Accounting Chapter 6

In Order

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

The goods available for sale for the period equals

BI+Purchases

Net Sales on an income statement equals

Sales Revenue (gross) minus Sales Returns and Allowances minus Sales Revenue

Breyer Company bought inventory from Solar Company, FOB destination. On December 31, the last day of the accounting year, the goods were on a truck owned by Common Carrier, Inc., and not expected to arrive until January 2. Which company should include these goods in its December 31 inventory?

Solar

In a perpetual inventory system, the buyer of merchandise with the shipping terms FOB shipping point will ______.

add the transportation costs to its Inventory account

Sales Returns and Allowances are reported on the ______.

income statement

Corporations with high sales volume, such as WalMart, usually have ______.

low gross profit percentages

Sales Revenue reports the

sales price times the quantity of goods sold

Gross Profit

sales revenue - cost of goods sold

If sales returns and allowances are a large dollar amount relative to initial sales revenue, it may mean ______.

there are product quality issues

Inventory began was $30,000. During the period the company purchased $61,000 of merchandise. At the end of the period, inventory was $22,000. If the gross profit percentage was 40%, what was sales revenue?

$115,000

Which of the following are found on the income statement of a merchandiser?

Cost of Goods Sold Sales Revenue Gross Profit

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

On May 1, Doormart received an order from a customer. The goods were shipped FOB shipping point on May 3. The customer received the goods on May 5 and paid for the merchandise on June 1. When should Doormart record the sale?

May 3rd

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.

Multistep

In which of these situations would a merchandiser record revenue?

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.

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

Goods Available for Sale will ______ when sold.

become Cost of Goods Sold on the income statement

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

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

received by the customer

A multistep income statement is useful to financial statement users because it ______.

separates income statement items into meaningful components separates cost of goods sold from other operating expenses, which allows the calculation of gross profit

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

shipped from the seller's place of business