AC 210 Chapter 6 learnsmart

Inventory consists of the purchase price ______.

plus freight-in

Beginning inventory was $5,000. During the month, the company purchased an additional $25,000 of inventory. At the end of the month, ending inventory was $10,000. Cost of Goods sold equals ______.

$20,000

Bijoux Company has Net Sales of $40,000; Beginning Inventory of $5,000; Purchases of $25,000 and Ending Inventory of $7,000. Cost of Goods Sold equals ______.

$23,000

Sales Returns and Allowances are reported on the ______.

Income statement

Why is inventory reported as a current asset?

Inventory is reported as a current asset because it will be converted into cash within a year of the balance sheet date.

______companies sell goods that they have produced. (Enter one word per blank.)

Manufacturing

FOB destination means that goods are owned by the buyer as soon as ______.

they arrive at the buyer's place of business

Gotit Inc. paid an invoice for $1,000 of merchandise plus shipping of $100. If the terms were 2/10, n/30, and the bill was paid within one week of receipt, how much cash was paid?

1,080

Alpha Company bought inventory from Omega Company, FOB shipping point. On December 31, the last day of the accounting year, the goods were on a truck owned by Theta, Inc., exactly half-way between Alpha and Omega. Which company should include these goods in its December 31 inventory?

Alpha

ABC Corp. sells a product for $1,000 cash that cost $600. The journal entry(ies) for this transaction using a perpetual inventory system include a debit to ______.

Cash of $1,000 and a credit to Sales Revenue of $1,000; a debit to Cost of Goods Sold of $600 and a credit to Inventory of $600

Which of the following are reported on the income statement? (Check all that apply.)

Cost of Goods Sold Sales Revenue Gross Profit

Inventory Sales Revenue Cost of Goods Sold Gross Profit

Current asset on the balance sheet available for sale Selling price times the quantity sold Cost times the quantity sold A subtotal on the income statement and is the amount earned from adding value to the inventory sold

Every merchandise sale has 2 components which require an entry in a perpetual inventory system. Select these two components given the sale was made on account to a customer.

Debit Accounts Receivable and credit Sales Revenue in the amount of the selling price times the quantity sold Debit Cost of Goods Sold and credit Inventory in the amount of the cost times the quantity sold

The journal entry to record the payment for merchandise previously purchased on account will cause stockholders' equity to ______.

Remain unchanged

Which of the following items are netted against Sales Revenue to arrive at Net Sales (Sales Revenue to net sales)? (Select all that apply.)

Sales Allowances Sales Returns Sales Discounts

Which of the following are found on the income statement of a merchandiser? (Check all that apply.)

Sales Revenue Cost of Goods Sold Gross Profit

Which of these will require a credit to the inventory account in a perpetual inventory system? (Check all that apply.)

Selling inventory for cash Selling inventory on account

Acme Enterprises, which uses a perpetual inventory system, recorded a debit to Sales Returns & Allowances and a credit to Accounts Receivable. (No other accounts were affected.) What business event must have taken place?

The customer received a damaged product, but kept the product and asked for a reduction in the price.

In which of these situations would a merchandiser record revenue? (Select all that apply.)

The obligation has been fulfilled and control of the goods has been transferred to the customer. Goods were sent FOB Shipping Point but have not yet arrived at the buyer's place of business.

What does the sales discount 2/10, n/30 mean?

You can take a 2% discount if you pay within 10 days, or the full amount is due within 30 days.

XYZ's journal entry to record the return of merchandise previously purchased on account by XYZ was recorded by debiting Inventory and crediting Accounts Payable. As a result of this entry, ______. (Select all that apply.)

assets will be overstated liabilities will be overstated

Berkley Company had beginning inventory of $4,000 and purchases of $20,000. If half of its inventory is sold, Berkley's total goods available for sale for the period will ______.

be split between cost of goods sold and ending inventory

Goods Available for Sale will ______ when sold.

become Cost of Goods Sold on the income statement

The Cost of Goods Sold equation is ______.

beginning inventory + purchases - ending inventory

Sales Returns & Allowances is a ______ account and is ______ when goods are returned by customers for a refund.

contra-revenue; debited

Under a perpetual inventory system, the entry to record the return of goods you had previously purchased on account was recorded with a debit to Accounts Payable and a credit to Inventory. This entry is ______.

correct

The journal entry to record the payment for merchandise previously purchased on account includes a ______. (Select all that apply.)

credit to Cash debit to Accounts Payable

When using the gross method, the journal entry to record taking a discount when paying for goods previously purchased on account includes a ______. (Check all that apply.)

credit to Cash for the amount paid credit to Inventory for the discount amount debit to Accounts Payable for the original cost

Inventory is reported as a(n) ______ on the ______.

current asset; balance sheet only

Using a perpetual inventory system, the entry to record the return of goods you previously purchased on account includes a ______. (Check all that apply and answer from the viewpoint of the buyer.)

debit to Accounts Payable credit to Inventory

In a perpetual system, the entry to record a purchase of merchandise on account includes a ______. (Check all that apply.)

debit to Inventory credit to Accounts Payable

Sales discounts should appear in the financial statements as a(n) ______.

deduction from sales

FOB ______ is the term used when ownership of the goods transfers to a buyer when the goods arrive at the buyer's place of business.

destination

Boopsie Agin, the company's bookkeeper, recorded the purchase of merchandise on account with a debit to Cost of Goods Sold and a credit to Cash. As a result, ______. (Check all that apply.)

liabilities are understated stockholders' equity is understated assets are understated

If a seller sells its merchandise with the shipping terms FOB destination, it credits Revenue when the merchandise is _______.

received by the customer

Sales returns and allowances ______. (Select all that apply.)

reduce the amount the seller expects to receive from customers are adjusted for at the end of the accounting period for estimated returns and allowance expected to occur in the following months are typically recorded after the initial sale when the actual return or allowance occurs

Sales Revenue reports the ______.

sales price times the quantity of goods sold

FOB ______ is the term used when ownership of the goods transfers to a buyer as soon as the goods leave the seller's place of business.

shipping point

To determine cost of goods sold for the period requires ______.

subtracting ending inventory from the goods available to sell, which is the beginning inventory plus purchases