Practice Quiz Retail Transactions 1. ABC Co. began operations on January 1. Please prepare journal entries, where appropriate, for the following transactions during January. Jan 2 Purchased $8,000 merchandise, 2/10, n/30. FOB Shipping Point Jan 4 The responsible party paid the freight bill of $75 Jan 8 Returned $600 of merchandise purchased on Jan 2 receiving credit memo Jan 12 Paid amount owed for January 2 Jan 14 Sold $4,000 of merchandise, 1/10, n/30, FOB Destination. Cost of the merchandise was $1,500 Jan 16 The responsible party paid the freight bill of $50 Jan 24 Collected amount owed from January 14 Jan 29 Sold $2,000 of merchandise, n/30, FOB Shipping Point. Cost of the merchandise was $750 Jan 31 The responsible party paid the freight bill of $50 2. What is the balance in the Inventory account at January 31? 3. Prepare a Multi-step Income Statement for the month of January using the above information and the additional information below: Sales Salaries $800 Property Taxes $300 Insurance Advertising $400 $700 Interest Expense $200 4. What is the advantage of the Multi-step Income Statement format? What additional visibility does this income statement provide to us in terms of different levels of profitability and why is each important in decision making? Please address each level. 5. Why do companies offer payment terms? Why do they offer discounts for early payment? 6. Any evidence of the matching principle in this chapter?
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