acc250 ch 4

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

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

Which statement below correctly explains what merchandise inventory is?

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.

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

current assets section

Name the temporary accounts used to record the costs of merchandise purchased in a periodic inventory system. (Check all that apply.)

purchases; transportation-in; purchase returns and allowances; purchase discounts

The cash operating cycle for a merchandiser begins with cash purchases of merchandise and ends with _____.

receipt of cash

Under a periodic inventory system, purchases are

recorded in a separate temporary account which is closed at period end

Sales is a(n) ______ account.

revenue

Under a periodic inventory system

the revenue but not the cost of goods sold is recorded

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 are correct regarding a merchandiser's multi-step income statement.

- All expenses are subtracted from gross profit in order to calculate net income. - Cost of goods sold is subtracted from net sales in order to determine gross profit.

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

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

Identify the statements below which summarize what cash discounts are.

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

Sticky Co. purchased merchandise on August 5 at a $1,000 invoice price with terms of 2/10,n/30 and paid for the merchandise on August 14. Determine its entry to record this purchase and the subsequent payment under both the gross method and the net method by matching the action on the left with the method on the right. (Assume a periodic inventory system.)

- Cash would be credited for $980 on August 14. --- Both methods - Purchases would be debited for $980 on August 5.---Net method - Purchases discounts would be credited for $20 on August 14---Gross method

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

- Cost of goods sold is an expense reported on the income statement. - 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.

Sally Beauty Warehouse uses the perpetual inventory system to account for its merchandise. On Nov 2, it sold $700 of merchandise on credit with terms of 2/15,n/30. Demonstrate the required journal entry to record the receipt of payment from the customer on Nov 13, by selecting all of the correct actions below.

- Credit Accounts Receivable $700. - Debit Cash $686. - Debit Sales Discounts $14.

Juice Drinks uses the periodic inventory system to account for its merchandise purchases. On December 1, it purchased $250 of merchandise with terms of 4/10,n/30. If payment is made on December 5, demonstrate the required journal entry to record the payment by selecting all of the correct actions below.

- Credit Cash $240. - Credit Purchase Discounts $10. - Debit Accounts Payable $250.

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.

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

X-Mart uses the perpetual inventory system to account for its merchandise. On June 1, it sold $7,000 of merchandise for cash. The original cost of the merchandise to X-Mart was $500. Demonstrate the required journal entry to record the cost of the sale by selecting all of the correct actions below.

- Credit Merchandise Inventory $500. - Debit Cost of Goods Sold $500.

X-Mart uses the perpetual inventory system to account for its merchandise. On May 1, it sold $1,400 of merchandise for cash. The original cost of the merchandise to X-Mart was $500. Demonstrate the required journal entry to record the cost of the sale by selecting all of the correct actions below.

- Credit Merchandise Inventory $500. - Debit Cost of Goods Sold $500.

LOL Music Store uses the periodic 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 Purchase Discounts $20.

X-Mart uses the periodic inventory system to account for its merchandise. On May 1, it sold $1,400 of merchandise on credit. The original cost of the merchandise to X-Mart was $500. Demonstrate the required journal entry to record the sale by selecting all of the correct actions below. (Check all that apply.)

- Debit Accounts Receivable $1400 - Credit Sales $1400

X-Mart uses the periodic inventory system to account for its merchandise. On May 1, it sold $400 of merchandise on account with terms of 2/15, n/40. On May 3, its customer returned $50 of merchandise due to defect. On May 11, its customer paid the remaining balance due. Demonstrate the required journal entry to record the receipt of payment by selecting all of the correct actions below. (Check all that apply.)

- Debit Cash $343. - Credit Accounts Receivable $350. - Debit Sales Discounts $7.

Dogs R US uses the periodic inventory system to account for its merchandise. A customer returned merchandise purchased on credit for $400 with a cost to Dogs R US of $100 and the returned merchandise can be sold to other customers, demonstrate the required journal entry to record the return by selecting all of the correct actions below. (Check all that apply.)

- Debit Sales Returns and Allowances $400. - Credit Accounts Receivable $400.

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.

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

Summarize a periodic inventory system by selecting all of the correct statements below.

- The balance in the Merchandise Inventory account remains the beginning balance until the end of the period. - The Purchase Returns and Allowances account is used during the period. - Cost of goods sold is computed at the end of the period. - The Merchandise Inventory account is updated only at the end of the period. - The Purchases account is used during the period. - The Purchase Discounts account is used during the period.

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

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

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.

- When the shipping costs are the responsibility of the buyer, then the Merchandise Inventory account is debited for the freight charges. - 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.

In which order would the components of a merchandiser's multi-step income statement be arranged.

1. net sales 2. cost of goods sold 3. gross profit 4. expenses 5. net income

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 acquires, but then returns to the seller.

Merchandise inventory that is still available for sale is considered an ______ and is reported on the ______ and merchandise that is sold during the period is considered an ______ and reported on the ______.

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

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.

Blank 1: between Blank 2: reduced

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 ______ after a sale for a refund of the purchase price or reduction in the amount owed.

Blank 1: customers Blank 2: seller

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

Blank 1: revenue Blank 2: debit

Gross profit is computed as net _____ minus cost of goods sold.

Blank 1: sales

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.

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.

Juice Drinks returned $25 of defective merchandise to its supplier. Demonstrate the required journal entry that Juice Drinks will record for the return, assuming the purchase was made on account and that Juice Store uses the periodic inventory system.

Debit Accounts Payable $25 and credit Purchases Returns and Allowances $25.

On June 5, Jo's Market sold $1,000 of goods on credit with terms of 2/10,n/30. How will Jo's Market record the customer's payment on June 8?

Debit Cash $980; debit Sales Discounts $20; and credit Accounts Receivable $1,000

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.

X-Mart purchased $300 of merchandise on account. Demonstrate the journal entry to record this transaction, under the periodic inventory system.

Debit Purchases $300 and credit Accounts Payable $300.

J-Lo Company purchased $550 of merchandise on account. Demonstrate the journal entry to record this transaction under the periodic inventory system.

Debit Purchases $550 and credit Accounts Payable $550.

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. The seller uses the perpetual inventory system. 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.

ABC Mart received a $20 freight bill for merchandise it purchased with freight terms of FOB shipping point. Assuming it paid the bill immediately, demonstrate the journal entry required to record the freight charges, assuming the periodic inventory system is used.

Debit Transportation-In $20 and credit Cash $20.

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

FOB destination

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 sales allowance can be described as:

a reduction in the selling price of defective or unacceptable merchandise sold to customers

Sales Discounts is a ______ account.

contra-revenue

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

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