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Exam 4: Reporting and Analyzing Merchandising Operations

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Question 131

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A company that uses a perpetual inventory system purchased $1,800 of merchandise on July 5 with terms 2/10, n/30. On July 7, it returned $200 worth of merchandise. On July 28, it paid the full amount due. The amount of the cash paid on July 28 equals:

A) $200.
B) $1,564.
C) $1,568.
D) $1,600.
E) $1,800.

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

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Question 132

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A periodic inventory system requires updating the inventory account only at the beginning of an accounting period.

A) True
B) False

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Question 133

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Following is the year-end adjusted trial balance for Fred's Corner Grocery, Inc. for the current year: Required: Prepare the closing entries at December 31 for the current year.

The following statements regarding merchandise inventory are true except:

On March 12, Masterson Company, Inc. sold merchandise in the amount of $7,800 to Forsythe Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,500. Masterson uses the gross method of accounting for sales and a perpetual inventory system. On March 15, Forsythe was given an allowance of $600 on defective merchandise that had a cost of $350. Forsythe pays the invoice on March 20, and takes the appropriate discount. The journal entry that Masterson makes on March 15 when the allowance is given is:

A company that uses the gross method of recording purchases and a perpetual inventory system purchased $1,800 of merchandise on July 5 with terms 2/10, n/30. On July 7, it returned $200 worth of merchandise. On July 28, it paid the full amount due. The correct journal entry to record the purchase on July 5 is:

What is inventory shrinkage? How do managers account for shrinkage?

Quick assets include cash and cash equivalents, inventory, and current receivables.

All of the following statements regarding sales returns and allowances are true except:

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

The current asset account debited when recording a seller's cost-side adjusting entry for the estimated amount of current and future sales returns and allowances is ___________________________.

Companies that use a perpetual inventory system under the gross method debit the total purchase invoice amount and credit cash discounts taken to the Merchandise Inventory account.

A company purchased $10,000 of merchandise on June 15 with terms of 3/10, n/45. On June 20, it returned $800 of that merchandise. On June 24, it paid the balance owed for the merchandise taking any discount it was entitled to. The cash paid on June 24 equals:

The periodic inventory system requires updating the inventory account at the end of the period to reflect the quantity and cost of goods available for sale and the cost of goods sold.

Juniper Company, Inc. uses a perpetual inventory system. The company purchased $9,750 of merchandise on August 7 with terms 1/10, n/30. On August 11, it returned $1,500 worth of merchandise. On August 26, it paid the full amount due. The amount of the cash paid on August 26 equals:

Tahoe Ski Company uses the net method of accounting for purchases and a perpetual inventory system and had the following transactions during January: Prepare journal entries to record each of the preceding transactions.

Assuming a seller has not yet collected cash for goods sold, a credit memorandum is prepared to inform the buyer of the seller's credit to its Accounts Payable account arising from a sales return or allowance.

Clausen Corporation has estimated for October, based on current sales of $1,750,000 and cost of goods sold of $950,000, that current and future returns and allowances will equal 4% of those sales. Prepare the adjusting entries necessary to record the revenue side and cost side estimates for returns and allowances.

A company has sales of $695,000 and cost of goods sold of $278,000. Its gross profit equals:

Juniper Company, Inc. uses the gross method of recording purchases and a perpetual inventory system. The company purchased $9,750 of merchandise on August 7 with terms 1/10, n/30. On August 11, it returned $1,500 worth of merchandise. On August 16, it paid the full amount due. The correct journal entry to record the payment on August 16 is: