Exam 2

Skysong, Inc. sells $1800 of merchandise on account to Riverbed Company with credit terms of 2/10, n/30. If Riverbed Company remits a check taking advantage of the discount offered, what is the amount of Riverbed Company's check? A. $1764 B. $1800 C. $1620 D. $1680

A. $1764 1800 * .98

On June 10, Windsor Company purchased $8,100 of merchandise from Wildhorse Company, on account, terms 2/10, n/30. Windsor pays the freight costs of $360 on June 11. Goods totaling $200 are returned to Wildhorse for credit on June 12. On June 19, Windsor Company pays Wildhorse Company in full, less the purchase discount. Both companies use a perpetual inventory system. Prepare separate entries for each transaction on the books of Windsor Company. Prepare separate entries for each transaction for Wildhorse Company. The merchandise purchased by Windsor on June 10 cost Wildhorse $2,410, and the goods returned cost Wildhorse $270.

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n its income statement for the year ended December 31, 2022, Marigold Corp. reported the following condensed data. Salaries and wages expenses $390,600 Loss on disposal of plant assets $70,140 Cost of goods sold 829,080 Sales revenue 1,856,400 Interest expense 59,640 Income tax expense 21,000 Interest revenue 54,600 Sales discounts 134,400 Depreciation expense 260,400 Utilities expense 92,400 Prepare a multiple-step income statement. Calculate the profit margin and gross profit rate. (not on doc)

Look at Image E on doc Profit Margin: 3% (revenue-cost)/revenue Gross Profit Rate: 52% (revenue-cost of good sold)/revenue

Below is a series of cost of goods sold sections for companies B, M, O, and S. Fill in the lettered blanks to complete the cost of goods sold sections.

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T/F For a merchandiser, the primary source of revenues is the sale of inventory.

True

T/F In a periodic inventory system, the cost of goods sold is determined only at the end of the accounting period.

True

T/F Measuring net income for a merchandiser is conceptually the same as for a service company.

True

T/F Sales salaries and wages is an example of an operating expense.

True

Farley Bains, an auditor with Nolls CPAs, is performing a review of Blue Spruce Corp.'s Inventory account. Blue Spruce did not have a good year, and top management is under pressure to boost reported income. According to its records, the inventory balance at year-end was $722,410. However, the following information was not considered when determining that amount. Prepare a schedule to determine the correct inventory amount. A. Ending inventory-as reported B. Included in the company's count were goods with a cost of $244,500 that the company is holding on consignment. The goods belong to Nader Corporation. C. The physical count did not include goods purchased by Blue Spruce with a cost of $37,230 that were shipped FOB shipping point on December 28 and did not arrive at Blue Spruce's warehouse until January 3. D. Included in the Inventory account was $15,330 of office supplies that were stored in the warehouse and were to be used by the company's supervisors and managers during the coming year. E. The company received an order on December 29 that was boxed and was sitting on the loading dock awaiting pick-up on December 31. The shipper picked up the goods on January 1 and delivered them on January 6. The shipping terms were FOB shipping point. The goods had a selling price of $41,650 and a cost of $29,710. The goods were not included in the count because they were sitting on the dock. F. Included in the count was $54,700 of goods that were parts for a machine that the company no longer made. Given the high-tech nature of Blue Spruce's products, it was unlikely that these obsolete parts had any other use. However, management would prefer to keep them on the books at cost, "since that is what we paid for them, after all." G. Correct Inventory

A. 722,410 B. -244,500 C. 37,230 D. -15,330 E. 29,710 F. -54,700 G. 474,820

Under the perpetual inventory system, in addition to making the entry to record a sale, a company would A. debit Cost of Goods sold and credit Inventory. B. debit Cost of Goods Sold and credit Purchases. C. make no additional entry until the end of the period. D. debit Inventory and credit Cost of Goods Sold.

A. debit Cost of Goods sold and credit Inventory

Which of the following is not considered in computing net cost of purchases? A. Freight paid on purchased goods B. Freight paid on goods shipped to customers C. Purchases returns and allowances D. Purchases

B. Freight paid on goods shipped to customers

Coronado's Market recorded the following events involving a recent purchase of inventory: Received goods for $79000, terms 2/9, n/30. Returned $1200 of the shipment for credit. Paid $400 freight on the shipment. Paid the invoice within the discount period. As a result of these events, the company's inventory A. increased by $76244. B. increased by $76644. C. increased by $78200. D. increased by $76636.

B. increased by $76644. 79,000 - 1,200 + 400 - ((79,000-1,200)*.98) = 76,644

Financial information is presented below: Operating expenses$ 45000 Sales revenue 241000 Cost of goods sold 131000 Gross profit would be A. $ 45000. B. $ 65000. C. $ 110000. D. $196000.

C. $ 110000. 241,000 - 131,000

Pina Colada Corp. purchased merchandise inventory with an invoice price of $11400 and credit terms of 2/10, n/30. What is the net cost of the goods if Pina Colada Corp. pays within the discount period? A. $10260 B. $10488 C. $11172 D. $11400

C. $11172 Invoice * discount 11400 * (1.00-0.02) = 11172

Inventory becomes part of cost of goods sold when a company A. pays for the inventory. B. purchases the inventory. C. sells the inventory. D. receives payment from the customer.

C. sells the inventory.

Under a perpetual inventory system, acquisition of merchandise for resale is debited to: A. the Supplies account. B. the Purchases account. C. the Inventory account. D. the Cost of Goods Sold account.

C. the Inventory account.

At the beginning of the year, Concord had an inventory of $640000. During the year, the company purchased goods costing $2020000. If Concord reported ending inventory of $960000 and sales of $3440000, their cost of goods sold and gross profit rate would be A. $2380000 and 50.58%. B. $1060000 and 49.42%. C. $1700000 and 49.42%. D. $1700000 and 50.58%.

D. $1700000 and 50.58%. 640,000 + 2,020,000 - 960,000 = 1,700,000 3,440,000 - 1,700,000 = 1,740,000 1,740,000/3,440,000 = 50.58

Under the perpetual system, cash freight costs incurred by the buyer for the transporting of goods is recorded in which account? A. Freight Expense B. Freight-In C. Freight-Out D. Inventory

D. Inventory

T/F A periodic inventory system provides better control over inventories than a perpetual system.

False

T/F For a merchandiser, sales less operating expenses is called gross profit.

False

T/F In a perpetual inventory system, no detailed inventory records of goods on hand are maintained.

False

T/F The operating cycle of a merchandiser is the same as that of a service company.

False

This information relates to Kingbird Co. 1.On April 5, purchased merchandise from Blossom Company for $25,000, terms 2/10, n/30. 2.On April 6, paid freight costs of $500 on merchandise purchased from Blossom. 3.On April 7, purchased equipment on account for $30,000. 4.On April 8, returned $3,500 of April 5 merchandise to Blossom Company. 5.On April 15, paid the amount due to Blossom Company in full. Prepare the journal entries to record the transactions listed above on Kingbird Co.'s books. Kingbird Co. uses a perpetual inventory system. Assume that Kingbird Co. paid the balance due to Blossom Company on May 4 instead of April 15. Prepare the journal entry to record this payment.

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Assume that on September 1, Office Depot had an inventory that included a variety of calculators. The company uses a perpetual inventory system. During September, these transactions occurred. Sept. 6 Purchased calculators from Crane Co. at a total cost of $1,640, terms n/30. 9 Paid freight of $50 on calculators purchased from Crane Co. 10 Returned calculators to Crane Co. for $57 credit because they did not meet specifications. 12 Sold calculators costing $490 for $680 to Fryer Book Store, terms n/30. 14 Granted credit of $45 to Fryer Book Store for the return of one calculator that was not ordered. The calculator cost $35. 20 Sold calculators costing $680 for $870 to Heasley Card Shop, terms n/30. Journalize the September transactions.

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