mwer general questions about erchandisers ES.1 (LO 1) Mr. Etemadi has prepared the following list of statements about service companies and merchandisers. 1. Measuring net income for a merchandiser is conceptually the same as for a service company. 2. For a merchandiser, sales less operating expenses is called gross profit. 3. For a merchandiser, the primary source of revenues is the sale of inventory 4. Sales salaries and wages is an example of an operating expense. 5. The operating cycle of a merchandiser is the same as that of a service company 6. In a perpetual inventory system, no detailed inventory records of goods on hand are maintained. 7. In a periodic inventory system, the cost of goods sold is determined only at the end of the account- ing period. 8. A periodic inventory system provides better control over inventories than a perpetual system Instructions Identify each statement as true or false. If false, indicate how to correct the statement. ournalze purchase transoctions, ES.2 (LO 2) Information related to Harwick Co. is presented below. 1. On April 5, purchased merchandise on account from Botham Company for $23,000, terms 2/10, net/30, FOB shipping point 2. On April 6, paid freight costs of $900 on merchandise purchased from Botham. 3. On April 7, purchased equipment on account for $26,000. 4. On April 8. returned damaged merchandise to Botham Company and was granted a $3,000 credit for returned merchandise. 5. On April 15. paid the amount duc to Botham Company in full. Instructions a. Prepare the journal entries to record these transactions on the books of Harwick Co. under a per- petual inventory system. b. Assume that Harwick Co. paid the balance due to Botham Company on May 4 instead of April 15 Prepare the journal entry to record this payment. E5.3 (LO 2,3) On September 1, Boylan Office Supply had an inventory of 30 calculators at a cost of $18 cach. The company uses a perpetual inventory system. During September, the following transactions occurred Journalize perpetual inventory entries Sept Purchased with cash 80 calculators at $20 each from Guthrie Co. Paid freight of $80 on calculators purchased from Guthrie Co Returned 3 calculators to Guthrie Co. for 563 cash (including freight) because they did not meet specifications. Sold 26 calculators costing $21 (inclading freight) for $31 each on account to Lee Book 10 12 Store, terms n/30. Granted credit of $31 to Lee Book Store for the return of one calculator that was not ondemd 14 Sold 30 calculators costing $21 for $32 each on account to Orr's Card Shop, terms n/30 20 Instructions Journalize the September transactions ES.4 (LO 2, 3) On June 10. Tuzun Company purchased 58,000 of merchandise on account from Epps Company, FOB shipping point, terms 2/10, n30. Tuzun pays the freight costs of $400 on June 11. Damaged goods totaling $300 are returned to Epps for credit on June 12. The fair value of these eoods is $70. On June 19, Tuzun pays Epps Company in full, less the purchase discount. Both companies use a perpetual inventory system. Prepare purchase and sale entries Instructions a. Prepare separate entries for each transaction on the books of Tuzun Company b. Prepare separate entries for each transaction for Epps Company. The merchandise purchased bu Tuzun on June 10 had cost Epps $4,800
