4-154
236.
Following is the adjusted trial balance for Mercer Grocery, Inc. for the current year. Mercer
uses a periodic inventory system. A physical count of the inventory indicates that $60,000
of merchandise is on hand. Prepare the December 31 closing entries.
Mercer Grocery, Inc.
Adjusted Trial Balance
December 31
Dr.
Cr.
Cash
$67,500
Accounts receivable
46,000
Merchandise inventory
42,000
Store supplies
800
Accounts payable
16,000
Salaries payable
850
Common stock
1,000
Retained earnings
124,630
Dividends
45,000
Sales
550,000
Sales returns & allowances
4,500
Sales discounts
4,250
Purchases
403,900
Purchases returns &
allowances
2,900
Purchases discounts
5,350
Transportation-in
4,800
Salaries expense
68,325
Advertising expense
8,150
Store supplies expense
450
Interest expense
5,055
Total
$700,730
$700,730
4-155
Fill in the Blank Questions
237.
A ___________ is an intermediary that buys products from manufacturers and sells to
retailers.
238.
A ________________ company’s operating cycle begins with the purchase of merchandise
and ends with the collection of cash from merchandise sales.
239.
Products that a company owns and intends to sell are called _____________________.
240.
A ___________ inventory system updates the accounting records for merchandise
transactions only at the end of an accounting period.
241.
The __________________ inventory system continually updates accounting records for
merchandise transactions – specifically, for those records of inventory available for sale
and inventory sold.
242.
Beginning inventory plus the net cost of purchases is the _____________________.
243.
A period’s beginning inventory is equal to the prior period’s ___________________.
244.
Besides the current ratio, the liquidity of a company can be measured using the
____________________, which only includes the most liquid current assets in its
calculation.
245.
The gross margin ratio equals net sales less ___________ divided by net sales.
246.
_________________ are the amounts and timing of payment from a buyer to a seller stated
on the invoice.
247.
A buyer issues a _______________________ to inform the seller of a debit made to the
seller’s account payable in the buyer’s records.
248.
FOB _________________ means the buyer accepts ownership when the goods depart the
seller’s place of business. The buyer is responsible for paying shipping costs and bears the
risk of damage or loss when goods are in transit.
249.
FOB _________________ means ownership of goods transfers to the buyer when the goods
arrive at the buyer’s place of business. The seller is responsible for paying shipping
charges and bears the risk of damage or loss in transit.
250.
Merchandise that customers return to the seller after a sale is referred to as
___________________.
251.
Reductions in the selling price of defective or unacceptable merchandise that a customer
is willing to keep are referred to as _____________________________.
252.
A seller usually prepares a ____________________ to confirm a buyer’s return or allowance,
and informs the buyer of the seller’s credit to the buyer’s Account Receivable on the
seller’s books.
253.
____________________ can benefit a seller by decreasing the delay in receiving cash and
reducing future collection efforts.
254.
Inventory shrinkage can be computed by comparing the ___________ of inventory with
recorded quantities and amounts.
255.
________________________ expenses are those costs that support a company’s overall
operations and include expenses related to accounting, human resource management, and
financial management.
256.
A _____________________ income statement format shows detailed computations of net
sales and other costs and expenses, and reports subtotals for various classes of items.
257.
A ______________________ income statement includes cost of goods sold as another
expense and shows only one subtotal for total expenses.
258.
Non-operating activities reported on the income statement that include interest, dividend,
and rent revenues, and gains from asset disposals are called
_____________________________.
259.
Non-operating activities reported on the income statement that include interest expense,
losses from asset disposals, and casualty losses are called
____________________________.
260.
When a company has no reportable non-operating activities, its income from operations is
reported as ___________________.
261.
Under the ______________ inventory accounting system, each purchase, purchase return
and allowance, purchase discount, and transportation-in transaction is recorded in a
separate temporary account.
262.
The current liability account credited when recording a seller’s revenue-side adjusting
entry for the estimated amount of current and future sales returns and allowances is
263.
The current asset account debited when recording a seller’s cost-side adjusting entry for
the estimated amount of current and future sales returns and allowances is
___________________________.
264.
If a buyer of goods that uses the net method of accounting for purchases fails to take an
early payment discount offered by the seller, the amount of the discount not taken is
recorded by the buyer as a debit to __________________.
265.
If a buyer of goods that uses the net method of accounting for purchases fails to take an
early payment discount offered by the seller, the amount of the discount not taken is
recorded by the seller as a credit to the ______________________ account.
266.
The means of recording purchases under the assumption that the cash discount for
prompt payment will be taken is called the _________________________.