If the merchandise costs $3,500, insurance in transit costs $250, tariff costs $75, processing the purchase order by the purchasing department costs $50, and the company receiving dock personnel cost $25, what is the total cost charged to the merchandise?

A. $3,850

B. $3,500

C. $3,825

D. $3,875

C. $3,825

merchandise costs $3,500 + insurance in transit costs $250 + processing costs $50 = $3,825

A company, using the periodic inventory system, has merchandise inventory costing $175 on hand at the beginning of the period. During the period, merchandise costing $635 is purchased. At year-end, merchandise inventory costing $160 is on hand. The cost of merchandise sold for the year is

A. $620

B. $650

C. $970

D. $300

B. $650

$175 + $635 - $160 = $650

Discounts taken by a buyer because of early payment are recorded on the seller’s accounting records as

A. Sales discount

B. Purchases discount

C. Early payment discount

D. Trade discount

Merchandise inventory is classified on the balance sheet as a

A. Long-Term Asset

B. Current Liability

C. Current Asset

D. Long-Term Liability

The amount of the total cash paid to the seller for merchandise purchased for consumption would normally include

A. the list price plus the sales tax

B. only the sales tax

C. only the list price

D. the list price less the sales tax

Which of the following accounts usually has a debit balance?

A. Freight-In

B. Purchase Discounts

C. Sales Tax Payable

D. Allowance for Doubtful Accounts

Who pays the freight cost when the terms are FOB destination?

A. either the buyer or the seller

B. the customer

C. the buyer

D. the seller

The arrangements between buyer and seller as to when payments for merchandise are to be made are called

A. credit terms

B. gross cash

C. cash on demand

D. net cash

When the perpetual inventory system is used, the inventory sold is debited to

A. merchandise inventory

B. sales

C. cost of merchandise sold

D. supplies expense

Because many companies use computerized accounting systems, periodic inventory is widely used.

True

False

A deduction allowed to wholesalers and retailers from the price of merchandise listed in catalogs is called cash discounts.

True

False

Closing entries for a merchandising business are not similar to those for a service business.

True

False

When a merchandising business is compared to a service business, the financial statement that is not affected by

that change is the Statement of Owner's Equity.

True

False

A buyer who acquires merchandise under credit terms of 1/10, n/30 has 30 days after the invoice date to take advantage of the cash discount.

True

False

On the income statement in the single-step form, the total of all expenses is deducted from the total of all revenues.

True

False

Other income and expenses are items that are not related to the primary operating activity.

True

False

Under the perpetual inventory system, a company purchases merchandise on terms 2/10, n/30. If payment is made within 10 days of the purchase, the entry to record the payment will include a credit to Cash and a credit to Purchase Discounts.

True

False

As we compare a merchandise business to a service business, the financial statement that changes the most is the Balance Sheet.

True

False

If payment is due by the end of the month in which the sale is made, the invoice terms are expressed as n/30.

True

False

Multiple-step income statements show

A. neither gross profit nor income from operations

B. income from operations but not gross profit

C. both gross profit and income from operations

D. gross profit but not income from operations

Inventory shortage is recorded when

A. merchandise is returned to a seller.

B. there is a difference between a physical count of inventory and inventory records.

C. merchandise is returned by a buyer.

D. merchandise purchased from a seller is incomplete or short.

When merchandise is returned under the perpetual inventory system, the buyer would credit

A. Merchandise Inventory

B. Purchases Returns and Allowances

C. Accounts Payable

D. Accounts Receivable

Calculate the gross profit for Jonas Company based on the data given below:

Sales                                                 $764,000

Selling Expenses                               52,500

Cost of Merchandise Sold                 538,000

Sales Discounts                                 7,100

Sales Returns and Allowances          3,650

A. $162,750

B. $753,250

C. $215,250

D. $700,750

C. $215,250

Sales  $764,000 - Cost of Merchandise Sold  538,000 - Sales Discounts  7,100 - Sales Returns and Allowances  3,650 = $215,250

When purchases of merchandise are made with cash, the transaction may be recorded with the following entry

A. debit Merchandise Inventory; credit Cash

B. debit Cash; credit Merchandise Inventory

C. debit Merchandise Inventory; credit Cash Discounts

D. debit Merchandise Inventory; credit Purchases

Periodic Inventory

(Definition)

The inventory system in which the inventory records do not show the amount available for sale or sold during the period.

The inventory system in which each purchase and sale of merchandise is recorded in an inventory account.

Gross Profit

(Equation)

Cost of Merchandise Sold is an Expense.

True 

False

Cost of Merchandise Sold

(Equation)

Merchandise Available for Sale

(Equation)

D. $36,580

Merchandise Inventory Sep.1  5,700  + Purchases 32,000 - Purchases returns and allowances 1,200 - Purchases discounts 960 + Freight In 1,040 - Merchandise Inventory Sep.30  6,370 = 30,210 Cost of Goods Sold

Sales 63,000 -  Sales returns and allowances 910 = 62,090 Net Sales

Net Sales - Cost of Goods Sold = Gross Profit

62,090 - 30,210 = 31,880?????