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Exam 6: Accounting for Merchandising Businesses

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Question 91

True/False

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Title to merchandise shipped FOB shipping point passes to the buyer upon delivery of the merchandise to the buyer's place of business.

A) True
B) False

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Question 92

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Freight in is the amount paid by the company to deliver merchandise sold to a customer.

A) True
B) False

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Question 93

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A retailer purchases merchandise with a catalog list price of $30,000. The retailer receives a 15% trade discount and credit terms of 2/10, n/30. How much cash will be needed to pay this invoice within the discount period?

The term "inventory" can indicate

Merchandise with a list price of $4,700 is purchased on account, terms FOB shipping point, 1/10, n/30. The seller prepaid freight costs of $100. Prior to payment, $1,400 of the merchandise is returned. The correct amount is paid within the discount period. Record the foregoing transactions of the buyer in the sequence indicated below, assuming a perpetual inventory system is used.

Record the following transactions for Sparky's Pet Shop using the general journal form provided below. Assume Sparky's uses a perpetual inventory system. Omit transaction descriptions from entries:

Using the letter preceding each account, arrange the following selected accounts in the order they would normally appear in a chart of accounts of a company that uses a multiple-step income statement.

The primary difference between a periodic and perpetual inventory system is that a

Using the following information, what is the amount of cost of merchandise sold?

In many retail businesses, inventory is the largest current asset.

The seller may prepay the freight costs even though the terms are FOB shipping point.

The arrangements between buyer and seller as to when payments for merchandise are to be made are called

When purchases of merchandise are made for cash, the transaction may be recorded with the following entry

Who pays the freight costs when the terms are FOB shipping point?

What is the normal balance of the following accounts? a. Sales Tax Payable b. Merchandise Inventory c. Delivery Expense d. Cost of Merchandise Sold e. Sales Returns and Allowance f. Sales Discounts g. Sales

Discuss the following statement: "Operating cycles for all merchandising businesses are the same, with similar profit margins." Include an example(s) to illustrate your explanation.

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?

Based on the information below, journalize the entries for the Seller and the Buyer. Both use a perpetual inventory system.

The buyer will include the sales tax as part of the cost of items purchased for use.

In a periodic inventory system, the cost of merchandise purchased includes the cost of freight-in.