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Exam 6: Accounting for Merchandising Businesses

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Question 101

Multiple Choice

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Which account is not classified as a selling expense?

A) Sales Salaries
B) Freight-Out
C) Freight-In
D) Advertising Expense

E) None of the above
F) A) and B)

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Question 102

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Gross profit minus selling expenses equals net income.

A) True
B) False

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Question 103

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Dorman Co. sold merchandise to Smith Co. on account, $23,500, terms 2/15, net 45. The cost of the merchandise sold is $16,000. Dorman Co. issued a credit memo for $1,750 for merchandise returned that originally cost $1,400. The Smith Co. paid the invoice within the discount period. What is amount of net sales from the above transactions?

Match each of the following terms with the correct definition below.

The amount of the total cash paid to the seller for merchandise purchased for consumption would normally include

A company using the periodic inventory system has the following account balances: Merchandise Inventory at the beginning of the year, $3,600; Freight-In, $650; Purchases, $10,700; Purchases Returns and Allowances, $1,950; Purchases Discounts, $330. The cost of merchandise purchased is equal to

When a merchandising business is compared to a service business, the financial statement that is affected by that change is the Statement of Owner's Equity.

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?

There is no difference between the recording of cash sales and the recording of MasterCard or VISA sales.

Other income and expenses are items that are related to the primary operating activity.

Gadget Palace is a retailer selling unique hardware. Gadget Palace uses perpetual inventory. Use a General Journal to journalize the following four transactions during the month of August: Computation of payment:

The chart of accounts for a merchandise business would include an account called Delivery Expense.

As we compare a merchandise business to a service business, the financial statement that changes the most is the Balance Sheet.

Using a perpetual inventory system, the entry to record the return from a customer of merchandise sold on account includes a

Journalize the entries to record the following selected transactions:

The seller records the sales tax as part of the sales amount.

Journalize the following transactions for the Evans Company. Assume the company uses a perpetual inventory system.

Using a perpetual inventory system, the entry to record the purchase of $30,000 of merchandise on account would include a

If title to merchandise purchases passes to the buyer when the goods are shipped from the seller, the terms are

The form of income statement that derives its name from the fact that the total of all expenses is deducted from the total of all revenues is called a