KAB Inc, a Small Retail Store, Had the Following Results for for May

question 25

Multiple Choice

KAB Inc., a small retail store, had the following results for May. The budgets for June and July are also given.
Sales are collected 80% in the month of the sale and the balance in the month following the sale. (There are no bad debts.) The goods that are sold are purchased in the month prior to sale. Suppliers of the goods are paid in the month following the sale. The "selling and administrative expenses" are paid in the month of the sale.
-The amount of cash collected during June should be:

• A) $32,000
• B) $40,000
• C) $40,400
• D) $41,000

Calculate cost of goods sold under a periodic inventory system.

Identify various discounts and allowances in merchandising accounting.

Calculate and analyze gross profit.

Explain the differences in financial statement preparation between service and merchandising businesses.

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