A Merchandiser Uses a Perpetual Inventory System

question 12

Multiple Choice

A merchandiser uses a perpetual inventory system.The beginning Retained Earnings balance of the merchandiser was $110,000.During the year,Sales Revenue amounted to $80,000,Sales Returns and Allowances were $2,000,Sales Discounts were $4,000,Cost of Goods Sold was $40,000,and all other expenses totaled $12,000.The company declared and paid $25,000 as dividends.The closing balance of Retained Earnings would be ________.

• A)$111,000
• B)$107,000
• C)$98,000
• D)$110,000

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Definitions:

Net Sales

Total sales revenue minus returns, allowances, and discounts.

Gross Profit

Gross profit refers to the difference between revenue and the cost of goods sold before administrative, overhead, and other expenses.

Receivables Turnover Ratio

A financial metric that measures a company's effectiveness in extending credit and collecting debts, calculated by dividing net credit sales by the average accounts receivable.

Net Sales

The amount of sales revenue remaining after deducting returns, allowances for damaged or missing goods, and discounts.