134. Anthony Company sold Madison Company merchandise on account FOB shipping point, 2/10, net 30, for
$10,000. Anthony prepaid the $300 shipping charge. Which of the following entries does Anthony make to
record this sale?
135. Emma Co. sold Isabella Co. merchandise on account FOB shipping point,, 2/10, net 30, for
$15,000. Emma Co. prepaid the $750 shipping charge. Using the perpetual inventory method, which of the
following entries will Isabella Co. make to record payment of the merchandise if Isabella Co. pays within the
discount period?
136. A chart of accounts for a merchandising business
137. Cumberland Co. sells $2,000 of inventory to Hancock Co. for cash. Cumberland paid $1,250 for the
merchandise. Under a perpetual inventory system, which of the following journal entry(ies) would be
recorded?
138. Isaac Co. sells merchandise on credit to Sonar Co in the amount of $5,700. The invoice is dated on April
1 with terms of 1/15, net 45. What is the amount of the discount and up to what date must the invoice be paid
in order for the buyer to take advantage of the discount?
139. Isaac Co. sells merchandise on credit to Sonar Co in the amount of $9,600. The invoice is dated on April
15 with terms of 1/15, net 45. If Sonar Co. chooses not to take the discount, by when should the payment be
made?
140. Discounts taken by a buyer because of early payment are recorded on the seller’s accounting records as
141. Taking advantage of a 2/10, n/30 purchases discount is equal to a savings yearly rate of approximately
142. Who pays the freight costs when the terms are FOB shipping point?
143. Who pays the freight cost when the terms are FOB destination?
144. 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?
145. What type of company would normally offer trade discounts to its customers?
146. Which of the following accounts will only be found in the chart of accounts of a merchandising company?
147. Which of the following items would affect the cost of merchandise inventory acquired during the period?
148. If title to merchandise purchases passes to the buyer when the goods are delivered to the buyer, the terms
are
149. If title to merchandise purchases passes to the buyer when the goods are shipped from the seller, the terms
are
150. If the merchandise costs $3,500, insurance in transit costs $250, tariff costs $75, processing the purchase
order by the purchasing department costs $50, and the company receiving dock personnel cost $25, what is the
total cost charged to the merchandise?
151. Under the perpetual inventory system, all purchases of merchandise are debited to the account entitled
152. When the perpetual inventory system is used, the inventory sold is debited to
153. Under a perpetual inventory system
154. The proper journal entry to record the receipt of inventory purchased on account in a perpetual inventory
system would be:
155. Which of the following items should not be included in the cost of ending merchandise inventory?
156. The Corbit Corp. sold merchandise $10,000 for cash. The cost of the merchandise sold was $7,590. The
journal entry(s) to record this transaction would be
157. Inventory shortage is recorded when
158. If the physical count of the inventory revealed $158,000 of merchandise on hand and the inventory records
reported $163,000, what would be the necessary adjusting entry to record inventory shortage?
159. Which account will be included in both service and merchandising companies closing entries?
160. Ramone Company had $600,000 in Net Sales for the year 2010. The total assets at the beginning of the
year were $240,000 and total assets at the end of the year were $280,000. The ratio of net sales to total assets is
(round answer to 2 decimal places):
161. Cleary Company had total Sales of $550,000; Sales Discounts of $10,000; Sales Returns of $40,000 and
Cost of Merchandise Sold of $200,000 during 2010. The total asset balance at the beginning of the year was
$175,000 and at the end of the year was $167,000. Calculate the ratio of net sales to total assets (Round answer
to 2 decimal points).
162. What is the major difference between a periodic and perpetual inventory system?
163. Which of the following accounts will not be found on the Cost of Merchandise Sold section on the Income
Statement?
164. Under the periodic inventory system, the journal entry to record the purchase of merchandise inventory
will include a debit to
165. Under the periodic inventory system, the journal entry to record the cost of merchandise sold at the point
of sale will include the following account
166. Under a periodic inventory system, closing entries will include
167. The proper journal entry to record the receipt of inventory purchased on account in a periodic inventory
system would be:
168. Which of the following accounts should be closed to Income Summary at the end of the fiscal year?
169. Calculate the gross profit for Jonas Company based on the data given below:
Sales
$764,000
Selling Expenses
52,500
Cost of Merchandise Sold
538,000
Sales Discounts
7,100
Sales Returns and Allowances
3,650
170. Abbey Co. sold merchandise to Gomez Co. on account, $35,000, terms 2/15, net 45. The cost of the
merchandise sold is $24,500. Abbey Co. issued a credit memo for $3,600 for merchandise returned that
originally cost $1,700. Gomez Co. paid the invoice within the discount period. What is the amount of gross
profit earned by Abbey Co. on the above transactions?
171. Calculate income from operations for Jonas Company based on the data given below:
Sales
$764,000
Selling Expenses
52,500
Cost of Merchandise Sold
538,000
Sales Discounts
7,100
Sales Returns and Allowances
3,650
172. Describe the major differences in preparing the financial statements for a service business and a
merchandising business.
Service Business
Merchandising Business
Income Statement:
Income Statement:
Balance Sheet:
Balance Sheet:
173. Calculate the gross profit for Jonas Company based on the data given below:
Sales
$764,000
Selling Expenses
52,500
Cost of Merchandise Sold
538,000
Sales Discounts
7,100
Sales Returns and Allowances
3,650
174. During the current year, merchandise is sold for $86,000 cash and for $93,950 on account. The cost of the
merchandise sold is $76,240. What is the amount of the gross profit?
Income Statement:
Income Statement
Equals: Net Income
Balance Sheet:
Balance Sheet:
175. Abbey Co. sold merchandise to Gomez Co. on account, $35,000, terms 2/15, net 45. The cost of the
merchandise sold is $24,500. Abbey Co. issued a credit memo for $3,600 for merchandise returned that
originally cost $1,700. Gomez Co. paid the invoice within the discount period. What is the amount of gross
profit earned by Abbey Co. on the above transactions?
176. Based upon the following data, determine the cost of merchandise sold for August.
Merchandise Inventory August 1
$ 75,560
Merchandise Inventory August 31
96,330
Purchases
373,880
Purchases Returns & Allowances
14,760
Purchases Discounts
10,900
Freight In
4,135
Cost of merchandise sold:
Merchandise Inventory August 1
$75,560
Purchases
$373,880
Less: Purchases Returns and Allowances
$14,760
Purchases Discounts
10,900
25,660
Net Purchases
$348,220
Add Freight In
4,135
Merchandise available for sale
427,915
Less merchandise inventory, August 31
96,330
Cost of merchandise sold
$331,585
177. Journalize the following merchandise transactions:
A.
Sold merchandise on account, $17,300 with terms 2/10, net 30. The cost of the merchandise sold was $12,600.
B.
Received payment less the discount.
A.
Accounts Receivable
17,300
Sales
17,300
Cost of Merchandise Sold
12,600
Merchandise Inventory
12,600
Cash
16,954
178. Travis Company purchased merchandise on account from a supplier for $5,700, terms 2/10, net 30. Travis
returned $1,100 of the merchandise and received full credit. Travis Company paid for the merchandise within
the discount period.
Under a perpetual inventory system, record all of the journal entries required for the above transactions.
179. On March 25, 2014, Patton Company sold merchandise on account,$10,000. The applicable sales tax
percentage is 8.5%. Record the transaction.
Journal
Date
Description
Post Ref
Debit
Credit
Mar. 25
Accounts Receivable
10,850
Sales
10,000
Sales Tax Payable
180. On March 29th, customers who owe $10,500.00 for purchases made on Sonic Sales Company submit
payments of $4,250.00. Journalize this event.
Mar 29
Cash
4,250.00
Accounts Receivable
4,250.00
Merchandise Inventory
5,700
Accounts Payable
5,700
Accounts Payable
1,100
Merchandise Inventory
1,100
Accounts Payable
4,600
Cash
4,508
Merchandise Inventory
181. Determine the amount to be paid in full settlement of each invoice, assuming that credit for returns and
allowances was received prior to payment and that all invoices were paid within the discount period.
Merchandise
Freight Paid by Seller
Freight Terms
Returns and Allowances
a
$4,500
$140
FOB Shipping Point, 2/10, net
30
$1,200
b
$7,650
$200
FOB Destination, 1/10, net 45
$450
182. On March 4th, Micro Sales makes $4,850.00 in sales on bank credit cards which charge a 2.5% service
charge and deposit the funds into Micro Sales bank accounts at the end of the business day. Journalize the sales
and recognition of expense.
Mar 4
Cash
4,728.75
Credit Card Expense
121.25
Sales
4,850.00
183. Sampson Co. sold merchandise to Batson Co. on account, $46,000, terms 2/15, net 45. The cost of the
merchandise sold is $38,500. Sampson Co. issued a credit memo for $1,500 for merchandise returned that
originally cost $950. The Batson Co. paid the invoice within the discount period. Prepare the entries that both
Sampson and Batson Companies would record for the above. Assume both Sampson and Batson use a
perpetual inventory system.
Sampson Company Journal Entries:
Accounts Receivable
46,000
Sales
46,000
Cost of Merchandise Sold
38,500
Merchandise Inventory
38,500
Sales Returns and Allowances
1,500
Accounts Receivable
1,500
Merchandise Inventory
950
Cost of Merchandise Sold
950
Cash
43,610
Sales Discounts
890
Accounts Receivable
44,500
184. Maxi Company’s perpetual inventory records indicate that $820,300 of merchandise should be on hand on
October 31, 2014. The physical inventory indicates that $781,900 is actually on hand. Journalize the adjusting
entry for the inventory shrinkage for Maxi Company for the year ended October 31, 2014.
Cost of Merchandise Sold
38,400
Merchandise Inventory
38,400
Merchandise Inventory
46,000
Accounts Payable
46,000
Accounts Payable
1,500
Merchandise Inventory
1,500
Accounts Payable
44,500
Cash
43,610
Merchandise Inventory
185. The records of Nevada Co. indicated that $420,000 of merchandise should be on hand on December 31,
2010. The physical inventory indicates that $370,000 of merchandise is actually on hand. Journalize the
adjusting entry for the inventory shrinkage for the year ended December 31, 2010.
Journal
Date
Description
Post Ref
Debit
Credit
186. Selected accounts and amounts appear below. Journalize the closing entry, assuming a perpetual
inventory system.
Merchandise Inventory
$ 45,500
Cost of Merchandise Sold
652,500
Income Summary
652,500
Cost of Merchandise Sold
652,500
Journal
Dec 31
Cost of Merchandise Sold
50,000
Merchandise Inventory
50,000
187. 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.
188. Complete the following data taken from the condensed income statements for merchandising Companies
A, B, & C.
Company A
Company B
Company C
Net income
315
?
215
Sales
?
865
560
Gross Profit
430
?
325
Operating Expenses
?
125
?
Cost of merchandise sold
545
320
?
Company A
Company B
Company C
Net income
315
420
215
Sales
975
865
560
Gross Profit
430
545
325
Operating Expenses
115
125
110
Cost of merchandise sold
545
320
235
Company A
Company B
Company C
Sales
975
865
560
Less COMS
545
320
235
Gross Profit
430
545
325
Less Operating Expenses
115
125
110
Net income
315
420
215
189. Complete the following data taken from the condensed income statements for merchandising Companies
X, Y, & Z.
Company X
Company Y
Company Z
Net income or (loss)
220
?
(70)
Sales
?
1,315
890
Gross Profit
435
?
465
Operating Expenses
?
565
?
Cost of merchandise sold
330
775
?
190. During the current year, merchandise is sold for $137,500 cash and $425,600 on account. The cost of the
merchandise sold is $322,325. What is the amount of the gross profit?
191. During the current year, merchandise is sold for $117,500 cash and $241,750 on account. The cost of the
merchandise sold is $157,400. What is the amount of the gross profit?
Company X
Company Y
Company Z
Net income or (loss)
220
(25)
(70)
Sales
765
1,315
890
Gross Profit
435
540
465
Operating Expenses
215
565
535
Cost of merchandise sold
330
775
425
Company X
Company Y
Company Z
Sales
765
1,315
890
Less COMS
330
775
425
Gross Profit
435
540
465
Less Operating Expenses
215
565
535
Net income or (loss)
220
(25)
(70)
192. 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
193. Using the following data taken from Hsu’s Imports Inc., prepare the cost of merchandise sold section of
the income statement for the year ended March 31, 2011.
Merchandise inventory, April 1, 2010
$193,250
Merchandise inventory, March 31, 2011
180,100
Purchases
1,079,600
Purchases returns and allowances
51,200
Purchases discounts
18,500
Sales
1,860,000
Freight in
19,250
Merchandise inventory,
April 1, 2010
$193,250
Purchases
$1,079,600
Less:
Purchases returns and
allowances
$51,200
Purchases discounts
18,500
69,700
Net purchases
$1,009,900
Add Freight in
19,250
Cost of merchandise
purchased
1,029,150
Merchandise available for sale
$1,222,400
Less merchandise inventory,
March 31, 2011arch 31, 2011
180,100
194. Using the following data taken from Hsu’s Imports Inc., determine the gross profit to be reported on the
income statement for the year ended March 31, 2011.
Merchandise inventory, April 1, 2010
$193,250
Merchandise inventory, March 31, 2011
180,100
Purchases
1,079,600
Purchases returns and allowances
51,200
Purchases discounts
18,500
Sales
1,860,000
Freight in
19,250
Merch. inventory,
April 1, 2010
$193,250
Purchases
$1,079,600
Less:
Purchases returns and
allowances
$51,200
Purchases discounts
18,500
69,700
Net purchases
$1,009,900
Add Freight in
19,250
Cost of merchandise
purchased
1,029,150
Merchandise available for sale
$1,222,400
Less merchandise inventory,
March 31, 2011
180,100
Cost of merchandise sold
$1,042,300
195. Using the following data taken from Martinez Inc., prepare the cost of merchandise sold section of the
income statement for the year ended May 31, 2011.
Merchandise inventory, June 1, 2010
$393,250
Merchandise inventory, May 31, 2011
380,100
Purchases
1,579,600
Purchases returns and allowances
81,200
Purchases discounts
16,500
Sales
2,060,000
Freight in
59,250
Merchandise inventory,
June 1, 2010
$393,250
Purchases
$1,579,600
Less:
Purchases returns and
allowances
$81,200
Purchases discounts
16,500
97,700
Net purchases
$1,481,900
Add Freight in
59,250
Cost of merchandise
purchased
1,541,150
Merchandise available for sale
$1,934,400
Less merchandise inventory,
May 31, 2011
380,100
Cost of merchandise sold
$1,554,300
196. Using the following data taken from Martinez Inc., determine the gross profit to be reported on the income
statement for the year ended May 31, 2011.
Merchandise inventory, June 1, 2010
$393,250
Merchandise inventory, May 31, 2011
380,100
Purchases
1,579,600
Purchases returns and allowances
81,200
Purchases discounts
16,500
Sales
2,060,000
Freight in
59,250
197. Which of the following accounts would be included in the chart of accounts of a merchandising company
using the: (a) periodic inventory system, (b) perpetual inventory system, or (c) both systems?
(1) Purchases
(2) Freight in
(3) Sales Returns and Allowances
(4) Delivery Expense
(5) Purchases Returns and Allowances
Merchandise inventory,
June 1, 2010
$393,250
Purchases
$1,579,600
Less:
Purchases returns and
allowances
$81,200
Purchases discounts
16,500
97,700
Net purchases
$1,481,900
Add Freight in
59,250
Cost of merchandise
purchased
1,541,150
Merchandise available for sale
$1,934,400
Less merchandise inventory,
May 31, 2011
380,100
Cost of merchandise sold
$1,554,300