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Exam 4: Accounting for Merchandising Businesses

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Question 71

True/False

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If the ownership of merchandise passes to the buyer when the seller delivers the merchandise for shipment, the terms are stated as FOB destination.

A) True
B) False

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Question 72

Multiple Choice

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If title to merchandise purchases passes to the buyer when the goods are shipped from the seller, the terms are:

A) n/30.
B) FOB shipping point.
C) FOB destination.
D) consigned.

E) A) and D)
F) A) and C)

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Question 73

Multiple Choice

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Expenses that are incurred directly or entirely in connection with the sale of merchandise are classified as:

The following data for the year ended June 30, 2013, were extracted from the accounting records of Roof Co.: $\begin{array} { l l } \$ 300,000 & \text { Cost of merchandise sold } \\95,000 & \text { Operating Espenses } \\450,000 & \text { Sales }\end{array}$ Prepare a multiple-step income statement for the current year ended June 30, 2013.

Office salaries, depreciation of office equipment, and office supplies are examples of what type of expense?

A sale of $600 on account subject to a sales tax of 5% would increase account receivable by $570.

A sales invoice included the following information: merchandise price, $6,000; terms 2/10, n/eom. Assuming that a credit for merchandise returned of $600 is granted prior to payment, and that the invoice is paid within the discount period, what is the amount of cash received by the seller?

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

Merchandise is ordered on November 12; the merchandise is shipped by the seller and the invoice is prepared, dated, and mailed by the seller on November 15; the merchandise is received by the buyer on November 17; the transaction is recorded in the seller's accounts on November 15. If the credit terms are 1/10, n/30, the discount period begins with what date?

Sometimes a(n) _____ is offered to buyers as a means of encouraging them to pay before the end of the credit period.

Gold Co. sold merchandise to Bronze Co. on account, $25,000, terms 2/15, net 45. The cost of the merchandise sold is $18,500. Gold Co. issued a credit memorandum for $2,500 for merchandise returned that originally cost $1,900. Bronze Co. paid the invoice within the discount period. What is amount of net sales from the transactions?

The form of income statement that derives its name from the fact that the total of all expenses is deducted from the total of all revenues is called a:

The sales discount account is a contra account to Sales.

Credit memorandum is issued by the seller to customers for return of damaged or defective merchandise.

To determine cash payments for operating expenses for the cash flow statement using the direct method, a decrease in prepaid expenses is added to operating expenses other than depreciation.

In a perpetual inventory system, merchandise returned to vendors reduces the merchandise inventory account.

Investing activities include:

Which of the following businesses is a merchandising business?