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Exam 5: Retailing Operations

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Question 21

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A company purchased inventory for $2000 from a vendor on credit,FOB shipping point,with terms of2/10,n/30.The company paid the shipper $100 cash for freight in.The company then returned damaged goods worth $200.The invoice has been paid 8 days after the sale.Assuming that there was no beginning inventory balance,the cost of inventory would be: (Assume a perpetual inventory system.)

A) $1864.
B) $1900.
C) $1960.
D) $1764.

E) All of the above
F) C) and D)

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Question 22

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A company sold inventory worth $212 for $330 on credit.The seller uses the perpetual inventory system.The entry to record the cost of inventory sold would include:

A) a debit to Inventory for $212 and a credit to Cost of sales for $212
B) a debit to Cost of sales and a credit to Inventory for $212
C) a debit to Sales and a credit to Cash for $330
D) a debit to Cash and a credit to Sales for $330

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

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Question 23

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Which of the following correctly describes the rate of inventory turnover?

The following details are provided by Blue Bell Retailers.The company uses the periodic inventory system. $\begin{array} { | l | l | } \hline \text { Net sales } & \$ 200,000 \\\hline \text { Purchases } & 90,000 \\\hline \text { Purchase returns and allowances } & 1800 \\\hline \text { Purchase discounts } & 1500 \\\hline \text { Freight in } & 1800 \\\hline \text { Beginning inventory } & 63,000 \\\hline \text { Ending inventory } & 37,000 \\\hline\end{array}$ Calculate the amount of net purchases.

Purchase returns and allowances decrease the net amount of cash that will be paid for the inventory,and so they should reduce the cost of the inventory as recorded in the Inventory account.

Thomas Company provided the following particulars for year 2017: $\begin{array} { | l | l | } \hline \text { Cost of sales } & \$ 1,100,000 \\\hline \text { Beginning inventory } & 340,000 \\\hline \text { Ending inventory } & 350,000 \\\hline\end{array}$ Calculate Thomas's rate of inventory turnover for the year.(Round your answer to two decimal places.)

The following information relates to Nebula Ltd. $\begin{array} { | l | l | } \hline \text { Sales revenue } & \$ 230,000 \\\hline \text { Cost of sales } & 150,000 \\\hline \text { Interest revenue } & 10,000 \\\hline \text { Operating expenses } & 40,000 \\\hline \text { Sales discounts } & 20,000 \\\hline \text { Sales returns and allowances } & 7000 \\\hline\end{array}$ Calculate the profit.

The trial balance of a retailer is as follows.A physical count of inventory at the end of the accounting year reveals $27 000 of inventory on hand.(Assume a perpetual inventory system.) Debit Credit Cash $12 600 Accounts receivable 2 400 Prepaid rent 800 Inventory 29 000 Accounts payable $4 200 Salaries payable 1 000 Loan payable 800 Smith,Capital 13 800 Drawings 1 000 Sales revenue 95 000 Sales returns and allowances 1 600 Sales discounts 400 Cost of sales 23 000 Salaries expense 21 000 Rent expense 14 000 Depreciation expense 8 500 Supplies expense 500 Total $114 800 $114 800 What is the journal entry to record the inventory shortfall?

A firm uses the perpetual inventory method.To record a sale of inventory on credit will require an entry to record revenue and an entry to record cost of sales.

The accounting cycle for a retailing business begins with the purchase of inventory.

A company using the perpetual inventory system purchased inventory worth $24,000 on credit with terms of 2/10,n/30.Defective inventory of $2000 was returned 2 days later and the accounts were appropriately adjusted.If the invoice is paid within 10 days,the amount of the purchase discount that would be available to the company is:

Which of the following means that the shipment is free on board at the point of shipment and the buyer pays all transportation costs?

Which of the following accounts is used ONLY at the end of the accounting period?

The entry to close Sales discounts and Sales returns and allowances results in a debit to Income summary.

A high rate of inventory turnover indicates which of the following?

What is a purchase return?

FOB shipping point means that the:

Which of the following are the normal balances of Sales,Sales discounts and Sales returns and allowances,respectively?

Thomas Company provided the following particulars for year 2017: $\begin{array} { | l | l | } \hline \text { Cost of sales } & \$ 1,400,000 \\\hline \text { Beginning inventory } & 340,000 \\\hline \text { Ending inventory } & 350,000 \\\hline\end{array}$ Calculate the average number of days that inventory was held by Thomas Company during 2017.(Assume 365 days in a year.Round your intermediate calculations and final answer to two decimal places.)

Which of the following assets does a retailer-but NOT a service business-need?