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5-1 Merchandising Operations 103.Stan’s Market recorded the following events involving a recent purchase of inventory: Received goods for $60,000, terms 2/10, n/30. Returned $1,200 of the shipment for credit. Paid $300 freight on the shipment. Paid the invoice within the discount period. As a result of these events, the company’s inventory a.increased by $57,624. b.increased by $59,100. c.increased by $57,918. d.increased.
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5-1 Merchandising Operations EXERCISES Ex. 215 Sue Cole is a new accountant with Simon Company. Simon purchased merchandise on account for $5,000. The credit terms are 1/10, n/30. Sue has talked with the company's banker and knows that she could earn 6% on any money invested in the company's savings account. Instructions (a)Should Sue pay the.
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Ex. 275 Presented below is the Trial Balance and Adjusted Trial Balance for Stabler Company on December 31. STABLER COMPANY Trial Balance December 31 Before AdjustmentAfter Adjustment      Dr.                 Cr.       Dr.                   Cr.  Cash$  3,000$  3,000 Accounts Receivable2,8003,700 Prepaid Rent2,1001,500 Supplies1,200700 Automobile Equipment18,00018,000 Accumulated Depreciation— Automobile Equipment$ 1,300$ 1,500 Accounts Payable2,7003,000 Notes Payable10,00010,000 Interest Payable120 Salaries Payable800 Unearned Service Revenue4,4604,060 Common Stock8,2008,200 Dividends3,2003,200 Service Revenue8,0009,300 Salaries Expense2,0602,860 Utilities Expense1,8002,100 Rent Expense5001,100 Supplies Expense500 Depreciation Expense— Automobile Equipment200 Interest Expense              120       Totals$34,660$34,660$36,980$36,980 Instructions: Prepare.
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5-1 Merchandising Operations               21.If merchandise costing $5,000, with terms 2/10, n/30, is paid within 10 days, the amount of the purchase discount is $100.               22.When an invoice is paid within the discount period, the amount of the discount decreases Inventory.               23.Sales revenues are only earned during the period cash is collected.
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Brief Exercises The statements of financial position of Rocky Acre Spread Ltd. include the following: 12/31/1212/31/11 Interest Receivable              €4,300              €   -0- Supplies              5,000              3,000 Wages Payable              3,600              3,800 Unearned Revenue              -0-              4,000 The income statement for 2012 shows the following: Interest Revenue              €18,400 Service Revenue              75,700 Supplies Expense              8,700 Wages Expense              41,000 Instructions Calculate the following for 2012: 1.Cash received for interest. 2.Cash paid for.
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5-1 Merchandising Operations MULTIPLE CHOICE QUESTIONS               53.Merchandising companies that sell to retailers are known as a.brokers. b.corporations. c.wholesalers. d.service firms.               54.Which of the following would not be considered a merchandising operation? a.Retailer b.Wholesaler c.Service firm d.Merchandising company               55.Which of the following activities is not a component of the operating cycle? a.Sale of merchandise b.Payment of employees’ salaries c.Collection of cash from merchandise sales d.Purchase.
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S-A E 299(Ethics) Benson and Jencks is a manufacturing company that specializes in writing instruments. The past year was a difficult one for the company, as it sought to retain its share in a market in which the largest competitors were also rapid innovators. Benson and Jencks introduced a new product.
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5-1 Merchandising Operations 173.Financial information is presented below: Operating Expenses              $ 35,000 Sales Returns and Allowances              12,000 Sales Discounts              3,000 Sales Revenue              140,000 Cost of Goods Sold              80,000 The profit margin ratio would be a..43. b..20. c..07. d..08. 174.What is an advantage of using the multiple-step income statement? a.It highlights the components of net income. b.Gross profit is not a separate item. c.It is easier to.
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Ex. 273 Dallison Company has an accounting fiscal year, which ends on June 30. The company also has a policy of paying the weekly payroll on Friday.  Payroll records indicate the following salary costs were incurred.   Date Amount MondayJune 28$3,200 TuesdayJune 292,800 WednesdayJune 302,400 ThursdayJuly 13,000 FridayJuly 22,600 Instructions: (a)Prepare any necessary adjusting journal entries that should be made.
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5-1 Merchandising Operations 163.Financial information is presented below: Operating Expenses              $  21,000 Sales Returns and Allowances              7,000 Sales Discounts              3,000 Sales Revenue              150,000 Cost of Goods Sold              105,000 Gross profit would be a.$42,000. b.$35,000. c.$38,000. d.$45,000. 164.Financial information is presented below: Operating Expenses              $  21,000 Sales Returns and Allowances              7,000 Sales Discounts              3,000 Sales Revenue              150,000 Cost of Goods Sold              105,000 The gross profit rate would be a..30. b..25. c..75. d..27. 165.Financial information is.
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5-1 Merchandising Operations TRUE-FALSE STATEMENTS               1.Retailers and wholesalers are both considered merchandising enterprises.               2.The operating cycle of a merchandising company ordinarily is shorter than that of a service company.               3.Sales minus operating expenses equals gross profit.               4.Under a perpetual inventory system, the cost of goods sold is determined each time a sale.
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5-1 Merchandising Operations               11.A very small business most likely would have to use the perpetual inventory system.               12.The computer has increased greatly the use of the periodic inventory system.               13.Cost of Goods Sold is considered an expense of a merchandising firm.               14.Operating expenses are subtracted from revenue for a service.
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MATCHING 290.Match the items below by entering the appropriate code letter in the space provided.  A.Periodicity assumptionF.Accrued revenues B.Cash basisG.Depreciation C.Revenue recognition principleH.Post-closing trial balance D.Prepaid expensesI.Accrued expenses E.Expense recognition principleJ.Book value                             1.Events recorded only in periods the company receives or pays cash                             2.Expenses paid before they are incurred                             3.Cost less accumulated.
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5-1 Merchandising Operations               73.The figure for which of the following items is determined at a different time under the perpetual inventory method than under the periodic method? a.Sales Revenue b.Cost of Goods Sold c.Purchases d.Accounts Receivable               74.In a perpetual inventory system, cost of goods sold is recorded a.on a daily basis. b.on a monthly basis. c.on an annual.
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COMPLETION STATEMENTS               279.The ______________ assumption states that the economic life of a business can be divided into artificial time periods.               280.The ______________ principle gives accountants guidance as to when revenue is to be recorded.               281.In a service company, revenue is earned when the service is _______________.               282.The expense recognition principle.
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5-1 Merchandising Operations Ex. 217 (a)Bazil Company purchased merchandise on account from Office Suppliers for $56,000, with terms of 2/10, n/30. During the discount period, Bazil returned some merchandise and paid $53,900 as payment in full. Bazil uses a perpetual inventory system. Prepare the journal entries that Bazil Company made to record.
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EXERCISES Ex. 251 The balance sheets of Palle’ Company include the following: 12/31/1112/31/10 Interest Receivable$4,300$   -0- Supplies5,0003,900 Wages Payable3,7003,800 Unearned Service Revenue-0-4,000 The income statement for 2011 shows the following: Interest Revenue$15,500 Service Revenue78,700 Supplies Expense10,700 Wages Expense44,000 Instructions: Calculate the following for 2011: 1.Cash received for interest. 2.Cash paid for supplies. 3.Cash paid for wages. 4.Cash received for service revenue. Ex. 252 The 2011 income statement for Moring Company.
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5-1 Merchandising Operations               83.Under a perpetual inventory system, acquisition of merchandise for resale is debited to a.the Inventory account. b.the Purchases account. c.the Supplies account. d.the Cost of Goods Sold account.               84.The journal entry to record a return of merchandise purchased on account under a perpetual inventory system would credit a.Accounts Payable. b.Purchase Returns and Allowances. c.Sales Revenue. d.Inventory.              .
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Ex. 257 The Downtown Company accumulates the following adjustment data at December 31. 1.Revenue of $1,100 collected in advance has been earned. 2.Salaries of $600 are unpaid. 3.Prepaid rent totaling $450 has expired. 4.Supplies of $550 have been used. 5.Revenue earned but unbilled totals $750. 6.Utility expenses of $300 are unpaid. 7.Interest of $250 has accrued on a.
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Ex. 269 Prepare the required end-of-period adjusting entries for each independent case listed below. Case 1 The Thoma Company began the year with a $3,000 balance in the Office Supplies account.  During the year, $8,500 of additional office supplies were purchased.  A physical count of office supplies on hand at the end of.
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5-1 Merchandising Operations 183.Which of the following is not considered in computing net cost of purchases? a.Purchases returns and allowances b.Purchases c.Freight paid on purchased goods d.Freight paid on goods shipped to customers               184.Assume Grammar Company uses the periodic inventory system and has a beginning merchandise inventory balance of $5,000, purchases of $75,000, and sales of.
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Ex. 265 Prepare adjusting entries for the following transactions. Omit explanations. 1.Unrecorded interest accrued on savings bonds is $410. 2.Property taxes incurred but not paid or recorded amount to $800. 3.Legal service revenues of $4,000 were collected in advance.  By year end $900 was still unearned. 4.Prepaid insurance had a $500 debit balance prior to.
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Ex. 261 A review of the ledger of Weakly Service Co. at December 31, 2011, produces the following data pertaining to the preparation of annual adjusting entries: (a)Notes Payable $70,000: This is a 9-month note, dated September 1, 2011, with an 9% interest rate. (b)Prepaid Rent $648,000. The company rents offices throughout the.
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SHORT-ANSWER ESSAY QUESTIONS S-A E 291 You are part of a group of individuals (incorporators) who want to form a new corporation.  During discussions on forming the business, Mark Adams makes this statement: Our business will have accounts receivable and accounts payable.  It will also acquire a substantial amount of computers and equipment. .
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5-1 Merchandising Operations Ex. 219 On October 1, the Kile Bicycle Store had an inventory of 20 ten speed bicycles at a cost of $150 each. During the month of October the following transactions occurred. Assume Kile uses a perpetual inventory system. Oct.4Purchased 200 bicycles at a cost of $145 each from the Nixon.
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5-1 Merchandising Operations Ex. 221 Petersen Book Store entered into the transactions listed below. In the journal provided, prepare Petersen’s necessary entries, assuming use of the perpetual inventory system. July 6Purchased $1,800 of merchandise on credit, terms n/30. 8                  Returned $100 of the items purchased on July 6. 9                  Paid freight charges of $90 on.
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5-1 Merchandising Operations               41.A merchandising company’s net income is determined by subtracting operating expenses from gross profit.               42.Sales revenues, cost of goods sold, and gross profit are amounts on a merchandising company's income statement not commonly found on the income statement of a service company.               43.The income statement for a merchandising.
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5-1 Merchandising Operations 143.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 a.multiple-step statement. b.revenue statement. c.report-form statement. d.single-step statement. 144.Gross profit does not appear a.on a multiple-step income statement. b.on a single-step income statement. c.to be relevant in.
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5-1 Merchandising Operations 113.A sales invoice is prepared when goods a.are sold for cash. b.are sold on credit. c.sold on credit are returned. d.are sold on credit or for cash.               114.The Sales Returns and Allowances account is classified as a(n) a.asset account. b.contra asset account. c.expense account. d.contra revenue account. 115.The entry to record the return of goods from a customer.
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5-1 Merchandising Operations               63.The primary source of revenue for a wholesaler is a.investment income. b.service revenue. c.the sale of merchandise. d.the sale of plant assets the company owns.               64.Generally, the revenue account for a merchandising enterprise is called a.Sales Revenue or Sales. b.Investment Income. c.Gross Profit. d.Net Sales.               65.Under a perpetual inventory system a.accounting records continuously disclose the amount of.
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5-1 Merchandising Operations 153.Multiple-step income statements show a.gross profit but not income from operations. b.neither gross profit nor income from operations. c.both income from operations and gross profit. d.income from operations but not gross profit. 154.Interest expense would be classified on a multiple-step income statement under the heading a.Other expenses and losses b.Other revenues and gains c.Selling expenses d.Cost of goods.
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5-1 Merchandising Operations               93.Davies Company purchased merchandise inventory with an invoice price of $7,500 and credit terms of 2/10, n/30. What is the net cost of the goods if Davies Company pays within the discount period? a.$7,500 b.$7,380 c.$7,350 d$6,000               94.A credit sale of $1,600 is made on April 25, terms 2/10, net/30, on which.
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5-1 Merchandising Operations Ex. 220 On September 1, Pennington Supply had an inventory of 20 backpacks at a cost of $25 each. The company uses a perpetual inventory system. During September, the following transactions and events occurred. Sept.4Purchased 40 backpacks at $25 each from Sievert, terms 2/10, n/30. 6Received credit of $100 for the return.
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Ex. 278 The adjusted trial balance shown below is for Rich Company at the end of its fiscal year: RICH COMPANY Trial Balance March 31, 2011    Debit  Credit Cash ...............................................$ 12,900 Accounts Receivable ...................................9,400 Office Supplies .......................................700 Prepaid Insurance .....................................2,500 Office Equipment ......................................16,000 Accumulated Depreciation—Office Equipment .................$  4,800 Accounts Payable .....................................5,800 Salaries Payable ......................................1,100 Unearned Rent Revenue ................................600 Common Stock........................................10,000 Retained Earnings .....................................5,600 Dividends ...........................................3,800 Service Revenue.
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S-A E 294 The long-term liability section of Alpha Corporation’s Balance Sheet includes the following accounts Notes Payable $100,000 Mortgage Payable      250,000 Salaries Payable       75,000 Accumulated Depreciation   125,000 Total Long-Term Liabilities $550,000 Alpha Corporation is an established company and does not experience any financial difficulties or have any cash flow problems.  Discuss at least two items that.
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5-1 Merchandising Operations               31.Sales Discounts and Sales Returns and Allowances both have normal debit balances.               32.Merchandise is sold for $5,000 with terms 1/10, n/30. If $1,000 of the merchandise is returned prior to payment and the invoice is paid within the discount period, the amount of the sales discount is $40.              .
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International Financial Reporting Standards True-False Statements               1.The cash basis of accounting is not in accordance with IFRS.               2.The expense recognition principle requires that efforts be matched with accomplishments.               3.Adjusting entries are needed to enable financial statements to conform to International Financial Reporting Standards (IFRS). Multiple Choice Questions               4.Which of the following are.
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Ex. 255 Hooper Company prepared the following income statement using the cash basis of accounting: HOOPER COMPANY Income Statement, Cash Basis For the Year Ended December 31, 2011 Service revenue (does not include $30,000 of services rendered on account because the collection will not be until 2012)........................$380,000 Expenses (does not include $25,000 of expenses on account.
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5-1 Merchandising Operations 133.The collection of a $900 account beyond the 2 percent discount period will result in a a.debit to cash for $882. b.debit to Accounts Receivable for $900. c.debit to Cash for $900. d.debit to Sales Discounts for $18. 134.The collection of a $500 account beyond the 2 percent discount period will result in.
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5-1 Merchandising Operations 123.A Sales Returns and Allowances account is not debited if a customer a.returns defective merchandise. b.receives a credit for merchandise of inferior quality. c.utilizes a prompt payment incentive. d.returns goods that are not in accordance with specifications.               124.As an incentive for customers to pay their accounts promptly, a business may offer its customers a.a.
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Ex. 277 The adjusted trial balance of Nicks Financial Planners appears below and using the information from the adjusted trial balance, you are to prepare for the month ending December 31: 1.an income statement; 2.a retained earnings statement; and 3.a balance sheet. NICKS FINANCIAL PLANNERS Adjusted Trial Balance December 31, 2011    Debit  Credit Cash ...............................................$ 16,400 Accounts Receivable ...................................2,200 Office.
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5-1 Merchandising Operations Be. 210 Prepare the journal entries to record the following transactions on Markowitz Company’s books using a perpetual inventory system. On February 6, Markowitz Company sold $75,000 of merchandise to the Lyman Company, terms 2/10, net /30. The cost of the merchandise sold was $50,000. On February 8, the Lyman.
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Ex. 276 The Golden Petting Zoo operates a drive-through tourist attraction in Colorado.  The company adjusts its accounts at the end of each month.  The selected accounts appearing below reflect balances after adjusting entries were prepared on April 30.  The adjusted trial balance shows the following: Prepaid Rent$  15,000 Fencing42,000 Accumulated Depreciation—Fencing5,500 Unearned Ticket Revenue400 Other.
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Ex. 258 The adjusted trial balance of Masters Company includes the following balance sheet accounts that frequently require adjustment. For each account, indicate (a) the type of adjusting entry (prepaid expenses, unearned revenues, accrued revenues, or accrued expenses) and (b) the related account in the adjusting entry. (a)(b) Balance Sheet AccountType of Adjusting.
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5-1 Merchandising Operations BRIEF EXERCISES Be. 207 Presented here are the components in Rowland Company’s income statement. Determine the missing amounts.    Cost of GrossOperating   Net _Sales_Goods Sold_Profit ExpensesIncome $75,000         (a)$30,000     (b)$17,000      (c)          $56,000    $54,000$48,000    (d) Be. 208 On September 4, Roberta’s Knickknacks buys merchandise on account from Dolan Company. The selling price of the goods is.
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Ex. 253 A company using the cash basis of accounting reports net income for 2011 of $50,460. If the company had used the accrual basis of accounting it would have reported the following year-end balances:   2011  2010 Accounts receivable$3,450$5,100 Supplies on hand  1,740  1,950 Wages payable  3,600  2,250 Other unpaid amounts  2,400  2,100 Instructions: Determine the company’s.
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5-1 Merchandising Operations Ex. 218 June4Black Company purchased $7,000 worth of merchandise, terms n/30 from Hayes Company. The cost of the merchandise was $4,900. 12            Black returned $500 worth of goods to Hayes for full credit. The goods had a cost of $350 to Hayes. 12            Black paid the account in full. Ex. 218(Cont.) Instructions Prepare the journal.
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5-1 Merchandising Operations 193.A decline in a company’s gross profit could be caused by all of the following except a.selling products with a lower markup. b.clearance of discontinued inventory. c.paying lower prices to its suppliers. d.increasing competition resulting in a lower selling price. 194.If Hostell Company has net sales of $500,000 and cost of goods sold of.
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Ex. 267 Janus Coat Company purchased a delivery truck on June 1 for $24,000, paying $8,000 cash and signing a 6%, 2-month note for the remaining balance.  The truck is expected to depreciate $4,800 each year. Janus Coat Company prepares monthly financial statements. Instructions: (a)Prepare the general journal entry to record the acquisition.
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Ex. 271 One part of an adjusting entry is given below. Instructions: Indicate the account title for the other part of the entry. 1.Unearned Service Revenue is debited. 2.Prepaid Rent is credited. 3.Accounts Receivable is debited. 4.Depreciation Expense is debited. 5.Utilities Expense is debited. 6.Interest Payable is credited. 7.Service Revenue is credited (give two possible debit accounts). 8.Interest Receivable is debited. Ex..
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