Determine Which of the Following Statements about Merchandise is Correct

1. The buyer and seller of merchandise must agree on who is responsible for paying freigtTt terms. Show your understanding of freightterms by selecting all of the correct statements below. (Check all that apply.) When the shipping costs are the responsibility of the buyer, then the Merchandise Inventory aocount is debited for the freight charges. Revenue for the sale will be recorded afterthe goods reach their destination, if the gooos are shipped FOB destination. Term FOB shipping point means the buyer accepts ownership when the goods depart the seller’s place of business Term FOB destination means that the sellers is responsible for shipping cost 2. What is a purchase return? A purchase return to merchandise a buyer acquires, but then return to the seller 3. A sales return refers to merchandise that customers (customers/sellers/creditors) return to the seller (customer/seller/creditor) after a sale for a refund of the purchase price or reduction in the amount owed 4. The components of merchandise’s multip- step in come statement are shown below. In which order would they appear on the statement? Net sales, cost of goods sold, gross profit, expense, net income 5. Which statement below correctly explains what merchandise Inventory Is? Merchandise Inventory Is an asset reported on the balance sheet and contains the cost o products purchased for sale. 6. determine which of the following statement below regarding a merchandiser are correct? 7. A cash discount can be summarized as a discount given to buyers (buyers/creditors/sellers) to encourage them to pay earlier(earlier/later/less/more). 8. Explain what the credit term of 2/10 n /30 mean? The buyer can deduct 2% of the invoice amount if payments is made within 10days of the invoice; the full payment is due within a 30 days credit period 9. sales discount is a contra revenue account and has a debit balance 10. on June 5, Jo’s market sold $1000 of goods on credit with term of 2/10 n /30. How will Jo’s Market record the customer’s payment on June 8?  Debit cash $980, debit sales discounts $20, and credit accounts receivable $1000? 11. Determine which of the definitions on the right go with the entity on the left? Retailer: An intermediary that buys products from manufacturers or wholesalers and sells them to consumers Whole saler: An intermediary that buys products from c->J manufacturers and sells them to retailers or wholesalers Merchandiser: Earns net income by buying and selling products 12. identify the statement below which are correct regarding a merchandiser's multi-step income statement? Cost of goods sold is subtracted from net sales I order to figure gross profit Expense are subtracted from gross profit in order to calculate net income The haeding of the statement contains three lines 13. On Dec. 7, Toys R Fun purchased $1,000 of merchandise with terms of 2/10,n/30. If payment is made on December 16, demonstrate the required journal entry for Toys R Fun to record the payment under the perpetual inventory system. Debit accounts payable $1000, credit cash $980 , credit Merchandise inventory $20 14. a merchandiser earns net income by buying and selling merchandise 15. Sales is a revenue account 16. On June 5, X-Mart purchased $400 of merchandilse with terms of 2/10,n/30. If payment is made on June 11, calculate the purchase discount that may be taken by X-Mart. 8 17. Dogs R US uses the perpetual inventory system to account for its merchandise. On May 1, it returned $50 of merchandise due to a defect. Assuming that the purchase was originally bought on credit, demonstrate the required journal entry to record the return by selecting a// of the correct actions below. (Check all that apply.) Credit Merchandise Inventory $50. Debit Accounts Payable $50 18. The discount period is the time between (before/between) the invoice date and a specified date on which the payment amount owed can be reduced (increased/reduced) because of early payment. 19. Cost of goods sold is characterized by which of the following statements? (Check all that apply.) Cost of goods sold includes the expenses of buying and preparing an item for sale. Cost of goods sold is an expense reported on the income statement. Cost of goods sold is used to figure gross profit Cost of goods sold is also called cost of sales 20. Merchandise inventory consists of products that a company acquires to resell to customers 21. . The gross profit on a product is computed as:Sales - Cost of Goods Sold = Gross Profit 22. Dogs R US uses the periodic Inventory system to account for Its merchandise. A customer returned some of t he merchandise purchased. Assuming that the purchase was orlgJnally purchased on credit for $400 with a cost to Dogs R US of $100 and the returned merchandise can be sold to other customers, demonstre:te the required journal entry to record the return by selectlng a// of the correct actions below. (Check all that apply.) Credit Accounts Receivable $400. Debit Sales Retums and Allowances $400. Debit merchandise inventory $100 Credit cost og goods sold $100 23. Toys R Fun purchased $4,000 of merchandise for resale and paid immediately. To record this transaction, Toys R Fun's accountant would debit the Merchandise Inventory (Merchandise Inventory/Accounts Payable/Cash) account and credit the Cash (Cash/Merchandise Inventory/Accounts Payable) account. 24. Jo's market sold 1,000 of goods on credit with terms of 2/10, n/30. the original cost of the goods was 400. the required journal entry to record the sale and cost of the sale would be debit accounts receivable 1,000 credit sales 1,000 25. 26. 27. 28. 29. 30. 31. 32. debit costs of goods sold 400 credit merchandise inventory 400 A periodic (periodic/perpetual) inventory system can be described as an inventory system that updates the inventory account only at the end of the period (p·urchase/period). On Jan 5, a customer returned merchandise that had been purchased earlier on credit. The original sale was for $500, and the cost to the seller was $150. Demonstrate the required journal entry to record the return on the books of the seller, assuming the goods can be sold to another customer. Debit Sales Returns and Allowances $500; debit Merchandise Inventory $150; credit Accounts Receivable $500; and credit Cost of Goods Sold $150 Sally Beauty Warehouse uses the perpetual inventory system to account for its merchandise. On Nov 2, It sold $700 of merchandise on credit with terms of 2/15,n/30. Demonstrate the required journal entry to record the receipt of payment from the customer on Nov 13, by selecting all of the correct actions below. (Check all that apply.) Credit Accounts Receivable $700. Debit Gash $686 Debit Sales Discounts $14 Jello's Market purchased $1,000 of goods on account with terms of 2/10,n/30. They returned $200 of the goods due to defect the next day. If the company pays for the purchase within the discount period and uses the perpetual inventory system, the required journal entry to record the payment would: debit Accounts Payable $800; credit Merchandise Inventory $16; and credit Cash $784 Demonstrate how to prepare a multiple-step income statement by ranking the items below in the order they would appear on a multiple-step income statement of a merchandiser. Sales "" 2 Cost of goods sold "" 3 Gross profit "" 4 Operating expenses "" 5 Income from operations "" 6 Other revenues and expenses Explain what a debit memorandum Is by completing the following sentence. When a buyer returns or takes an allowance on mercl1andlse, the buyer(buyer/creditor/seller) Issues a debit memorandum to Inform the seller (buyer/creditor/seller) of a debit made to the seller's account In the buyer's records. Which of the statements below summarize why a seller would give a sales allowance? (Check all that apply.) In order to entice a customer to keep damaged or defective merchandise, the seller is wllling to decrease the selling price. The seller want to keep a customer happy Sold merchandise was defective or unacceptable The seller wants to avoid future lost sales Which of the statement below summarize why a buyer would desire a purchase allowance? In order to keep defective, but still marketable merchandise, the buyer would need a reduction in the purchase price Purchase merchandise was defective or unacceptable 33. identify the statement below that are correct regarding the closing entries for a merchandiser using the perpetual inventory system? Sales return and allowances is closed with the expense accounts Sales discounts is closed with the expense accounts Cost of goods sold is closed with the expense accounts Sales is closed as a revenue account The dividends account is closed to Retained earnings 34. Given the partial list of accounts below, the entJyto close the temporary credit balance accounts would include a: Account Debit Credit Sales $20,000 Sales Discounts $ 500 Cost of Goods Sold $1,900 Merchandise Inventory $5,000 Accounts Payable $ 500 Owner, Gapital $10,000 Ans: credit to Income Summary, $20,000. 35. A purchase allowance can be described as A reduction in the cost of defective or unacceptable merchandise that a buyer acquired 36. X-Mart uses the perpetual Inventory system to account for its merchandise. On May 1, it sold $1,400 of merchandise on credit with terms of j/10,n/ 40. Demonstrate the required journal entry to record the receipt of payment on May 25 by selecting all of the correct actions below. (Check all that apply.) Credit Accounts Receivable $1,400 l Debit cash $1,400. 37. recall that Merchandise inventory is considered a current asset on the balance sheet of a merchandiser using the periodic inventory system 38. Recall the formula for calculating a company's acid-test ratio. (Cash short-term investment current receivable) current liabilities 39. Complete the following statement. Merchandise inventory that is still available for sale is considered a(n) asset (asseVexpense/revenue) and is reported on the balance sheet (balance sheeVincome statement) and merchandise that is sold during the period is considered a(n) expense (assevexpense/liability) and reported on the income statement (balance sheet/income statement). 40. A merchandiser has four closing journal entries at the end of an accounting cycle Close the income summary account Close the dividends account close expense accounts close revenue accounts 41. Dogs R US uses the perpetual Inventory system to account for its merchandise. A customer returned merchandlse due to a defect. Assuming that the purdlase was originally bought on credit for $400 wltll a cost to Dogs R US of $100, and tile defective, returned merchandise Is only estimated to be worth $30, demonstrate the required journal entry to record the return and to \ vrite down the defective merchandise by selecting all of tile correct actions below. (Check all that apply.) Credit accounts receivable $400 Debit loss from defective merchandise $70 Debit sales returns and allowances $400 Credit cost of goods sold $100 Debit merchandise inventory $30 42. Credit terms of n/15 EOM were printed on an Invoice. Explain what this means. The credit term stand for net 15 days after end of month 43. Determine which of the following statements are correct regarding the adjusting entries for a merchandiser and a service business. (Check all that apply.) Both types of business make adjustments for depreciation Merchandise business make adjustment for shrinkage Both types of business make adjustment for accrued expense Both types of business make adjustments for accrued revenue 44. Identified the two types of inventory systems from the choices below Perpetual inventory system and periodic inventory system 45. Calculate its cost of goods sold during the period Beginning inventory $35000; cost of goods purchase; ending inventory 40000 Ans: $95000 46. Identify the financial statements of a merchandiser. (Check all that apply.) Income statement; balance sheet; statement of owner’s equity 47. LOL Music Store uses the periodic inventory system to account for its merchandise. On November 17, it purchased $1,000 of merchandise with terms of 2/5,n/60. If payment is made on November 21, demonstrate the required journal entry to record the payment by selecting a/I of the correct actions below. (Check all that apply.) Credit cash$980; creditmerchandise inventory $20 ; debit account payable$1000 48. Given the followinJ information for Q-mart, calculate its gross margin ratio. Net sales $10000; cost of goods sold 3200 Ans: 68% 49. Review the statements below and select the one that explains the purpose of a sales discount. they decrease the time that the seller has to wait for payment 50. Select the statements below that correctly describe the flow of costs In a merchandiser's accounting Beginning inventory + net purchase=merchandise available for sale Merchandise that is sold becomes an expense reported on the income statement Merchandise that is purchase becomes an asset reported on the balance sheet Ending inventory+ cost of goods sold= total merchandise available for sale 51. Identify the items or sub-headings below that would appear on a multiple-step income statement 52. why is it important for a business success to have a high gross margin a merchandiser must make a sufÏcient profit on the sale of its merchandise to vover the other expenses of its business 53. the balance sheet of a merchandiser and a service business have one major difference ans: merchandise inventory 54. Which of the statements below summarizes what the acid-test ratio measures? The acid test ration measures a merchandiser’s ability to pay its current liabilities 55. On Dec. 20 X-Mart received a @$100 allowance because the merchandise it purchase earlier in the month was of poor quality Debit Accounts Payable $100; credit merchandise inventory $100 56. If the seller is responsible for the shipping costs of merchandise sold, the shipping terms will be specified as: FOB destination