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5 - 1 Accounting for Merchandising Operations Exercises Ex. 202 For each of the following, determine the missing amounts.Sales Cost of  GrossOperatingNet RevenueGoods Sold_Profit ExpensesIncome 1.$100,000_______________$30,000$12,0002.________$135,000$125,000_______$80,000 Ex. 203 On October 1, Benji’s Bicycle Store had an inventory of 20 ten speed bicycles at a cost of $200 each. During the month of October, the following transactions occurred. Oct.4Purchased.
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5 - 1 Accounting for Merchandising Operations Ex. 220 The following information is available for Sheldon Leonard Company: Operating expenses$  85,000Cost of goods sold  200,000Sales  325,000 Sales returns and allowances16,000 InstructionsCompute each of the following:(a)Net sales(b)Gross profit(c)Income from operations aEx. 221 The adjusted trial balance of Dailey Music Company appears below. Dailey Music Company prepares monthly financial statements.
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5 - 1 Accounting for Merchandising Operations 113.Arquette Company's financial information is presented below. Sales Revenue$     ????              Cost of Goods Sold              540,000 Sales Returns and Allowances40,000              Gross Profit???? Net Sales              900,000 The missing amounts above are: Sales Revenue                  Gross Profit a.$940,000              $360,000 b.$860,000              $360,000 c.$940,000              $420,000 d.$860,000              $420,000 114.The sales revenue section of an income statement for a retailer would not.
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6 - 1 Inventories 74.The cost of goods available for sale is allocated to the cost of goods sold and the a.beginning inventory. b.ending inventory. c.cost of goods purchased. d.gross profit. 75.At May 1, 2014, Kibbee Company had beginning inventory consisting of 200 units with a unit cost of $7.  During May, the company purchased inventory as.
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6 - 1 Inventories 104.If companies have identical inventoriable costs but use different inventory flow assumptions when the price of goods have not been constant, then the a.cost of goods sold of the companies will be identical. b.cost of goods available for sale of the companies will be identical. c.ending inventory of the companies will.
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5 - 1 Accounting for Merchandising Operations MULTIPLE CHOICE QUESTIONS 43.Net income is gross profit less a.financing expenses. b.operating expenses. c.other expenses and losses. d.other expenses. 44.An enterprise which sells goods to customers is known as a a.proprietorship. b.corporation. c.retailer. d.service firm. 45.Which of the following would not be considered a merchandising company? a.Retailer b.Wholesaler c.Service firm d.Dot Com firm 46.A merchandising company that sells directly to consumers.
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5 - 1 Accounting for Merchandising Operations 63.Freight costs paid by a seller on merchandise sold to customers will cause an increase a.in the selling expense of the buyer. b.in operating expenses for the seller. c.to the cost of goods sold of the seller. d.to a contra-revenue account of the seller. 64.Paden Company purchased merchandise from Emmett.
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5 - 1 Accounting for Merchandising Operations 73.McIntyre Company made a purchase of merchandise on credit from Marvin Company on August 8, for $9,000, terms 3/10, n/30. On August 17, McIntyre makes the appropriate payment to Marvin. The entry on August 17 for McIntyre Company is: a.Accounts Payable              9,000 Cash                                          9,000 b.Accounts Payable             .
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5 - 1 Accounting for Merchandising Operations Ex. 215 Presented below is information for Annie Company for the month of March 2015. Cost of goods sold$245,000Rent expense$  36,000 Freight-out7,000Sales discounts8,000 Insurance expense5,000Sales returns and allowances11,000 Salaries and wages expense63,000Sales revenue410,000 Instructions (a)Prepare a multiple -step income statement. (b)Compute the gross profit rate. Ex. 216 In 2014, Rondelli Company had net sales of.
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6 - 1 Inventories 94.Netta Shutters has the following inventory information. Nov.              1              Inventory              30 units @              $8.00 8Purchase              120 units @              $8.30 17Purchase              60 units @              $8.40 25Purchase              90 units @              $8.80 A physical count of merchandise inventory on November 30 reveals that there are 90 units on hand. Assume a periodic inventory system is used..
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5 - 1 Accounting for Merchandising Operations COMPLETION STATEMENTS               227.A ________________ buys and sells goods rather than performing services to earn a profit.               228.Cost of goods sold is deducted from net sales revenue for the period in order to arrive at ________________.               229.Inventory on hand can be obtained from detailed inventory records.
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5 - 1 Accounting for Merchandising Operations Ex. 204 On September 1, Reid Supply had an inventory of 15 backpacks at a cost of $20 each. The company uses a perpetual inventory system. During September, the following transactions and events occurred. Sept.4Purchased 70 backpacks at $20 each from Hunter, terms 2/10, n/30. Sept.6Received credit of.
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5 - 1 Accounting for Merchandising Operations a31.Freight-in is an account that is subtracted from the Purchases account to arrive at cost of goods purchased. a32.Under a periodic inventory system, the acquisition of inventory is charged to the Purchases account. a33.Under a periodic inventory system, freight-in on merchandise purchases should be charged to the.
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6 - 1 Inventories 124.Othello Company understated its inventory by $20,000 at December 31, 2014. It did not correct the error in 2014 or 2015. As a result, Othello's owner's equity was: a.understated at December 31, 2014, and overstated at December 31, 2015. b.understated at December 31, 2014, and properly stated at December 31,.
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5 - 1 Accounting for Merchandising Operations BE 195 The income statement for Pepe Serna Company for the year ended December 31, 2014 is as follows: PEPE SERNA COMPANY Income Statement For the Year Ended December 31, 2014 Revenues Sales revenue.......................................$58,000 Interest revenue.....................................    3,000 Total revenues...................................61,000 Expenses Cost of goods sold...................................$33,000 Salaries and wages expense...........................13,000 Interest expense.....................................      1,000 Total expenses...................................   47,000 Net income...............................................$   14,000 Prepare the.
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5 - 1 Accounting for Merchandising Operations 93.When goods are returned that relate to a prior cash sale, a.the Sales Returns and Allowances account should not be used. b.the cash account will be credited. c.Sales Returns and Allowances will be credited. d.Accounts Receivable will be credited. 94.The Sales Returns and Allowances account does not provide information to.
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5 - 1 Accounting for Merchandising Operations SHORT-ANSWER ESSAY QUESTIONS S-A E  238 A merchandiser frequently has a need to use contra accounts related to the sale of goods. Identify the contra accounts that have normal debit balances and explain why they are not considered expenses. S-A E  239 Distinguish between FOB shipping point and FOB.
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5 - 1 Accounting for Merchandising Operations aEx. 222 Three items are missing in each of the following columns and are identified by letter. Sales revenue$        (a)$840,000 Sales returns and allowances15,00022,000 Sales discounts10,00015,000 Net sales440,000(d) Beginning inventory(b)300,000 Cost of goods purchased220,000(e) Ending inventory170,000303,000 Cost of goods sold252,000575,000 Gross profit(c)(f) Ex. 222(Cont.) Instructions Calculate the missing amounts and identify them by letter. aEx. 223 Reineman Supply Company uses.
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6 - 1 Inventories 84.Eneri Company's inventory records show the following data: Units              Unit Cost Inventory, January 1                            10,000$9.20 Purchases:              June 18              9,000              8.00 November 8              6,000              7.00 A physical inventory on December 31 shows 4,000 units on hand. Eneri sells the units for $13 each. The company has an effective tax rate of 20%. Eneri.
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5 - 1 Accounting for Merchandising Operations S-A E 243 The income statement for a merchandising company presents five amounts not shown on a service company’s income statement. Identify and briefly explain the five unique amounts. S-A E  244(Ethics) Holmes Corporation manufactures electronic components for use in many consumer products. Their raw materials are purchased.
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5 - 1 Accounting for Merchandising Operations 133.Financial information is presented below: Operating Expenses              $  60,000 Sales Revenue  225,000 Cost of Goods Sold                135,000 Gross profit would be a.$30,000. b.$90,000. MC. 133              (Cont.) c.$165,000. d.$225,000. 134.Financial information is presented below: Operating Expenses              $  60,000 Sales Revenue  225,000 Cost of Goods Sold                135,000 The gross profit rate would be a..133. b..400. c..600. d..733. 135.Financial information is presented below: Operating Expenses              $ .
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5 - 1 Accounting for Merchandising Operations a163.              Cobb Company's accounting records show the following at the year ending on December 31, 2014: Purchase Discounts              $    11,200 Freight - In              15,600 Purchases              402,000 Beginning Inventory              47,000 Ending Inventory57,600 Purchase Returns              12,800 Using the periodic system, the cost of goods purchased is a.$378,000. b.$383,000. c.$393,600. d.$404,200. a164.              Cobb Company's accounting records show the following at.
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5 - 1 Accounting for Merchandising Operations Ex. 213 Kennedy Company had the following account balances at year-end: cost of goods sold $85,000; inventory $15,000; operating expenses $39,000; sales revenue $144,000; sales discounts $1,600; and sales returns and allowances $2,300. A physical count of inventory determines that inventory on hand is $14,400. Instructions (a)Prepare the.
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5 - 1 Accounting for Merchandising Operations a153.              The Freight-In account a.increases the cost of merchandise purchased. b.is contra to the Purchases account. c.is a permanent account. d.has a normal credit balance. a154.              Net purchases plus freight-in determines a.cost of goods sold. b.cost of goods available for sale. c.cost of goods purchased. d.total goods available for sale. a155.              Goldblum Company has the.
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5 - 1 Accounting for Merchandising Operations 103.Which of the following accounts has a normal credit balance? a.Sales Returns and Allowances b.Sales Discounts c.Sales Revenue d.Selling Expense 104.With respect to the income statement, a.contra-revenue accounts do not appear on the income statement. b.sales discounts increase the amount of sales. c.contra-revenue accounts increase the amount of operating expenses. d.sales discounts are included.
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5 - 1 Accounting for Merchandising Operations 123.All of the following items would be reported as other expenses and losses except a.freight-out. b.casualty losses. c.interest expense. d.loss from employees' strikes. 124.If a company has net sales of $700,000 and cost of goods sold of $455,000, the gross profit percentage is a.25%. b.35%. c.65%. d.100%. 125.A company shows the following balances: Sales Revenue$2,500,000 Sales Returns.
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5 - 1 Accounting for Merchandising Operations aEx. 224 The following information is available for Hopkins Company: Beginning inventory$  45,000Ending inventory70,000Freight-in10,000Purchases290,000Purchase returns and allowances8,000 Ex. 224(Cont.) InstructionsCompute each of the following:(a)Net purchases(b)Cost of goods purchased(c)Cost of goods sold Ex. 225 The income statement of Jue’s Luggage. includes the items listed below: Net sales$900,000 Gross profit315,000 Beginning inventory80,000 Purchase discounts15,000 Purchase returns and allowances8,000 Freight-in10,000 Operating.
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5 - 1 Accounting for Merchandising Operations 143.During August, 2014, Baxter’s Supply Store generated revenues of $60,000. The company’s expenses were as follows: cost of goods sold of $36,000 and operating expenses of $4,000. The company also had rent revenue of $1,000 and a gain on the sale of a delivery truck.
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5 - 1 Accounting for Merchandising Operations MATCHING 237.Match the items below by entering the appropriate code letter in the space provided. A.Net salesF.FOB shipping point B.Sales discountsG.Freight-out C.Purchase invoiceH.Gross profit D.Periodic inventory systemI.Operating expenses E.FOB destinationJ.Income from operations _____              1.An incentive to encourage customers to pay their accounts early. _____              2.Expenses incurred in the process of earning sales revenue. _____             .
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5 - 1 Accounting for Merchandising Operations BRIEF Exercises BE 190 Presented here are the components in Bradley Company’s income statement. Determine the missing amounts. Sales Cost ofGrossOperatingNet RevenueGoods Sold_Profit ExpensesIncome $75,000(a)$35,000(b)$17,000 (c)$86,000$59,000$48,000(d) BE 191 Prepare the necessary journal entries on the books of Kelly Carpet Company to record the following transactions, assuming a perpetual inventory system (you may.
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5 - 1 Accounting for Merchandising Operations Ex. 218 Instructions State the missing items identified by ?.               1.Gross profit – Operating expenses = ?               2.Cost of goods sold + Gross profit on sales = ?               3.Sales Revenue – (? + ?) = Net sales               4.Income from operations + ? – ? = Net income              .
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5 - 1 Accounting for Merchandising Operations Ex. 207 An inexperienced accountant for Tilly Company made the following errors in recording merchandising transactions. 1.A $270 refund to a customer for faulty merchandise was debited to Sales Revenue $270 and credited to Cash $270. 2.A $310 credit purchase of supplies was debited to Inventory $310 and.
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5 - 1 Accounting for Merchandising Operations Ex. 211 The following information is available for Moiz Company:     Debit      Credit Owner’s Capital$  50,000 Owner’s Drawings$  30,000 Sales Revenue510,000 Sales Returns and Allowances20,000 Sales Discounts7,000 Cost of Goods Sold310,000 Freight-Out2,000 Advertising Expense15,000 Interest Expense19,000 Salaries and Wages Expense55,000 Utilities Expense18,000 Depreciation Expense7,000 Interest Revenue23,000 Instructions Using the above information, prepare the closing entries for Moiz Company. Ex. 212 The adjusted trial.
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5 - 1 Accounting for Merchandising Operations 83.In a perpetual inventory system, the Cost of Goods Sold account is used a.only when a cash sale of merchandise occurs. b.only when a credit sale of merchandise occurs. c.only when a sale of merchandise occurs. d.whenever there is a sale of merchandise or a return of merchandise sold. 84.Sales.
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6 - 1 Inventories 54.Cost of goods sold is computed from the following equation: a.beginning inventory – cost of goods purchased + ending inventory. b.sales – cost of goods purchased + beginning inventory – ending inventory. c.sales + gross profit – ending inventory + beginning inventory. d.beginning inventory + cost of goods purchased – ending inventory. 55.A.
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6 - 1 Inventories 64.The cost of goods available for sale is allocated between a.beginning inventory and ending inventory. b.beginning inventory and cost of goods on hand. c.ending inventory and cost of goods sold. d.beginning inventory and cost of goods purchased. 65.Indrisano's Used Cars uses the specific identification method of costing inventory. During March, Indrisano purchased three.
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5 - 1 Accounting for Merchandising Operations Ex. 217 Argentina Company gathered the following condensed data for the year ended December 31, 2014: Cost of goods sold$   750,000 Net sales1,200,000 Operating expenses275,000 Interest expense48,000 Dividend revenue38,000 Casualty loss from vandalism125,000 Instructions 1.Prepare a single-step income statement for the year ended December 31, 2014. 2.Prepare a multiple-step income statement for the year ended.
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5 - 1 Accounting for Merchandising Operations 183.Under GAPP, income statement items are generally described as a.administration, distribution, manufacturing, etc. b.salaries, depreciation, utilities, etc. c.administration, depreciation, manufacturing, etc. d.salaries, distribution, utilities, etc. 184.Under IFRS, income statement items are generally described as a.administration, distribution, manufacturing, etc. b.salaries, depreciation, utilities, etc. c.administration, depreciation, manufacturing, etc. d.salaries, distribution, utilities, etc. 185.For the income statement, IFRS.
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6 - 1 Inventories 134.The following information was available for Pete Company at December 31, 2014: beginning inventory $90,000; ending inventory $70,000; cost of goods sold $984,000; and sales $1,350,000. Pete’s days in inventory in 2014 was a21.6 days. b.25.9 days. c.29.7 days. d.33.5 days. 135.Delmar Company had beginning inventory of $90,000, ending inventory of $110,000, cost.
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5 - 1 Accounting for Merchandising Operations Ex. 206 (a)Karns Company purchased merchandise on account from Bailey Office Suppliers for $174,000, with terms of 2/10, n/30. During the discount period, Karns returned some merchandise and paid $156,800 as payment in full. Karns uses a perpetual inventory system. Prepare the journal entries that Karns.
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5 - 1 Accounting for Merchandising Operations Ex. 210 Newell Company completed the following transactions in October:        Credit Sales         Sales Returns  Date of   Date   Amount  Terms     Date  AmountCollection Oct.3$  6002/10, n/30Oct.8 Oct.111,7003/10, n/30Oct. 14$  400Oct.16 Oct.175,0001/10, n/30Oct. 201,000Oct.29 Oct.211,4002/10, n/60Oct. 23200Oct.27 Oct.232,3002/10, n/30Oct. 27400Oct.28 Instructions (a)Indicate the cash received for each collection. Show your calculations. (b)Prepare the journal entry for.
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6 - 1 Inventories TRUE-FALSE STATEMENTS 1.Transactions that affect inventories on hand have an effect on both the balance sheet and the income statement. 2.The more inventory a company has in stock, the greater the company's profit. 3.Raw materials inventories are the goods that a manufacturer has completed and are ready to be sold to.
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5 - 1 Accounting for Merchandising Operations aBE 200 Assume that Swann Company uses a periodic inventory system and has these account balances:  Purchases $630,000; Purchase Returns and Allowances $25,000; Purchase Discounts $11,000; and Freight-In $19,000; beginning inventory of $45,000; ending inventory of $55,000; and net sales of $750,000.  Determine the cost of.
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5 - 1 Accounting for Merchandising Operations 53.Detailed records of goods held for resale are not maintained under a a.perpetual inventory system. b.periodic inventory system. c.double entry accounting system. d.single entry accounting system. 54.A perpetual inventory system would likely be used by a(n) a.automobile dealership. b.hardware store. c.drugstore. d.convenience store. 55.Which of the following is a true statement about inventory systems? a.Periodic inventory.
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6 - 1 Inventories MULTIPLE CHOICE QUESTIONS 34.Inventories affect a.only the balance sheet. b.only the income statement. c.both the balance sheet and the income statement. d.neither the balance sheet nor the income statement. 35.Inventory is a.reported under the classification of Property, Plant, and Equipment on the balance sheet. b.often reported as a miscellaneous expense on the income statement. c.reported as a.
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5 - 1 Accounting for Merchandising Operations 173.In the balance sheet, ending inventory is reported a.in current assets immediately following accounts receivable. b.in current assets immediately following prepaid expenses. c.in current assets immediately following cash. d.under property, plant, and equipment. a174.              Cost of goods available for sale is computed by adding a.freight-in to net purchases. b.beginning inventory to net.
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6 - 1 Inventories 44.For companies that use a perpetual inventory system, all of the following are purposes for taking a physical inventory except a.to check the accuracy of the records. b.to determine the amount of wasted raw materials. c.to determine losses due to employee theft. d.to determine ownership of the goods. 45.Fetherston Company's goods in transit.
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6 - 1 Inventories 21.Inventory turnover is calculated as cost of goods sold divided by ending inventory. a22.If a company uses the FIFO cost assumption, the cost of goods sold for the period will be the same under a perpetual or periodic inventory system. a23.In applying the LIFO assumption in a perpetual inventory system,.
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