Accounting Chapter 4 Smartbook
Identify the statements below that are correct regarding the closing entries for a merchandiser using the perpetual inventory system.
-The Dividends account is closed to Retained Earnings -Sales Returns and Allowances is closed with the expense accounts. -Sales is closed as a revenue account. -Cost of goods sold is closed with the expense accounts. -Sales Discounts is closed with the expense accounts.
Dogs R US uses the perpetual inventory system to account for its merchandise. A customer returned merchandise. Assuming that the purchase was originally bought on credit for $400 with a cost to Dogs R US of $100, demonstrate required journal entry of Dogs R US to record the return by selecting all of the correct actions below.
-Credit Accounts Receivable $400. -Debit Merchandise Inventory $100. -Debit Sales Returns and Allowances $400. -Credit Cost of Goods Sold $100.
The Allowance for Sales Discounts account:
-Is a contra asset account. -Is reported on the balance sheet as a reduction to the Accounts Receivable account.
Select the statements below that correctly describe the flow of costs in a merchandiser's accounting cycle.
-Merchandise that is purchased becomes an asset reported on the balance sheet. -Ending inventory + Cost of goods sold = Total merchandise available for sale. -Merchandise that is sold becomes an expense reported on the income statement. -Beginning inventory + net purchases = Merchandise available for sale.
On Dec. 20, X-Mart received a $100 allowance because the merchandise it purchased on account, earlier in the month, was of poor quality. Demonstrate the required journal entry on X-Mart's books for the allowance assuming the perpetual inventory method.
Debit Accounts Payable $100; credit Merchandise Inventory $100.
Assume that X-Men has an unadjusted Accounts Receivable balance of $10,000 and Allowance for Sales Discounts balance of $0. $1,000 of accounts receivable are within the 2% discount period and X-Men expects that buyers will take $20 in future-period discounts arising from this period's sales. The adjusting entry for sales discounts is:
Debit Sales Discounts and credit Allowance for Sales Discounts for $20
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.
If the seller is responsible for the shipping costs of merchandise sold, the shipping terms will be specified as:
FOB destination
Which of the following equations correctly identify the cost flow of a merchandising company?
Net purchases plus beginning inventory equals merchandise available for sale
Which of the statements below summarizes what the acid-test ratio measures?
The acid-test ratio measures a merchandiser's ability to pay its current liabilities
