230)
Prepare journal entries to record the following merchandise transactions of Martinez Excavation
Equipment, which applies the perpetual inventory system and the gross method of recording
invoices.
May 1
Purchased merchandise from Kona Company for $12,700 under credit
terms of 2/15, n/45, FOB destination, and invoice dated May 1.
3
Sold merchandise to Walton for $8,000 under credit terms of 1/10, n/30,
FOB destination, invoice date May 3. The merchandise had cost $5,000.
5
Paid $350 cash for shipping charges related to the May 3 sale.
6
Returned $2,000 of the merchandise purchased on May 1 to Kona
Company.
7
Walton returned merchandise from the May 3 sale that had cost Martinez
$625 and had been sold for $1,000. The merchandise was restored to
inventory.
13
Received the balance due from Walton less the return.
14
Paid the amount due Kona Company.
231)
In its first month of business, Clausen Corporation reports sales of $1,750,000 and cost of goods
sold of $950,000. Clausen estimates that current and future returns and allowances will equal 4%
of those sales. Prepare the October 31 adjusting entries necessary to record the revenue side and
cost side estimates for returns and allowances.
232)
Stevenson Corporation reports unadjusted first-year sales of $400,000 and cost of goods sold of
$240,000. The company expects future returns and allowances equal to 3% of sales and 3% of cost
of sales. Prepare the adjusting entries necessary to record the revenue side and cost side estimates
for returns and allowances.
233)
Martin Corporation allows customers to return merchandise within 60 days of purchase. At
year-end, Martin estimates that sales of $20,000, with a cost of $14,000 will be returned in the
upcoming year. The unadjusted balance in Inventory Returns Estimated is a debit of $4,000, and
the unadjusted balance in Sales Refund Payable is a credit of $2,500. Prepare the adjusting entries
necessary to record the revenue side and cost side estimates for returns and allowances.
234)
Tahoe Ski Company uses the perpetual inventory system and the net method of accounting for
purchases. The company had the following transactions during January:
January 6: Purchased $4,000 of inventory. The seller’s credit terms are 2/10, n/30.
January 8: Returned $200 worth of defective units and received full credit.
January 15: Paid the amount due, less the returned items.
Prepare journal entries to record each of the preceding transactions.
235)
Barbara’s Boats uses the periodic inventory system and the net method of accounting for purchases.
The company had the following transactions during January:
January 6: Purchased $10,000 of inventory. The seller’s credit terms are 2/10, n/30.
January 31: Due to an oversight, the invoice was not paid within the discount period. Full
payment was made on January 31.
Prepare journal entries to record each of the preceding transactions.
236)
A ________ is an intermediary that buys products from manufacturers and sells to retailers.
237)
A ________ company’s operating cycle begins with the purchase of merchandise and ends with the
collection of cash from merchandise sales.
238)
Products that a company owns and intends to sell are called ________.
239)
________ inventory system updates the accounting record for inventory only at the end of an
accounting period.
240)
The ________ inventory system continually updates accounting records for merchandise
transactions for the amounts of inventory available for sale and inventory sold.
241)
Beginning inventory plus the net cost of purchases is the ________.
242)
A period’s beginning inventory is equal to the prior period’s ________.
243)
The liquidity of a company can be measured using the current ratio and the ________, which only
includes the most liquid current assets in its calculation.
244)
The gross margin ratio equals net sales less ________ divided by net sales.
245)
________ are the amounts and timing of payment from a buyer to a seller.
246)
A buyer issues a ________ to inform the seller of a debit made to the seller’s account payable in the
buyer’s records.
247)
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.
248)
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.
249)
Merchandise that customers return to the seller after a sale is referred to as _ .
250)
Reductions in the selling price of merchandise sold to customers, often involving damaged or
defective merchandise that a customer is willing to purchase with a decrease in the selling price is
referred to as _ _.
251)
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.
252)
________ can benefit a seller by decreasing the delay in receiving cash and reducing future
collection efforts.
253)
Inventory shrinkage can be computed by comparing the ________ of inventory with recorded
quantities and amounts.
254)
________ expenses are those costs that support a company’s overall operations and include
expenses related to accounting, human resource management, and financial management.
255)
A ________ income statement format shows detailed computations of net sales and other costs and
expenses, and reports subtotals for various classes of items.
256)
A ________ income statement includes cost of goods sold as another expense and shows only one
subtotal for total expenses.
257)
Non-operating activities that include interest, dividend, and rent revenues, and gains from asset
disposals are called ________.
258)
Non-operating activities that include interest expense, losses from asset disposals, and casualty
losses are reported as .
259)
When a company has no reportable nonoperating activities, its income from operations is reported
as ________.
260)
Under the ________ inventory accounting system, each purchase, purchase return and allowance,
purchase discount, and transportation-in transaction is recorded in a separate temporary account.