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Describe the recording process (including costs)for the types of transactions associated with sales of merchandise inventory using a perpetual inventory system.

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Sales of goods are recorded at list pric...

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Describe the difference between the periodic and perpetual inventory accounting systems.

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A periodic inventory system updates the ...

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Credit terms of 2/10,n/30 imply that the seller offers the purchaser a 2% cash discount if the amount is paid within 10 days of the invoice date.Otherwise,the full amount is due in 30 days.

A) True
B) False

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Inventory is not included in the calculation of the acid-test ratio.

A) True
B) False

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A company had sales of $350,000 and cost of goods sold of $200,000.Its gross profit equals $150,000.

A) True
B) False

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Vincent Company purchased merchandise from Liu Company with an invoice price of $300,000 and credit terms of 2/10,n/30.Liu Company's cost for the merchandise was $200,000.Vincent Company paid within the discount period.Assume that both buyer and seller use a perpetual inventory system and the gross method of recording invoices. 1.Prepare entries that Vincent should record for (a)the purchase and (b)the cash payment. 2.Prepare entries that Liu should record for (a)the sale and (b)the cash collection. 3.Assume that the buyer borrowed enough cash to pay the balance on the last day of the discount period at an annual interest rate of 9% and paid it back on the last day of the credit period.Compute how much the buyer saved by following this strategy.(Assume a 365-day year and round dollar amounts to the nearest cent.)

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blured image blured image 3.By borrowing the money on the last d...

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On September 12,Ryan Company sold merchandise in the amount of $5,800 to Johnson Company,with credit terms of 2/10,n/30.The cost of the items sold is $4,000.Ryan uses the periodic inventory system and the net method of accounting for sales.On September 14,Johnson returns some of the merchandise.The selling price of the merchandise is $500 and the cost of the merchandise returned is $350.Johnson pays the invoice on September 18,and takes the appropriate discount.The journal entry that Ryan makes on September 18 is:


A)  Cash 5,800 Accounts receivable 5,800\begin{array}{|l|r|r|}\hline \text { Cash } & 5,800 & \\\hline \text { Accounts receivable } & & 5,800 \\\hline\end{array}
B)  Cash 5,194 Accounts receivable 5,194\begin{array}{|l|r|r|}\hline \text { Cash } & 5,194 & \\\hline \text { Accounts receivable } & & 5,194 \\\hline\end{array}
C)  Cash 5,194 Sales discounts 106 Accounts receivable 5,300\begin{array}{|l|r|r|}\hline \text { Cash } & 5,194 & \\\hline \text { Sales discounts } & 106 & \\\hline \text { Accounts receivable } & & 5,300 \\\hline\end{array}
D)  Cash 5,684 Accourits receivable 5,684\begin{array} { | l | r | r | } \hline \text { Cash } & 5,684 & \\\hline \text { Accourits receivable } & & 5,684 \\\hline\end{array}
E)  Cash 5,684 Sales discounts 116 Accounts receivable 5,800\begin{array}{|l|r|r|}\hline \text { Cash } & 5,684 & \\\hline \text { Sales discounts } & 116 & \\\hline \text { Accounts receivable } & & 5,800 \\\hline\end{array}

F) C) and D)
G) A) and B)

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Purchase returns refer to merchandise a buyer acquires but then returns to the seller.

A) True
B) False

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Describe the key attributes of inventory for a merchandising company.

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Merchandise inventory refers to products...

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Prepare journal entries to record the following merchandising transactions of Margin Company,which applies the perpetual inventory system and the gross method of recording invoices.Margin Company offers all of its credit customers credit terms of 2/10,n/30. Prepare journal entries to record the following merchandising transactions of Margin Company,which applies the perpetual inventory system and the gross method of recording invoices.Margin Company offers all of its credit customers credit terms of 2/10,n/30.

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On September 12,Vander Company sold merchandise in the amount of $5,800 to Jepson Company,with credit terms of 2/10,n/30.The cost of the items sold is $4,000.Vander uses the periodic inventory system and the gross method of accounting for sales.Jepson pays the invoice on September 18,and takes the appropriate discount.The journal entry that Vander makes on September 18 is:


A)  Cash 5,800 Accounts receivable 5,800\begin{array}{|l|r|r|}\hline \text { Cash } & 5,800 & \\\hline \text { Accounts receivable } & & 5,800 \\\hline\end{array}
B)  Cash 4,000 Accounts receivable 4,000\begin{array}{|l|r|r|}\hline \text { Cash } & 4,000 & \\\hline \text { Accounts receivable } & & 4,000 \\\hline\end{array}
C)  Cash 3,920 Sales discounts 80 Accounts receivable 4,000\begin{array}{|l|r|r|}\hline \text { Cash } & 3,920 & \\\hline \text { Sales discounts } & 80 & \\\hline \text { Accounts receivable } & & 4,000 \\\hline\end{array}
D)  Cash 5,684 Accounts receivable 5,684\begin{array}{|l|r|r|}\hline \text { Cash } & 5,684 & \\\hline \text { Accounts receivable } & & 5,684 \\\hline\end{array}
E)  Cash 5,684 Sales discounts 116 Accounts receivable 5,800\begin{array}{|l|r|r|}\hline \text { Cash } & 5,684 & \\\hline \text { Sales discounts } & 116 & \\\hline \text { Accounts receivable } & & 5,800 \\\hline\end{array}

F) C) and D)
G) A) and B)

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A company has sales of $375,000 and its gross profit is $157,500.Its cost of goods sold equals:


A) $(217,000) .
B) $375,000.
C) $157,500.
D) $217,500.
E) $532,500.

F) C) and E)
G) A) and C)

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________ expenses are those costs that support a company's overall operations and include expenses related to accounting,human resource management,and financial management.

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General an...

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Credit terms for a purchase include the amounts and timing of payments from a buyer to a seller.

A) True
B) False

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Under both the periodic and perpetual inventory systems,the temporary account Purchases Returns and Allowances is used to accumulate the cost of all returns and allowances for a period.

A) True
B) False

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The seller is responsible for paying shipping charges and bears the risk of damage or loss in transit if goods are shipped FOB shipping point.

A) True
B) False

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Inventory Returns Estimated is a current asset account used in a period-end adjusting entry to reflect the inventory estimated to be returned in the future.

A) True
B) False

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A perpetual inventory system continually updates accounting records for merchandising transactions.

A) True
B) False

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All of the following statements regarding sales returns and allowances are true except:


A) New revenue recognition rules require sellers to report sales net of expected returns and allowances for annual periods.
B) The Inventory Returns Estimated account is a current liability account.
C) Sales returns and allowances estimates are typically made as period-end adjustments.
D) When sales returns and allowances adjustments are made to sales,an estimate must also be made for the cost side.
E) Sales Refund Payable is a current liability account.

F) All of the above
G) A) and C)

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On September 12,Vander Company sold merchandise in the amount of $5,800 to Jepson Company,with credit terms of 2/10,n/30.The cost of the items sold is $4,000.Jepson uses the periodic inventory system and the gross method of accounting for purchases.Jepson pays the invoice on September 18,and takes the appropriate discount.The journal entry that Jepson makes on September 18 is:


A)  Purchases 5,684 Cash 5,684\begin{array}{|l|r|r|}\hline \text { Purchases } & 5,684 & \\\hline \text { Cash } & & 5,684 \\\hline\end{array}
B)  Accounts payable 5,800 Merchandise inventory 116 Cash 5,684\begin{array}{|l|r|r|}\hline \text { Accounts payable } & 5,800 & \\\hline \text { Merchandise inventory } & & 116 \\\hline \text { Cash } & & 5,684 \\\hline\end{array}
C)  Accounts payable 5,800 Purchases discounts 116 Cash 5,684\begin{array}{|l|r|r|}\hline \text { Accounts payable } & 5,800 & \\\hline \text { Purchases discounts } & & 116 \\\hline \text { Cash } & & 5,684 \\\hline\end{array}
D)  Cash 5,684 Accounts receivable 5,684\begin{array}{|l|r|r|}\hline \text { Cash } & 5,684 & \\\hline \text { Accounts receivable } & & 5,684 \\\hline\end{array}
E)  Cash 5,684 Purchases discounts 116 Accounts payable 5,800\begin{array}{|l|r|r|}\hline \text { Cash } & 5,684 & \\\hline \text { Purchases discounts } & 116 & \\\hline \text { Accounts payable } & & 5,800 \\\hline\end{array}

F) B) and D)
G) A) and D)

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