37) Auto Parts, Inc. uses a periodic inventory system. Use the following details to calculate net purchases.
Beginning merchandise inventory
$5,000
Ending merchandise inventory
2,500
Purchases
21,000
Purchase Discounts
900
Purchase Returns and Allowances
1,200
Freight In
4,300
A) $23,100
B) $18,900
C) $23,900
D) $20,100
38) Robin, Inc. uses a periodic inventory system. Use the following details to calculate the cost of goods
sold.
Beginning merchandise inventory
$5,000
Ending merchandise inventory
2,500
Purchases
20,000
Purchase Discounts
800
Purchase Returns and Allowances
1,300
Freight In
4,200
A) $22,100
B) $17,900
C) $24,600
D) $27,100
39) Describe how the cost of goods sold is calculated when using the periodic inventory system.
40) Durable Equipment Company uses the periodic inventory system. Durable reported the following
selected amounts at June 30, 2019 (the beginning inventory balance is also provided):
Merchandise Inventory, July 1, 2018
$22,000
Merchandise Inventory, June 30, 2019
19,000
Purchases
96,000
Purchase Discounts
5,000
Purchase Returns and Allowances
8,500
Freight In
3,200
Net Sales Revenue
212,400
Delivery Expense
1,400
Sales Salaries Expense
44,200
Common Stock
45,000
Retained Earnings
24,500
Requirement A: Compute cost of goods sold.
Requirement B: Compute gross profit.
Beginning Merchandise Inventory
Purchases
$96,000
Less: Purchase Returns and Allowances
8,500
Purchase Discounts
5,000
Net Purchases
82,500
Plus: Freight In
3,200
Net Cost of Purchases
Cost of Goods Available for Sale
Less: Ending Inventory
Cost of Goods Sold
Less: Cost of Goods Sold
Gross Profit
41) When using the periodic inventory system, there is no need to record an adjusting entry for inventory
shrinkage.
42) When using the periodic inventory system, the process of recording the ending Merchandise
Inventory is completed by making an adjusting entry.
43) The key difference in the closing process under the periodic and perpetual inventory systems is how
merchandise inventory is handled.
44) Regarding the four-step closing process under the periodic inventory system, ________.
A) Purchase Returns and Allowances and Purchase Discounts accounts are closed with a credit via the
Income Summary account
B) Sales Revenue is closed with a credit via the Income Summary account
C) the beginning Merchandise Inventory, Purchases, and Freight In are closed with a debit via the Income
Summary account
D) the ending merchandise inventory balance must be recorded as a debit via the Income Summary
account
45) When a periodic inventory system is used, ________.
A) an adjusting entry is needed to record the ending Merchandise Inventory account balance
B) the process for closing the Income Summary and Dividends accounts differs from the process used in
the perpetual inventory system
C) beginning Merchandise Inventory, Purchases, and Freight In accounts are closed via the Income
Summary Account
D) there is no need to take a physical count of inventory
1) An amount that a business earns from selling merchandise inventory is known as sales revenue or
sales.
2) Under the perpetual inventory system, two journal entries are used to record the sale of merchandise.
One entry records the Sales Revenue and another entry records the Cost of Goods Sold.
3) In a perpetual inventory system, the Cost of Goods Sold account is debited at the time of each sale.
4) When a perpetual inventory system is used, at the time of each sale an entry to record an expense and
an increase in Merchandise Inventory must be made.
5) Cost of Goods Sold is based on the company‘s cost, not the retail price.
6) When a company that uses the perpetual inventory system sells goods for cash, the journal entry to
record cost of goods sold is:
A)
Cost of Goods Sold
XX
Sales
XX
B) No journal entry is required.
C)
Cost of Goods Sold
XX
Merchandise Inventory
XX
D)
Sales
XX
Merchandise Inventory
XX
7) Regarding the Cost of Goods Sold account, which of the following statements is incorrect?
A) In a perpetual inventory system, the Cost of Goods Sold account keeps a current balance throughout
the period.
B) Cost of Goods sold is a contra revenue account.
C) Cost of Goods Sold is based on the company’s cost, not the retail price.
D) Cost of Goods Sold represents the cost of inventory that has been sold to customers.
8) Journalize the following transaction for a merchandiser that uses the perpetual inventory system.
Sold goods for cash, $1,200 (cost $750). Omit explanations.
9) When a sale is made on account, Accounts Receivable is debited.