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Exam 6: Merchandising Operations and the Multistep Income Statement

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Question 31

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FAD Company uses a periodic inventory system and its inventory records for the period contain the following information: The journal entry necessary at the end of the period to adjust cost of goods sold for the ending inventory still on hand will include which of the following?

A) Debit Inventory for $6,250.
B) Credit Cost of Goods Sold for $11,250.
C) Debit Purchases for $11,250.
D) Credit Inventory for $6,250.

E) B) and D)
F) B) and C)

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Question 32

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If a company that uses a perpetual inventory system sold inventory which cost $1,000 for a selling price of $3,000,the accounting equation would show a net:

A) increase in assets and net increase in stockholders' equity.
B) increase in assets and net decrease in liabilities.
C) decrease in assets and net increase in liabilities.
D) decrease in assets and net decrease in stockholders' equity.

E) A) and B)
F) C) and D)

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Question 33

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The following is a listing of some of the balance sheet accounts and all of the income statement accounts for Northview Company as they appear on the company's adjusted trial balance. $\begin{array}{lr}\text { Accounts Payable } & \$ 30,000 \\\text { Accounts Receivable } & 33,000 \\\text { Inventory } & 60,000 \\\text { Advertising Expense } & 36,000 \\\text { Cost of Goods Sold } & 267,000 \\\text { Delivery Expense } & 18,000 \\\text { Income Tax Expense } & 6,000 \\\text { Insurance Expense } & 3,000 \\\text { Rent Expense } & 36,000 \\\text { Sales Revenue } & 480,000 \\\text { Sales Discounts } & 33,000 \\\text { Sales Returns \& Allowances } & 57,000\end{array}$ The gross profit percentage would be closest to:

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

To make it easier for financial statement users to compare account balances from one period to the next,companies report:

Which of the following is a merchandising company?

Missouri Company uses a perpetual inventory system.On October 1,Missouri Company sold inventory on account in the amount of $6,500 to Montebello Company,terms 1/10,n/30.The items cost Missouri $4,200.On October 4,Montebello returns some of the inventory.This inventory had a selling price of $500 and a cost of $200.On October 8,Montebello Company paid Missouri Company the amount due on that date. What is the amount of cash received by Missouri Company on October 8 for the receipt of payment from Montebello?

If merchandise purchased on credit is returned to the seller for a full refund,what would be the effect on the accounts listed below?

Cypress,Inc.sold merchandise for cash to a customer.The customer returned some of that merchandise because it was not satisfactory.What journal entry will Cypress use to record the return?

On July 1,Darin Company sold inventory costing $5,000 to Dee Company for $6,000,terms 3/10,n/30.Both companies use a perpetual inventory system.What journal entry will be recorded by Dee Company on July 1?

If merchandise costing $500 that was sold for cash at a price of $620 is returned by the customer,how would this transaction recorded when using a perpetual inventory system?

Multiple-step income statements:

Missouri Company uses a perpetual inventory system.On October 1,Missouri Company sold inventory on account in the amount of $6,500 to Montebello Company,terms 1/10,n/30.The items cost Missouri $4,200.On October 4,Montebello returns some of the inventory.This inventory had a selling price of $500 and a cost of $200.On October 8,Montebello Company paid Missouri Company the amount due on that date. What journal entry (entries) will Missouri Company make on October 4 to record the sales return?

A merchandising company's operating cycle begins with the acquisition of inventory and ends with the cash collection from sales.

Assuming the perpetual inventory system is used,which of the following statements about the multistep income statement is correct?

Clarendon Corp.sold $1,000 of merchandise to a customer on terms of 1/10,n/30.Its customer paid within the discount period.As a result of its customer making the payment within the discount period,Clarendon's total assets will:

Assume that a company uses a perpetual inventory system and records the return of inventory previously purchased on account with a debit to Accounts Payable and a credit to Inventory.This entry is:

Pixie Products reported net sales revenue of $18.8 billion and cost of goods sold of $5.6 billion,while Stardust Inc.reported net sales revenue of $22.3 billion and cost of goods sold of $9.3 billion.Which of the following statements is correct?

The journal entry to record the payment within the discount period for goods previously purchased on account causes:

Turquoise,Inc.is trying to decide whether to purchase identical inventory from one of the following suppliers: Required: Assume the company will pay within the discount period.What is the actual cost of the inventory if purchased from each supplier? (Round your final answers to 2 decimal places. )