from all other expenses.)Use the code letters I for increase,D for decrease,and NE for no effect.The answer for Transaction a is provided as an example.

Accepted Answer

The answer of Effects of transactions upon the accounting equation
Listed...

Question 6

If costs of goods sold is $560,000 and its gross profit rate is 20%,what is the gross profit?

Accepted Answer

Gross profit is calculated as sales minus the cost of goods sold. Given a gross profit rate of 20%, it means that gross profit is 20% of sales. To find the sales, we can set up the equation: Sales - Cost of Goods Sold = Gross Profit, where Gross Profit = 20% of Sales. Rearranging the equation to solve for Sales gives us Sales = Cost of Goods Sold / (1 - Gross Profit Rate). Plugging in the numbers: Sales = $560,000 / (1 - 0.20) = $560,000 / 0.80 = $700,000. Therefore, Gross Profit = Sales - Cost of Goods Sold = $700,000 - $560,000 = $140,000.

Question 7

A customer purchased merchandise for $400 which cost the seller $200.The customer was dissatisfied with some of the goods and thus returned $100 worth and received a cash refund.
(a)What journal entries should the seller make when the merchandise is sold and at the time of the return? Assume that the seller uses a perpetual inventory system.
(b)If the seller uses a periodic inventory system,what entries would be made?

Accepted Answer

The answer of A customer purchased merchandise for $400 which...

Question 8

Gross profit
The table below contains information from a recent annual report of Molloy,Inc.(Dollar amounts are stated in millions.)Fill in the missing amounts.

Accepted Answer

The answer of Gross profit
The table below contains information from...

Question 9

Perpetual inventory system: basic entries
Renato Company uses a perpetual inventory system.A partial chart of accounts is shown below,followed by a series of merchandising transactions.Indicate the accounts that should be debited and credited in recording each transaction.(Ignore sales taxes.)

Accepted Answer

The answer of Perpetual inventory system: basic entries
Renato Company uses...

Question 10

Accounting terminology
Listed below are nine technical accounting terms introduced in this chapter:
Gross profit
Gross profit rate
General ledger
Cost of goods sold
Physical inventory
Subsidiary ledger
Perpetual inventory system
Periodic inventory system
Inventory shrinkage
Each of the following statements may (or may not)describe one of these technical terms.In the space provided below each statement,indicate the accounting term described,or answer "None" if the statement does not correctly describe any of the terms.
______ a.An approach to accounting for inventories and the cost of goods sold used primarily in small businesses with manual accounting systems.
______ b.A reason why perpetual inventory records may not be entirely accurate.
______ c.The difference between the revenue earned by selling merchandise and the cost of goods sold.
______ d.Gross profit divided by average total stockholders' equity.
______ e.An accounting procedure used in both perpetual and periodic inventory systems.In a perpetual system,this procedure brings to light the amount of inventory shrinkage.In a periodic system,it is the basis for computing the cost of goods sold.
______ f.An accounting record showing the individual items comprising the balance of a general ledger account.
______ g.The accounting record in which transactions initially are recorded.

Accepted Answer

The answer of Accounting terminology
Listed below are nine technical accounting...

Question 11

Subsidiary ledgers
Listed below are several merchandising transactions of Siegel's Garden Center,a garden supply store.
(a)Purchased merchandise from Bayview Wholesale on account.
(b)Sold merchandise for cash.
(c)Sold merchandise on account to Dom's Landscaping Co.
(d)Paid the account payable to Bayview Wholesale.
(e)Collected the account receivable from Dom's Landscaping Co.
Among the accounting records maintained by Siegel's are subsidiary ledgers for inventory,accounts receivable,and accounts payable.
For each of the five transactions,you are to indicate any subsidiary ledger (or ledgers)to which the transaction would be posted.Use the code:
Inv = Inventory subsidiary ledger
AR = Accounts receivable subsidiary ledger
AP = Accounts payable subsidiary ledger
Also indicate whether each posting causes the balance in the subsidiary ledger account to increase or decrease.Organize your answer in tabular form as illustrated below.The answer for transaction a is provided as an example.

Accepted Answer

The answer of Subsidiary ledgers
Listed below are several merchandising transactions...

Question 12

Subsidiary ledgers
Explain the nature of subsidiary ledgers,and give two specific examples.For each of these examples,explain (1)the unit of organization within this ledger,and (2)the usefulness of this ledger in business operations.

Accepted Answer

The answer of Subsidiary ledgers
Explain the nature of subsidiary ledgers,and...

Question 13

On July 1,the inventory of at Barnett Shoes was $60,000.Because of anticipated back-to-school sales,the owner wants to have an inventory of $105,000 on hand at the beginning of August.Net sales during July are expected to total $70,000,with a gross profit rate of 45%.During July,the company should purchase merchandise costing:

Accepted Answer

First, calculate the desired ending inventory:
$105,000 - $70,000 (expected cost of goods sold) = $35,000

Then, calculate the cost of goods available for sale:
Beginning inventory + purchases = $60,000 + purchases

Since the gross profit rate is 45%, the cost of goods sold is 55% of net sales:
$70,000 (net sales) x 55% = $38,500 (cost of goods sold)

Therefore, the cost of goods available for sale must be:
$38,500 (cost of goods sold) + $35,000 (desired ending inventory) = $83,500

Subtracting the beginning inventory, the amount of purchases needed during July is:
$83,500 - $60,000 (beginning inventory) = $23,500

Therefore, the closest option is C: $83,500.

Question 14

Inventory systems
Indicate whether you would expect each of the following businesses to maintain a perpetual or a periodic inventory system.Explain the reasoning behind your answers:
(a)A jewelry store.
(b)A roadside vegetable stand.

Accepted Answer

The answer of Inventory systems
Indicate whether you would expect each...

Question 15

Journal entries for merchandising transactions
Shown below is a partial chart of accounts for Main Street Markets,followed by a series of merchandising transactions.The company uses a perpetual inventory system,records purchases at net cost,and records sales at the full invoice price.Sales taxes are collected on all sales,and the sales tax liability is recorded immediately.Freight charges on inbound shipments are recorded in the Inventory account.  Indicate the accounts that should be credited in recording each transaction by placing the appropriate account number(s)in the space provided.

Accepted Answer

The answer of Journal entries for merchandising transactions
Shown below is...

Question 16

Inventory systems
Briefly distinguish between a perpetual inventory system and a periodic inventory system.

Accepted Answer

The answer of Inventory systems
Briefly distinguish between a perpetual inventory...

Question 17

Periodic inventory system
Armstrong Creation uses a periodic inventory system.During the current year,the company purchased merchandise at a cost of $245,000.You are to compute the cost of goods sold under each of the following alternative assumptions:

Accepted Answer

The answer of Periodic inventory system
Armstrong Creation uses a periodic...

Question 18

Inventory systems
Bookmarks,Inc.sells used books at its store in the resort community of Lake Bryn Mawr.The owner maintains a large inventory of used books purchased from estate sales,flea markets,and customers.During the tourist seasons of summer and winter,the store is exceptionally busy with customers.Each customer usually makes small purchases ranging in amount from one to twenty dollars.What type of inventory system would you recommend to the owner of Bookmarks,Inc.? Explain the reasoning behind your advice.

Accepted Answer

The answer of Inventory systems
Bookmarks,Inc.sells used books at its store...

Question 19

At the beginning of 2015,Wilson Stores has an inventory of $300,000.Because sales growth was strong during 2015,the owner wants to increase inventory on hand to $450,000 at December 31,2015.If net sales for 2015 are expected to be $2,600,000,and the gross profit rate is expected to be 35%,compute the cost of the merchandise the owner should expect to purchase during 2015.

Accepted Answer

The answer of At the beginning of 2015,Wilson Stores has...

Question 20

Net sales and gross profit
Mayflower Supply House had gross sales revenue of $1,700,000,cost of goods sold of $950,000,sales returns and allowances of $52,500,and allowed sales discounts of $30,000.
Compute for the year:

Accepted Answer

The answer of Net sales and gross profit
Mayflower Supply House...

Quiz 6: Merchandising Activities

Prepare journals entries for the following,assuming the company uses a perpetual inventory method and records purchases at their net amounts.

If cost of goods sold is $360,000 and the gross profit rate is 40%,what is the gross profit?

Periodic inventory system Soundview Centre uses a periodic inventory system.At the end of 2015,the accounting records include the following information: Compute the following for 2015:

If costs of goods sold is $560,000 and its gross profit rate is 20%,what is the gross profit?

Gross profit The table below contains information from a recent annual report of Molloy,Inc.(Dollar amounts are stated in millions.)Fill in the missing amounts.

Perpetual inventory system: basic entries Renato Company uses a perpetual inventory system.A partial chart of accounts is shown below,followed by a series of merchandising transactions.Indicate the accounts that should be debited and credited in recording each transaction.(Ignore sales taxes.)

Subsidiary ledgers Explain the nature of subsidiary ledgers,and give two specific examples.For each of these examples,explain (1)the unit of organization within this ledger,and (2)the usefulness of this ledger in business operations.

Inventory systems Indicate whether you would expect each of the following businesses to maintain a perpetual or a periodic inventory system.Explain the reasoning behind your answers: (a)A jewelry store. (b)A roadside vegetable stand.

Inventory systems Briefly distinguish between a perpetual inventory system and a periodic inventory system.

Periodic inventory system Armstrong Creation uses a periodic inventory system.During the current year,the company purchased merchandise at a cost of $245,000.You are to compute the cost of goods sold under each of the following alternative assumptions:

Net sales and gross profit Mayflower Supply House had gross sales revenue of $1,700,000,cost of goods sold of $950,000,sales returns and allowances of $52,500,and allowed sales discounts of $30,000. Compute for the year: