Question 1

A merchandiser uses a perpetual inventory system. The beginning Capital balance of a merchandiser was $100,000. During the year, sales revenue amounted to $75,000, sales returns and allowances were $1,000, sales discounts were $3,000, cost of goods sold was $40,000, and all other expenses totaled $10,000. The total withdrawals amounted to $25,000. The closing balance of Capital would be:

Accepted Answer

To calculate the closing balance of Capital, we need to use the following formula:
Beginning Capital + Net Income (or - Net Loss) - Withdrawals = Closing Capital

Beginning Capital = $100,000
Net Sales = $75,000 - $1,000 - $3,000 = $71,000
Cost of Goods Sold = $40,000
Expenses = $10,000
Net Income = Net Sales - Cost of Goods Sold - Expenses = $21,000
Withdrawals = $25,000
Therefore, Closing Capital = $100,000 + $21,000 - $25,000 = $96,000. 
So, the correct answer is B.

Question 2

The net income calculated using both the single and multi-step formats of income statement is always the same.

Accepted Answer

Both single and multi-step income statements use the same formula for calculating net income, which is total revenues minus total expenses. Therefore, the net income calculated using both formats should be the same.

Question 3

Sales revenue of a merchandiser amounted to $20,000, sales returns and allowances amounted to $2,500, and sales discounts of $700. The merchandiser uses a perpetual inventory system. The first entry in the closing process would include:

Accepted Answer

The answer of Sales revenue of a merchandiser amounted to...

Question 4

An adjusted trial balance is given below.  What will be the final balance in the Smith, Capital account after recording the closing entries?

Accepted Answer

To find the final balance in the Smith, Capital account after recording the closing entries, we need to look at the credit balance in the account in the adjusted trial balance, which is $37,800. This represents the total amount of net income earned by the company during the period, which is transferred to the capital account through the closing entries. Therefore, the final balance in the Smith, Capital account after recording the closing entries will be $37,800.

Question 5

The entry to close Cost of Goods Sold includes a debit to Income summary.

Accepted Answer

Closing the Cost of Goods Sold account involves transferring its balance to the Income Summary account, which is done by debiting the Income Summary account and crediting the Cost of Goods Sold account.

Question 6

Operating income is gross profit minus operating expenses.

Accepted Answer

This is the definition of operating income.

Question 7

The Income Summary account has a credit balance of $25,000 after the revenue and expense accounts have been closed. Which of the following is to be credited to close the Income Summary account?

Accepted Answer

The Income Summary account is closed to the Owner's Capital account to transfer the net income or loss to the owner's equity. Since the Income Summary has a credit balance, it indicates a net income, which should be credited to the Owner's Capital account.

Question 8

The inventory account balance is $50,000. An actual count of inventory reveals that actual inventory is $43,000. Which of the following would be included in the adjusting entry? (Assume a perpetual inventory system)

Accepted Answer

Since the actual inventory is less than the recorded inventory, the adjusting entry will have to reduce the Merchandise Inventory account by $7,000 (the difference between the recorded and actual inventory). This is accomplished by crediting Merchandise Inventory for $7,000. The corresponding debit must go to an expense account, and since this is a perpetual inventory system, the expense account is Cost of Goods Sold. Therefore, choice D is the correct answer.

Question 9

The general ledger shows a balance of $67,900 in the Merchandise Inventory account at the end of the period. The physical inventory count shows inventory of $65,300. The adjusting entry includes a:

Accepted Answer

The adjusting entry needs to adjust the Merchandise Inventory account to reflect the actual physical inventory count. Since the physical inventory count is lower than the balance in the Merchandise Inventory account, a debit to Cost of Goods Sold and a credit to Merchandise Inventory is needed to lower the balance in Merchandise Inventory by the difference ($2,600). This reflects the cost of the products that were sold or lost but not yet recorded in the accounting system.

Question 10

An adjusted trial balance of a merchandiser is given below.  Provide journal entries to close the Income Summary account and the Smith, Withdrawals account.

Accepted Answer

The answer of An adjusted trial balance of a merchandiser...

Question 11

A merchandiser uses a perpetual inventory system. The beginning Capital balance of a merchandiser was $100,000. During the year, sales revenue amounted to $75,000, sales returns and allowances were $1,000, sales discounts were $3,000, cost of goods sold was $40,000, and all other expenses totaled $10,000. The total withdrawals amounted to $25,000.The last step in the closing process would include:

Accepted Answer

The answer of A merchandiser uses a perpetual inventory system....

Question 12

Cost of goods sold appears on a multi-step income statement but not on a single-step income statement.

Accepted Answer

Cost of goods sold appears on both multi-step and single-step income statements, as it is a crucial component in calculating gross profit and net income.

Question 13

If a physical count of inventory indicates that the Merchandise Inventory account is overstated, an additional adjusting entry is required to record the difference.

Accepted Answer

If the physical count shows that the Merchandise Inventory account is overstated, it means that the balance in the account is higher than the actual value of the inventory on hand. In this case, an adjusting entry is required to decrease the balance in the Merchandise Inventory account and record the difference as a loss or expense.

Question 14

The trial balance of a merchandiser is as follows. A physical count of inventory at the end of the accounting year reveals $28,000 of inventory on hand. (Assume a perpetual inventory system)  Give journal entry to record the inventory shrinkage.

Accepted Answer

The answer of The trial balance of a merchandiser is...

Question 15

An adjusted trial balance of a merchandiser is given below.  Give journal entry to close the expense accounts and contra revenue accounts with a debit balance.

Accepted Answer

The answer of An adjusted trial balance of a merchandiser...

Question 16

The Merchandise Inventory account of a company shows a balance of $50,000 but a physical count of inventory shows $48,000. Which of the following entries is required to record the shrinkage? (Assume a perpetual inventory system)

Accepted Answer

The answer of The Merchandise Inventory account of a company...

Question 17

A merchandiser uses a perpetual inventory system. The third step in the process of closing the accounts of a merchandiser is to:

Accepted Answer

The answer of A merchandiser uses a perpetual inventory system....

Question 18

The revenue, expenses, Sales Returns and Allowances and Sales Discounts will be closed via the:

Accepted Answer

The revenue, expenses, Sales Returns and Allowances and Sales Discounts will be closed via the Income Summary account, which ultimately closes to the Owner's Name, Capital account.

Question 19

An adjusted trial balance of a merchandiser is given below.  Give the journal entry to close the Sales Revenue account.

Accepted Answer

The answer of An adjusted trial balance of a merchandiser...

Question 20

A merchandiser had sales returns and allowances of $300, sales discounts of $700, cost of goods sold of $12,000, and all other expenses of $4,500. The merchandiser uses a perpetual inventory system. The second entry in the closing process would include:

Accepted Answer

The answer of A merchandiser had sales returns and allowances...

Quiz 5: Merchandising Operations

The net income calculated using both the single and multi-step formats of income statement is always the same.

Sales revenue of a merchandiser amounted to $20,000, sales returns and allowances amounted to $2,500, and sales discounts of $700. The merchandiser uses a perpetual inventory system. The first entry in the closing process would include:

An adjusted trial balance is given below. What will be the final balance in the Smith, Capital account after recording the closing entries?

The entry to close Cost of Goods Sold includes a debit to Income summary.

Operating income is gross profit minus operating expenses.

The Income Summary account has a credit balance of $25,000 after the revenue and expense accounts have been closed. Which of the following is to be credited to close the Income Summary account?

The inventory account balance is $50,000. An actual count of inventory reveals that actual inventory is $43,000. Which of the following would be included in the adjusting entry? (Assume a perpetual inventory system)

The general ledger shows a balance of $67,900 in the Merchandise Inventory account at the end of the period. The physical inventory count shows inventory of $65,300. The adjusting entry includes a:

An adjusted trial balance of a merchandiser is given below. Provide journal entries to close the Income Summary account and the Smith, Withdrawals account.

Cost of goods sold appears on a multi-step income statement but not on a single-step income statement.

If a physical count of inventory indicates that the Merchandise Inventory account is overstated, an additional adjusting entry is required to record the difference.

The trial balance of a merchandiser is as follows. A physical count of inventory at the end of the accounting year reveals $28,000 of inventory on hand. (Assume a perpetual inventory system) Give journal entry to record the inventory shrinkage.

An adjusted trial balance of a merchandiser is given below. Give journal entry to close the expense accounts and contra revenue accounts with a debit balance.

The Merchandise Inventory account of a company shows a balance of $50,000 but a physical count of inventory shows $48,000. Which of the following entries is required to record the shrinkage? (Assume a perpetual inventory system)

A merchandiser uses a perpetual inventory system. The third step in the process of closing the accounts of a merchandiser is to:

The revenue, expenses, Sales Returns and Allowances and Sales Discounts will be closed via the:

An adjusted trial balance of a merchandiser is given below. Give the journal entry to close the Sales Revenue account.

A merchandiser had sales returns and allowances of $300, sales discounts of $700, cost of goods sold of $12,000, and all other expenses of $4,500. The merchandiser uses a perpetual inventory system. The second entry in the closing process would include: