Accounting Chapter 6

gross profit

subtotal on the income statement and is the amount earned from adding value to the inventory sold

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

the cost of goods sold is included in one line together. true

Beyer Company bought inventory from Sellar Company, FOB destination. On December 31, the last day of the accounting year, the goods were on a truck owned by Common Carrier, Inc., in transit between Beyer and Sellar. Which company should include these goods in its December 31 inventory

Sellar

FOB destination

Situation in which the buyer takes ownership (title) at the delivery destination point and the seller pays the freight

Operating Cycle

The time span during which cash is paid for goods and services, which are then sold to customers from whom the business collects cash.

Cost of Goods Sold

cost x quantity sold

inventory

current asset intended to be sold on balance sheet

The entry to record a sales return that results in the issuing of a gift card is recorded with a debit to Sales Revenue and a credit to ____ _____ and also a debit to _____ and a credit to Cost of Goods Sold.

deferred revenue and inventory

In a perpetual inventory system, the journal entry to record the payment of cash for the shipping costs of purchased merchandise will cause ______.

one asset to increase and another asset to decrease

Sales Revenue

selling price x quantity sold

Which of the following should be debited to Inventory?

- Freight-in- purchases of merchandise on account

Sales returns and allowances ___________.

- are typically recorded after the initial sale when the actual return or allowance occurs - 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

XYZ's journal entry to record the 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, ________.

-assests will be overstated-liabilities will be overstated

Put the 5-step revenue model for a bundle sale in its proper order by placing the 1st step at the top.

1. Identify the contract 2. Identify the seller's performance obligations 3. Determine the transaction price 4. Allocate the transaction price to each performance obligation in the bundle set 5. Recognize revenue when (or as) each performance obligation is satisfied

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

1. Sales Revenue 2. Sales Returns, Allowances and Discounts 3. Net Sales 4. Cost of Goods Sold 5. Gross Profit

after performing a physical count of inventory at the end of the accounting period, it was discovered that the amount of inventory on hand was less than the accounting records reported. The entry to record this inventory shrinkage includes:

1. credit to Inventory and debit to goods sold.

Match the description for each part of the purchase discount 2/10,n/30 2 10 30 when the full amount is due the discount period discount percentage

2: discount percentage 10: the discount period 30: when the full amount is due

Bijoux Company Has Sales Of $40,000, Beginning Inventory Of $5,000, Purchases Of $25,000, And Ending Inventory Of $7,000. The goods available during the sale period

30,000= 25k+5k

XYZ Company sold merchandise for $5,000 with payment in terms of 2/10,n/30. If the customer pays within the discount period and takes the discount, XYZ will receive:

4900

In which of these situations would a merchandiser record revenue?

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

FOB Shipping Point (free on board)

The seller pays only the cost of delivering the products to the transportation company

Using a perpetual inventory system, the journal entry to record a sale on account will include a ______.

Using a perpetual inventory system, the journal entry to record a sale on account will include a ______.

beginning inventory + purchases - ending inventory

cost of goods sold on the income statement

accounts payable is:

credited for purchases made on account; debited for debts paid off

supplies

current asset used internally not intended to be sold

inventory is reported as a __ on the ___

current asset; balance sheet

FOB buyer destination means that

goods are owned by the buyer as soon as they arrive at the buyers place of business.

the cost of inventory sold is reported on the

income statement and not the balance sheet.

In a perpetual system, the (blank) account is debited when a company purchases merchandise on account.

inventory

Which line item would be found on a merchandiser's balance sheet and not on a service firm's?

inventory

under ____ the inventory system, inventory records are updated only at the of the accounting period.

periodic

A benefit of the _____ inventory system is that inventory shrinkage from theft, fraud and error is able to be estimated.

perpetual

Which inventory system records a change in the Inventory account every time goods are bought, sold or returned?

perpetual

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

remain unchanged

Surfshack corps. buys surfboards, wetsuits, and surf wax from rip to shreds inc. for sale to consumers. What type of company is surfshack corp?

retail merchandiser

Purchase ________ and allowances are accounted for with a credit to Inventory and a debit to Cash or Accounts Payable.

returns

Which line item would be found on a service firm's income sheet and not on a merchandiser's?

service revenue

How should the seller of a bundle sale for 8,000 be recorded when the sale involves the delivery of a copier machine and a one year service agreement?The seller must _____ and recognize the revenue _____.

split the 8,000 between the product and service contract; for the product when delivered and the service when performed