busn 201 ch 4- part A

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

Which statement below correctly describes merchandise inventory?

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

Determine which of the following statements about merchandise is correct.

Merchandise is acquired for resale to customers.

To compute net income for a merchandiser, you will start with net sales, subtract cost of goods sold and subtract _______

expenses

Show your understanding of what merchandise is by completing the following sentence. Merchandise consists of _______, that a company acquires to resell to ________. Use one word for each blank.

products consumers

An invoice is referred to as a ______ invoice for a buyer and as a _______ invoice for the seller.

purchase sales

Explain how to compute gross profit by completing the following sentence. Gross profit is calculated by taking the net (sales/costs) of a product and (adding/subtracting) the cost of the goods sold.

sales subtracting

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

What is a purchase return?

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

Identify the statements below which summarize what cash discounts are. (Check all that apply.)

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

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? (Check all that apply.)

Cost of goods sold is used to figure gross profit. Cost of goods sold includes the expenses of buying and preparing an item for sale. Cost of goods sold is also called cost of sales. Cost of goods sold is an expense reported on the income statement.

LOL Music Store uses the perpetual 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 December 21, demonstrate the required journal entry to record the payment by selecting all of the correct actions below. (Check all that apply.)

Debit Accounts Payable $1,000. Credit Cash $1,000.

LOL Music Store uses the perpetual 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 all of the correct actions below. (Check all that apply.)

Debit Accounts Payable $1,000. Credit Cash $980. Credit Merchandise Inventory $20.

On Dec. 7, Toys R Fun purchased $1,000 of merchandise with terms of 2/10,n/30. If payment is made on December 30, demonstrate the required journal entry for Toys R Fun to record the payment under the perpetual inventory system.

Debit Accounts Payable $1,000; credit Cash $1,000.

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 $1,000; credit Cash $980; credit Merchandise Inventory $20.

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.

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

Debit Merchandise Inventory $300; credit Cash $300.

Determine which statements below are correct regarding merchandise available for sale during a period. (Check all that apply.)

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

Toys R Fun purchased $4,000 of merchandise and paid immediately. To record this transaction, Toys R Fun would debit the Merchandise (Inventory/Payable/Cash) account and credit the (Cash/Inventory/Accounts Payable) account.

Inventory Cash

Review the statements below and select the one that accurately describes a perpetual inventory system.

It is an inventory system that continually updates accounting records for merchandise transactions.

How do you compute net income for a merchandiser.

Net sales - cost of goods sold - other expenses.

Which of the following costs are included in merchandise inventory? (Check all that apply.)

Shipping fees charged by the vendor Taxes assessed on the merchandise Costs necessary to ready the merchandise for sale Purchase costs

Which of the statements below explain why perpetual inventory systems are becoming more popular? (Check all that apply.)

Technological advances have made it easier to use. Managers have immediate access to detailed information on sales and inventory levels.

Explain what the credit terms of 2/10,n/30 mean. (Check all that apply.)

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.

Credit terms of n/15 were printed on an invoice. Explain what this means.

The credit terms stand for net 15 days.

Determine which of the definitions below describes gross profit.

The difference between net sales and the cost of the goods sold

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.

A purchase allowance can be described as:

a reduction in the cost of defective or unacceptable merchandise that a buyer acquires

Merchandise inventory can be described as: (Check all that apply.)

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

Complete the following statement. Merchandise inventory that is still available for sale is considered a(n) (asset/expense/revenue) and is reported on the (balance sheet/income statement) and merchandise that is sold during the period is considered a(n) (asset/expense/liability) and reported on the (balance sheet/income statement).

asset balance sheet expense income statment

The discount period is the time (before/between) the invoice date and a specified date on which the payment amount owed can be (increased/reduced) because of early payment.

between reduced

A purchase return refers to merchandise a (buyer/seller/creditor) purchased, but then returns to the (buyer/seller/creditor) for a refund of the purchase price or reduction in the amount owed.

buyer seller

A cash discount can be summarized as a discount given to (buyers/creditors/sellers) to encourage them to pay (earlier/later/less/more).

buyers earlier