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The amount recorded for merchandise inventory includes all of the following except:


A) Purchase discounts.
B) Returns and allowances.
C) Freight costs paid by the buyer.
D) Freight costs paid by the seller.
E) Trade discounts.

F) None of the above
G) A) and B)

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If a company sells merchandise with credit terms 2/10 n/60,the credit period is 10 days and the discount period is 60 days.

A) True
B) False

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Products that a company owns and intends to sell are called ________.

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Merchandis...

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A company purchased $1,800 of merchandise on July 5 with terms 2/10,n/30.On July 7,it returned $200 worth of merchandise.On July 28,it paid the full amount due.Assuming the company uses a perpetual inventory system,and records purchases using the gross method,the correct journal entry to record the merchandise return on July 7 is:


A) Debit Merchandise Inventory $1,600; credit Cash $1,600.
B) Debit Merchandise Inventory $200; credit Accounts Payable $200.
C) Debit Merchandise Inventory $200; credit Sales Returns $200.
D) Debit Accounts Payable $200; credit Merchandise Inventory $200.
E) Debit Accounts Payable $1,800; credit Purchase Returns $200; credit Merchandise Inventory $1,600.

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

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In a perpetual inventory system,the Merchandise Inventory account must be closed at the end of the accounting period.

A) True
B) False

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The net method of recording purchases refers to recording:


A) Purchases at the invoice price less any cash discounts.
B) Specified amounts and timing of payments that a buyer agrees to in return for being granted credit.
C) Purchases at the full invoice price, without deducting any cash discounts.
D) Inventory at its selling price.
E) Inventory at the lower of cost or market.

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

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The gross margin ratio equals net sales less ________ divided by net sales.

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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 5,806\begin{array} { | l | r | r | } \hline \text { Cash } & 5,684 & \\\hline \text { Purchases discounts } & 116 & \\\hline \text { Accounts payable } & & 5,806 \\\hline\end{array}

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

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Morgan,Inc.uses a perpetual inventory system and the net method of recording purchases.On May 12,a merchandise purchase of $15,000 was made on credit,2/10,n/30.The journal entry to record this purchase is:


A)  Merchandise Inventory 15,000 Accounts Payable 15,000\begin{array} { | l | r | l | } \hline \text { Merchandise Inventory } & 15,000 & \\\hline \text { Accounts Payable } & & 15,000 \\\hline\end{array}
B)  Accounts Payable 15,000 Merchandise Inventory 15,000\begin{array} { | l | r | l | } \hline \text { Accounts Payable } & 15,000 & \\\hline \text { Merchandise Inventory } & & 15,000 \\\hline\end{array}
C)  Purchases 15,000 Accounts Payable 15,000\begin{array} { | l | r | l | } \hline \text { Purchases } & 15,000 & \\\hline \text { Accounts Payable } & & 15,000 \\\hline\end{array}
D)  Purchases 14,700 Accounts Payable 14,700\begin{array} { | l | r | l | } \hline \text { Purchases } & 14,700 & \\\hline \text { Accounts Payable } & & 14,700 \\\hline\end{array}
E)  Merchandise Inventory 14,700 Accounts Payable 14,700\begin{array} { | l | r | l | } \hline \text { Merchandise Inventory } & 14,700 & \\\hline \text { Accounts Payable } & & 14,700 \\\hline\end{array}

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

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A buyer using a perpetual inventory system records the costs of shipping merchandise it purchases in a Delivery Expense account.

A) True
B) False

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Garza Company had sales of $135,000,sales discounts of $2,000,and sales returns of $3,200.Garza Company's net sales equals:


A) $5,200.
B) $129,800.
C) $133,000.
D) $135,000.
E) $140,200.

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

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A ________ is an intermediary that buys products from manufacturers and sells to retailers.

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The year-end adjusted trial balance of Gordon Produce for the current year,is shown below: The year-end adjusted trial balance of Gordon Produce for the current year,is shown below: Prepare closing entries at December 31 for the current year. Prepare closing entries at December 31 for the current year.

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Cash sales shorten the operating cycle for a merchandiser; credit sales lengthen operating cycles.

A) True
B) False

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A company uses the perpetual inventory system and recorded the following entry:  Accounts Payable 2,500 Merchandise Inventory 50 Cash 2,450\begin{array} { | l | r | r | } \hline \text { Accounts Payable } & 2,500 & \\\hline \text { Merchandise Inventory } & & 50 \\\hline \text { Cash } & & 2,450 \\\hline\end{array} This entry reflects a:


A) Purchase of merchandise on credit.
B) Return of merchandise.
C) Sale of merchandise on credit.
D) Payment of the account payable less a 2% cash discount taken.
E) Payment of the account payable less a 1% cash discount taken.

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

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A ________ inventory system updates the accounting record for inventory only at the end of an accounting period.

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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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New revenue recognition rules require that sellers report sales net of expected sales discounts.

A) True
B) False

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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.The journal entry or entries that Ryan will make on September 12 is (are) :


A)  Sales 5,800 Accounts receivable 5,800\begin{array} { | l | r | r | } \hline \text { Sales } & 5,800 & \\\hline \text { Accounts receivable } & & 5,800 \\\hline\end{array}
B)  Accounts receivable 5,684 Sales 5,684 Cost of goods sold 4,000 Merchandise Inventory 4,000\begin{array} { | l | r | r | } \hline \text { Accounts receivable } & 5,684 & \\\hline \text { Sales } & & 5,684 \\\hline \text { Cost of goods sold } & 4,000 & \\\hline \text { Merchandise Inventory } & & 4,000 \\\hline\end{array}
C)  Accounts receivable 5,800 Sales 5,800\begin{array} { | l | r | r | } \hline \text { Accounts receivable } & 5,800 & \\\hline \text { Sales } & & 5,800 \\\hline\end{array}
D)  Accounts receivable 5,800 Sales 5,800 Cost of goods Sold 4,000 Merchandise inventory 4,000\begin{array} { | l | r | r | } \hline \text { Accounts receivable } & 5,800 & \\\hline \text { Sales } & & 5,800 \\\hline \text { Cost of goods Sold } & 4,000 & \\\hline \text { Merchandise inventory } & & 4,000 \\\hline\end{array}
E)  Accounts receivable 5,684 Sales 5,684\begin{array} { | l | r | r | } \hline \text { Accounts receivable } & 5,684 & \\\hline \text { Sales } & & 5,684 \\\hline\end{array}

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

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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.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 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 | l | } \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 5,806\begin{array} { | l | r | r | } \hline \text { Cash } & 5,684 & \\\hline \text { Sales discounts } & 116 & \\\hline \text { Accounts receivable } & & 5,806 \\\hline\end{array}

F) C) and D)
G) B) and E)

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