A Merchandiser Uses a Perpetual Inventory System

question 106

Multiple Choice

A merchandiser uses a perpetual inventory system.The beginning Retained Earnings 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 company declared and paid $25,000 as dividends.The last step in the closing process would include ________.

• A)a debit to Income Summary for $54,000
• B)a credit to Income Summary for $75,000
• C)a debit to Retained Earnings account for $21,000
• D)a debit to Retained Earnings account for $25,000

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Definitions:

Accounting Period

A specific time frame for which financial accounting records are kept, closing with a balance sheet.

Process Cost System

A type of cost system that accumulates costs for each of the various departments within a manufacturing facility.

Job Order

An order for products or services issued by a company to manage production or service tasks as per client requirements.

Customer Specifications

Customer specifications are the detailed descriptions or requirements given by a customer regarding how a product or service should be delivered or executed.