ACC 120 Chapter 6

The income statement for ABC Company shows Gross profit of $144,000; Operating expenses of $130,000; and Cost of goods sold of $216,000. What is net sales revenue? Multiple choice question. $490,000 $274,000 $360,000 $246,000

$360,000 Explanation Net sales​ revenue = Cost of goods sold + Gross profit = $216,000 + $144,000 = $360,000 Reason: Net sales revenue - Cost of goods sold = Gross profit. To solve for sales, rearrange the equation as Gross profit + Cost of goods sold = Net sales revenue (= $144,000 + 216,000 = $360,000).

Cost of Goods Sold on the income statement reports the ______. Multiple choice question. cost of merchandise available to sell at the end of the period cost times the quantity of goods sold during the period cost of merchandise purchased during the period amount of cash paid during the period

cost times the quantity of goods sold during the period

Sales discounts should appear in the financial statements as a(n) ______. Multiple choice question. addition to inventory operating expense addition to sales deduction from sales part of current liabilities

deduction from sales

Merchandisers record revenue when they ______.

fulfill their performance obligations by transferring control of the goods to customers

Using a perpetual inventory system, the effect on the accounting equation of purchasing merchandise on account includes a(n) ______. (Check all that apply.) Multiple select question. decrease in stockholders' equity increase in liabilities decrease in assets increase in assets

increase in liabilities increase in assets Includes a debit to inventory and a credit to Accounts payable

True or false: When a company sells different types of products, the income statement will report the Cost of Goods Sold for all of the products in one line item. True false question. True False

true

In which of the following ways does a periodic system differ from a perpetual system? (Check all that apply.) Multiple select question. Cost of Goods Sold will be debited at the time of the sale in a periodic system. Cost of Goods Sold is not updated until the end of the accounting period in a periodic system. Inventory is not updated until the end of the accounting period in a periodic system. Accounts receivable is not updated until the end of the accounting period in a periodic system.

Cost of Goods Sold is not updated until the end of the accounting period in a periodic system. Inventory is not updated until the end of the accounting period in a periodic system.

Which inventory system requires that the inventory account be updated at the time merchandise is sold? Multiple choice question. Both perpetual and periodic systems Periodic system Perpetual system

Perpetual system

What are the two stages of accounting for a purchase discount using the gross method? (Check all that apply.) Multiple select question. The Inventory account is first reduced by the expected discount. The purchase is first recorded at full cost. The Accounts Payable account is later reduced by the discounted amount. The purchase is first recorded at the discounted amount The Inventory account is later reduced if payment is made within the discount period.

The purchase is first recorded at full cost. The Inventory account is later reduced if payment is made within the discount period.

Corporations with high sales volume, such as WalMart, usually have ______. Multiple choice question. high gross profit percentages the same gross profit percentage as high-end retailers low gross profit percentages

low gross profit percentages

A income statement shows how much profit is earned from product sales without being clouded by other operating expenses and separates other items that are not core to the operations of the company. (Enter only one word per blank.)

multistep

If sales returns and allowances are a large dollar amount relative to initial sales revenue, it may mean ______. Multiple choice question. the shipping terms should be changed to FOB destination the shipping terms should be changed to FOB shipping point the discount period is too long the discount period is too short there are product quality issues

there are product quality issues

In which company would you rather invest? Multiple choice question. A company with low gross profit percentage and low sales volume A company with low gross profit percentage and high cost of goods sold A company with high gross profit percentage and high sales volume

A company with high gross profit percentage and high sales volume Reason: A low gross profit percentage can enable a company, such as WalMart, to generate high sales volume which may be desirable. A high cost of goods sold, though, is not desirable because it reduces net income.

Using a perpetual system, purchasing merchandise on account includes a ______. (Check all that apply.) Multiple select question. credit to Accounts Payable debit to Inventory debit to Cost of Goods Sold debit to Purchases credit to Accounts Receivable

credit to Accounts Payable debit to Inventory

Match the type of company with an example 1 Retailer 2Manufacturer

1 Walmart 2 Mattel, Goodyear

The journal entry to record taking a discount when paying for goods previously purchased on account and recorded using the gross method includes a ______. (Check all that apply.) Multiple select question. credit to a liability account debit to a liability account credit to two asset accounts debit to an asset account

1. Debit to Accounts Payable for the original cost 2. credit to Inventory for the discount amount 3. credit to Cash for the amount paid debit to a liability account credit to two asset accounts

Place the income statement line items in the proper order from the top to bottom.

1. Sales Revenue, gross 2. Sales Returns (allowances and discounts) 3. Net Sales, sales revenue 4. Cost of Goods Sold 5. Gross Profit

ABC Company had beginning inventory of $20,000, purchases of $81,000, and ending inventory of $24,000. Sales revenue was $160,000. What is ABC's gross profit percentage? Multiple choice question. 52% 10% 88% 47%

52% Reason: Cost of goods sold equals $77,000 (= $20,000 + 81,000 - 24,000). Gross profit percentage equals 52% (=$160,000 - $77,000)/$160,000.

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 ______. Multiple choice question. 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 Cash of $1,000 and a credit to Sales Revenue of $1,000 Inventory of $600 and a credit to Cash of $600; a debit to Cost of Goods Sold of $600 and a credit to Sales Revenue of $600 Cash of $1,000 and a credit to Deferred Revenue of $1,000; a debit to Cost of Goods Sold of $600 and a credit to Accounts Payable of $600

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.

In which of these situations would a merchandiser record revenue? (Select all that apply.) Multiple select question. Goods were sent FOB Shipping Point but have not yet arrived at the buyer's place of business. The customer paid for the goods in advance of the obligation being fulfilled and before the goods have been transferred to the customer. Goods were sent FOB Destination but have not yet arrived at the buyer's place of business. 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. The obligation has been fulfilled and control of the goods has been transferred to the customer.

Which line items are found on a multi-step but not on a single-step income statement. (Check all that apply.) Multiple select question. Gross Profit Income from Operations Cost of Goods Sold Net Income Net Sales

Gross Profit Income from Operations

Which of the following are reported on the income statement? (Check all that apply.) Multiple select question. Inventory Gross Profit Sales Revenue Cost of Goods Sold Goods Available to Sell

Gross Profit Sales Revenue Cost of Goods Sold

Service Company Retailers Wholesaler Manufacturing Company

Service Company Will typically not have Inventory on its balance sheet or Cost of Goods Sold on its income statement correct Toggle Button Unavailable. Will typically not have Inventory on its balance sheet or Cost of Goods Sold on its income statement Retailers Retailers Drop zone Buys goods and sells them directly to individuals correct Toggle Button Unavailable. Buys goods and sells them directly to individuals Wholesaler Wholesaler Drop zone Buys goods and sells them to other companies that will then sell them to individuals correct Toggle Button Unavailable. Buys goods and sells them to other companies that will then sell them to individuals Manufacturing Company Manufacturing Company Drop zone Makes the finished goods correct Toggle Button Unavailable. Makes the finished goods

True or false: Gross Profit is a stockholders' equity account and is credited when goods are delivered to customers. True false question. True False

False Reason: Gross Profit is a subtotal, not an account, found on the income statement.

____companies sell goods that have been obtained from other companies. (Enter one word per blank.)

Merchandising or retail

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

What does the sales discount 2/10, n/30 mean? Multiple choice question. You can take a 10% discount if you pay within 2 days, or the full amount is due within 30 days. For every day the bill is overdue past 10 days, you will be charged 2% interest. You can take a 2% discount if you pay within 10 days, or the full amount is due within 30 days. You can take a 10% discount if you pay within 2 days, or a 30% discount if you pay today.

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