Chapter 4: Accounting for Merchandising Operations

A company has sales of $763,000 and cost of goods sold of $306,000. Its gross profit equals:

• $(457,000).

• $763,000.

• $306,000.

• $457,000.

• $1,069,000.

A company purchased $3,100 of merchandise on July 5 with terms 3/10, n/30. On July 7, it returned $340 worth of merchandise. On July 8, it paid the full amount due. The amount of the cash paid on July 8 equals:

• $340.

• $2,667.

• $2,677.

• $2,760.

• $3,100.

A company purchased $3,700 of merchandise on July 5 with terms 2/10, n/30. On July 7, it returned $850 worth of merchandise. On July 12, 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 payment on July 12 is:

• Debit Merchandise Inventory $2,850; credit Cash $2,850.

• Debit Cash $2,850; credit Accounts Payable $2,850.

• Debit Accounts Payable $2,850; credit Merchandise Inventory $57; credit Cash $2,793.

• Debit Accounts Payable $3,700; credit Cash $3,700.

• Debit Accounts Payable $2,850; credit Cash $2,850.

A company purchased $3,300 worth of merchandise. Transportation costs were an additional $290. The company returned $230 worth of merchandise and then paid the invoice within the 3% cash discount period. The total cost of this merchandise is:

• $3,240.00.

• $3,093.00.

• $3,261.00.

• $3,267.90.

• $3,360.00.

Garza Company had sales of $150,200, sales discounts of $2,250, and sales returns of $3,605. Garza Company's net sales equals:

• $5,855.

• $144,345.

• $147,950.

• $150,200.

• $156,055.

On February 3, Smart Company sold merchandise in the amount of $4,300 to Truman Company, with credit terms of 3/10, n/30. The cost of the items sold is $2,970. Smart uses the perpetual inventory system and the gross method. Truman pays the invoice on February 8, and takes the appropriate discount. The journal entry that Smart makes on February 8 is:

• Cash 2,970

  Accounts receivable 2,970

• Cash 4,300

  Accounts receivable 4,300

• Cash 4,220

  Sales discounts 89

  Credit Accounts receivable 4,309

• Cash 2,890

  Accounts receivable 2,890

• Cash 4,171

  Sales discounts 129

  Credit Accounts receivable 4,300

On September 12, Vander Company sold merchandise in the amount of $6,600 to Jepson Company, with credit terms of 3/10, n/30. The cost of the items sold is $4,800. Vander uses the periodic inventory system and the gross method of accounting for sales. The journal entry or entries that Vander will make on September 12 is:

• Sales 6,600

  Accounts receivable 6,600

• Sales 6,600

  Credit Accounts receivable 6,600

  Cost of goods sold 4,800

  Credit Merchandise Inventory 4,800

• Accounts receivable 6,600

  Sales 6,600

• Accounts receivable 6,600

  Credit Sales 6,600

  Cost of goods sold 4,800

  Credit Merchandise Inventory 4,800

• Accounts receivable 4,800

  Sales 4,800

On September 12, Vander Company sold merchandise in the amount of $7,400 to Jepson Company, with credit terms of 3/10, n/30. The cost of the items sold is $4,800. 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:

• Purchases 7,178

  Cash 7,178

• Accounts payable 7,400

  Credit Merchandise inventory 222

  Credit Cash 7,178

• Accounts payable 7,400

  Credit Purchases discounts 222

  Credit Cash 7,178

• Cash 7,178

  Accounts receivable 7,178

• Cash 7,178

  Purchases discounts 222

  Credit Accounts payable 7,400

Cushman Company had $830,000 in sales, sales discounts of $12,450, sales returns and allowances of $18,675, cost of goods sold of $394,250, and $285,520 in operating expenses. Net income equals:

• $798,875.

• $150,230.

• $404,625.

• $119,105.

• $181,355.

A company purchased $8,800 of merchandise on June 15 with terms of 3/10, n/45. On June 20, it returned $440 of that merchandise. On June 24, it paid the balance owed for the merchandise taking any discount it was entitled to. The cash paid on June 24 equals:

• $8,109.

• $8,536.

• $8,800.

• $8,360.

• $8,153.