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Exam 4: Accounting for Merchandising Operations

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Question 91

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Operating expenses are classified into two categories: selling expenses and cost of goods sold.

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B) False

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Question 92

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Takita Company had net sales of $500,000 and cost of goods sold of $350,000.Calculate Takita's gross profit.

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$500,000 -...

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Question 93

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A company had sales of $375,000 and gross profit of $157,500.Its cost of goods sold was:

On October 1,Robertson Company sold merchandise in the amount of $5,800 to Alberts,with credit terms of 2/10,n/30.The cost of the items sold is $4,000.Robertson uses the perpetual inventory system.Alberts pays the invoice on October 8 and takes the appropriate discount.The journal entry that Robertson makes on October 8 is:

A company's current assets were $17,980,its quick assets were $11,420,and its current liabilities were $12,190.Its quick ratio equals:

Multiple-step income statements:

A company has sales of $2,530,000,sales discounts of $200,000,sales returns and allowances of $323,000,shipping charges of $115,000,sales commissions of $234,000,net income of $863,500,and cost of goods sold of $1,012,000.What is the gross profit/margin for the period?

Match the following definitions and terms by placing the number that identifies the best definition in the blank space next to the term.

In a perpetual inventory system,the merchandise inventory account reflects the cost of goods available for sale.

The acid-test ratio is defined as current assets divided by current liabilities.

The gross margin ratio is defined as gross margin divided by net sales.

From the adjusted trial balance for the Worker Products Company,prepare a multiple-step income statement in good form.

Merchandise inventory consists of products that a company acquires to resell to customers.

Fill in the blanks (a)through (g)for the Hendricks Company for each of the income statements for 2012,2013,and 2014. $\begin{array}{c}\text { HENDRICKS COMPANY}\\\text { Income Statements }\\\text { For the Years Ended December 31}\\\begin{array}{|l|r|r|r|}\hline &2012 & 2013 & 2014 \\\hline \text { Sales } & \$ 7,500 & \$ 10,000 & \text { (f) } \\\hline \text { Cost of goods sold } & & & \\\hline \text { Merchandise inventory (beginning) } & (\mathrm{a}) & 375 & 750 \\\hline \text { Total cost of merchandise purchases } & 2,400 & 3,625 & 4,875 \\\hline \text { Merchandise inventory (ending) } & (\mathrm{b}) & \underline{750} & \underline{625} \\\hline \text { Cost of goods sold } & \underline{2,770} & (\mathrm{~d}) & \underline{5,000} \\\hline \text { Gross profit } & (\mathrm{c}) & 6,750 & 5,200 \\\hline \text { Operating expenses } & 3,750 & 3,750 & (\mathrm{~g}) \\\hline \text { Net income } & \$ 980 & (\mathrm{e}) & \$ 2,500 \\\hline\end{array}\end{array}$

A company that uses the perpetual inventory system purchased merchandise inventory at a cost of $4,300 with credit terms 3/15,net 45.If the company elects to pay within the discount period,what would be the appropriate journal entry to record the payment?

In a periodic inventory system,cost of goods sold is recorded as each sale occurs.

Credit terms include the specifics regarding the amount owed and timing of payments from a buyer to a seller.

How do closing entries for a merchandising company that uses the perpetual inventory system differ from the closing entries for a service company?

Each sales transaction of a seller that uses a perpetual system involves recognizing both revenue and cost of merchandise sold.

Quick assets include cash,inventory,and current receivables.