Question 1

A company sold merchandise with a cost of $238 for $440 on account.The seller uses the perpetual inventory system.The entry to record the cost of merchandise sold would include ________.

Accepted Answer

To record the cost of merchandise sold, we need to debit the Cost of Goods Sold account (which represents the cost of the merchandise sold) and credit the Merchandise Inventory account (which represents the cost of the merchandise we still have on hand). The amount to be debited is the cost of the merchandise sold, which is $238 in this case. Therefore, the correct entry is a debit to Cost of Goods Sold and a credit to Merchandise Inventory for $238.

Question 2

Owens Jewelers uses the perpetual inventory system.On April 2,Owens sold merchandise with a cost of $5,500 for $7,000 to a customer on account with terms of 1/15,n/30.Which of the following journal entries correctly records the sales revenue?

Accepted Answer

The answer of Owens Jewelers uses the perpetual inventory system.On...

Question 3

WAXS-D,merchandisers of musical instruments,has provided the following details:

Credit terms are: 4/20,n/45,FOB shipping point.Calculate the net cost of inventory purchased assuming that there are no other inventory-related transactions during the month.

Accepted Answer

D)
Net Cost of Inventory Purchased
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Question 4

Freight out is an addition to the Merchandise Inventory account if the seller uses the perpetual inventory system.

Accepted Answer

Freight out, or shipping costs incurred by the seller to deliver goods to customers, is considered a selling expense and is not added to the Merchandise Inventory account. In the perpetual inventory system, inventory costs include the cost of goods purchased including any freight-in (shipping costs to receive goods) but not freight out.

Question 5

Under the perpetual inventory system,the journal entry to record cost of goods sold:

Accepted Answer

The answer of Under the perpetual inventory system,the journal entry...

Question 6

VB Specialty Foods,a grocery merchandiser,purchased goods and paid transportation to bring them to the company warehouse.The transportation cost is known as ________.

Accepted Answer

The transportation cost paid by VB Specialty Foods to bring the purchased goods to the company warehouse is referred to as "freight in." This cost is added to the cost of goods purchased and is included as part of inventory until the goods are sold. Option A ("freight out") refers to the transportation cost incurred to deliver the goods from the warehouse to the customer, while option B ("selling expense") refers to expenses incurred to promote and sell the goods. Option D ("cost of goods sold") refers to the cost of the products sold during a specific period.

Question 7

A merchandiser,following the perpetual inventory system,has the following transactions during August,2017:
  
Credit terms of invoice are 2/15,n/45.Give journal entries for the above transactions.

Accepted Answer

The answer of A merchandiser,following the perpetual inventory system,has the...

Question 8

Landon Jewelers uses the perpetual inventory system.On April 2,Landon sold merchandise with a cost of $3,500 for $8,000 to a customer on account with terms of 1/15,n/30.The journal entry to record the cost of goods sold would be:

Accepted Answer

A)
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Question 9

Portian Merchandisers has purchased merchandise on account and paid $450 for freight in.Give the journal entry for freight paid.(Assume a perpetual inventory system. )

Accepted Answer

The answer of Portian Merchandisers has purchased merchandise on account...

Question 10

Under the perpetual inventory system,two journal entries are used to record the sales of merchandise.One entry records the Sales Revenue and another entry records the Cost of Goods Sold.

Accepted Answer

Under the perpetual inventory system, every time a sale is made, two journal entries are made - one for recording the sales revenue and another for recording the cost of goods sold.

Question 11

A company has purchased inventory and received an invoice that requires the buyer to pay the transportation costs for delivering the merchandise.The terms are ________.

Accepted Answer

FOB shipping point means that the buyer is responsible for the transportation costs and risks from the shipping point.

Question 12

Under which of the following terms will the buyer be required to pay transportation costs?

Accepted Answer

Under FOB shipping point, the buyer is responsible for transportation costs from the shipping point.

Question 13

Which of the following is true of freight in?

Accepted Answer

Freight in represents the transportation cost incurred by the buyer/importer and is therefore considered a part of the cost of goods purchased. It is not a selling or administrative expense, nor is it the transportation cost on sales.

Question 14

A company purchased inventory for $74,000 from a vendor on account,FOB shipping point,with terms of 3/10,n/30.The company paid the shipper $1,500 cash for freight in.The company paid the vendor nine days after the sale.If there was no beginning inventory,the cost of inventory would be ________.(Assume a perpetual inventory system. )

Accepted Answer

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Question 15

FOB destination refers to a situation where title to goods while in transit belongs to the ________.

Accepted Answer

In FOB destination terms, the seller retains ownership and responsibility for the goods until they are delivered to the buyer's specified location, meaning the title to the goods while in transit belongs to the seller.

Question 16

The term "freight out" refers to ________.

Accepted Answer

Freight out refers to the transportation costs incurred by a company when delivering goods to its customers. These costs are typically included in the cost of goods sold and are deducted from revenue to determine gross profit. Therefore, option D is the best choice. Options A and B refer to the cost of acquiring inventory and are not related to the transportation costs associated with delivering goods. Option C does not accurately describe the concept of freight out as these costs are typically paid in cash.

Question 17

Reid Art Supply Company uses a perpetual inventory system.The company had the following transactions during August 2017:
  
Give journal entries for August 10 and 15.

Accepted Answer

The answer of Reid Art Supply Company uses a perpetual...

Question 18

An amount that a merchandiser earns by selling its inventory is known as sales revenue or sales.

Accepted Answer

This statement is true. Sales revenue is the money earned by a merchandiser through the sale of its inventory.

Question 19

A company purchased inventory for $3,000 from a vendor on account,FOB shipping point,with terms of 2/10,n/30.The company paid the shipper $100 cash for freight in.The company then returned damaged goods worth $200.The invoice was then paid eight days after the purchase.Assuming that there was no beginning inventory balance,the cost of inventory would be ________.(Assume a perpetual inventory system. )

Accepted Answer

B)
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Question 20

A company purchased inventory for $3,000 from a vendor on account,FOB shipping point,with terms of 2/10,n/30.The company paid $100 cash for freight in.The entry to record payment of invoice within 2 days by the purchaser would include ________.(Assume a perpetual inventory system. )

Accepted Answer

Since the terms are FOB shipping point, the buyer is responsible for paying the freight costs. Therefore, the cost of $100 for freight in is added to the cost of the inventory. The invoice amount is $3,000, but the buyer can take advantage of the discount if payment is made within 10 days, which amounts to 2% of $3,000 or $60. Therefore, the entry to record payment within the discount period would be a debit to Accounts Payable for $3,000, a credit to Merchandise Inventory for $60 ($3,000 x 2%), and a credit to Cash for $2,940 ($3,000 - $60 + $100).

Quiz 5: Merchandising Operations