acct week 7

On May 14, X-Mart purchased $500 of merchandise with terms of 3/15,n/40. If payment is made on May 28, calculate the purchase discount that may be taken by X-Mart.

$15

On June 5, X-Mart purchased $400 of merchandise 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

Identify the statements below which summarize what cash discounts are.

1. Cash discounts are described in credit terms 2. A seller views a cash discount as a sales discount 3. A buyer views a cash discount as a purchase discount 4. Sellers can grant a cash discount to encourage buyers to pay earlier 5. A reduced payment applies to the discount period

Sales Discounts is a contra ----- account and is increased with a -----.

1. contra-revenue 2. debit

Review the following credit terms and identify the one that states that the buyer will receive a 3% discount if the payment is made within 15 days. Otherwise, full payment is expected within 45 days of the invoice date.

3/15, n/45

What is a purchase return?

A purchase return refers to merchandise a buyer purchases, but then returns to the seller.

Toys R Fun purchased $4,000 of merchandise and paid immediately. To record this transaction, Toys R Fun's accountant would debit the ----- account and credit the ----- account.

Blank 1: Merchandise Inventory Blank 2: Cash

Merchandise inventory that is available for sale is a(n) ----- and reported on the -----. Merchandise that is sold during the period is a(n) ----- and reported on the -----.

Blank 1: asset Blank 2: balance sheet Blank 3: expense Blank 4: income statement

A purchase return refers to merchandise a ----- purchased, but then returns to the ----- for a refund of the purchase price or reduction in the amount owed.

Blank 1: buyer Blank 2: seller

A cash discount can be summarized as a discount given to ----- to encourage them to pay -----.

Blank 1: buyers Blank 2: earlier

A sales return refers to merchandise that ----- return to the ----- for a refund of the purchase price or reduction in the amount owed.

Blank 1: customers or customer Blank 2: seller or sellers

The discount period is the time between the invoice date and a specified date on which the payment amount owed can be ----- because of early payment.

Blank 1: reduced

The discount period is the time between the invoice date and a specified date on which the payment amount owed can be ------ because of early payment.

Blank 1: reduced

Sales is a(n) ----- account and is reported on the ----- -----

Blank 1: revenue Blank 2: income Blank 3: statement

A merchandiser has four closing journal entries at the end of an accounting cycle. Select the correct entries below.

Close revenue accounts. Close the withdrawals account. Close the income summary account. Close expense accounts.

Identify the statements below that are correct regarding the closing entries for a merchandiser using the perpetual inventory system.

Cost of goods sold is closed with the expense accounts. The Withdrawals account is closed to Owner, Capital. Sales Returns and Allowances is closed with the expense accounts. Sales is closed as a revenue account. Sales Discounts is closed with the expense accounts.

Explain how to determine gross profit on an income statement by selecting the correct statement below.

Cost of goods sold is subtracted from net sales.

Which of the statements below are correct regarding cost of goods sold?

Cost of goods sold is the expense of buying and preparing merchandise.

Cost of goods sold is characterized by which of the following statements?

Cost of goods sold is used to figure gross profit. Cost of goods sold is also called cost of sales. 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.

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. Credit Cost of Goods Sold $100. Debit Sales Returns and Allowances $400. Debit Merchandise Inventory $100.

Sticky Company's merchandise inventory balance at year end is $15,050, but a physical count reveals that only $15,000 of inventory exists. The adjusting entry to record the shrinkage includes: (Check all that apply).

Credit to Merchandise Inventory for $50 Debit to Cost of Goods Sold for $50

X-Mart purchased $300 of merchandise on account. Demonstrate the journal entry to record this transaction, assuming the perpetual inventory system is used.

Debit Merchandise Inventory $300; credit Accounts Payable $300.

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.

Determine which statements below are correct regarding merchandise available for sale during a period.

Ending inventory + Cost of goods sold = Merchandise available for sale Beginning inventory + Net purchases = Merchandise available for sale

Select the statements below that correctly describe the flow of costs in a merchandiser's accounting cycle.

Ending inventory + Cost of goods sold = Total merchandise available for sale. Merchandise that is purchased becomes an asset reported on the balance sheet. Beginning inventory + net purchases = Merchandise available for sale. Merchandise that is sold becomes an expense reported on the income statement.

If the seller is responsible for the shipping costs of merchandise sold, the shipping terms will be specified as:

FOB destination

A single-step income statement can be identified by which of the following formats?

It shows only one total for all expenses.

Which statement below correctly explains what merchandise inventory is?

Merchandise inventory is an asset reported on the balance sheet and represents the cost of products purchased for sale.

Determine which of the following statements about merchandise is correct.

Merchandise is acquired for resale to customers.

Determine which of the following statements below regarding a merchandiser are correct.

Merchandisers are often identified as retailers. A merchandiser earns net income by buying and selling merchandise. Merchandisers are also identified as wholesalers.

Which of the following equations correctly identify the cost flow of a merchandising company?

Net purchases plus beginning inventory equals merchandise available for sale

Identify the statement below that is the correct definition of "shrinkage".

Shrinkage is the term used to refer to the loss of inventory due to theft or deterioration.

The buyer and seller of merchandise must agree on who is responsible for paying freight terms. Show your understanding of freight terms by selecting all of the correct statements below.

Terms FOB destination means that the seller is responsible for shipping costs. Revenue for the sale will be recorded after the goods reach their destination, if the goods are shipped FOB destination. Terms FOB shipping point means the buyer accepts ownership when the goods depart the seller's place of business. When the shipping costs are the responsibility of the buyer, then the Merchandise Inventory account is debited for the freight charges.

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.

Explain what the credit terms of 2/10, n/30 mean.

The buyer can deduct 2% of the invoice amount if payment is made within 10 days of the invoice date. The full payment is due within a 30-day credit period.

Review the following statements and select the one that best describes a discount period.

The discount period is the time period in which a discount may be taken by the buyer.

Merchandise inventory can be described as:

an account appearing on a balance sheet of a merchandiser. an asset account. an account increased with a debit. products that a company owns and intends to sell.

Sales Discounts is a ______ account.

contra revenue

The Merchandise Inventory account on a classified balance sheet is reported in the:

current assets section

Jo's Market makes a credit sale for $1,000 with terms of 2/10,n/30. The cost of the merchandise is $400. The required journal entry to record the sale and cost of the sale is:

debit Accounts Receivable $1,000; credit Sales $1,000; debit Cost of Goods Sold $400; and credit Merchandise Inventory $400

Jan's Jams makes a credit sale for $300 with terms of 2/10,n/30. The cost of the merchandise is $200. The required journal entry to record the sale and the cost of the sale is:

debit Accounts Receivable $300; credit Sales $300; debit Cost of Goods Sold $200; and credit Merchandise Inventory $200

Sales is a(n) ______ account.

revenue