Acct Ch 6

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 for sale for the period equals:

$30,000

Periodic REcords

a. record purchases b. record sales (but not cost of goods sold) c. record end of period adjustments -count the units on hand -compute the dollar valuation of the ending inventory - compute and record the cost of goods sold d. transfer beginnning inventory and net purchases to cost of goods sold e. adjust the cost of goods sold by subtracting the amount of the ending inventory still on hand

Give an example of journal entires to accounts for a sale

Accounts Receivable Debit 1000 Sales Revenue Credit 1000 Cost of Goods Sold Debit 700 Inventory Credit 700

Cost of Goods Available for Sale

Beg Inventory + Purchases + Freight-in - Purchase returns and allowances - purchase discounts = Net purchases Net Purchases + Beginning Inventory = Cost of Goods Available for Sale

Summary of journal entry for goods returned on account

Buyer: Accounts Payable debit cost inventory credit cost seller: sales returns/allowances debit sp accounts receivable credit sp inventory debit cost cost of goods sold credit cost

Example of journal entry for sale with sales discount

Cash Debit 980 Sales Discount Debit 20 Accounts Receivable 1000

Cost of Goods Sold Formula

Cost of Goods Sold = Beginning Inventory + Purchases - Ending Inventory

In perpetual inventory system the entry to record the sale of merchandise to a customer on account would include a:

Debit to Accounts Receivable; Credit to Sales Revenue; Debit to Cost of Goods Sold; Credit to Inventory

Gross Profit Formula

Gross Profit = Net Sales - Cost of Goods Sold

Gross Profit Percentage Formula

Gross Profit Percentage = (Net Sales - CGS / Net Sales) x 100

In which of the following ways does the periodic inventory system differ for the perpetual inventory system?

Inventory is not updated until the end of the accounting period; Cost of Goods Sold is not updated until the end of the accounting period.

Summary of Journal Entries for Good Delivered

Purchase(buyer): Inventory Debit:Cost Accounts Payable Credit: cost Sale(selleR): Accounts Receivable Debit SP Sales Revenue Credit SP Cost of goods Sold Debit Cost Inventory Credit Cost

Summary of Journal Entries for Goods Ordered

Purchase(buyer):No transaction;no journal entry Sale (seller): No transaction; no journal entry

summary apprevication

SP = Selling Price, SP% = Selling price x % discount, Cost % = Cost x % Discount, Paid = Net cash paid(after discount)

Selling Price

Sales price is an increase in Sales Revenue and a corresponding increase in either cash or accounts receivable

Which items debit inventory and credit inventory?

debit: purchases, freight-in, and goods available Credit: purchase returns, purchase discounts

Sales discounts should appear in the financial statements as a:

deduction from sales

Net Sales on income statement equals Sales Revenue

less sales returns and allowances less sales discounts

periodic inventory system

maintain separate accounts for purchases transportation and so on

perpetual inventory system

maintains an up to date balance in the inventory account at all times

Multistep income statement

net sales/ cost of goods sold/ gross profit/ selling, general and admin expenses/ income from operations/ other revenues / income before income tax expense/ income tax expense/ net income

multistep income statement

presents important subtotals such as gross profit, to help distinguish core operating results from other less significant items that affect net income

In the periodic system for cost of goods to be updated which of the following must occur

take a physical count of inventory, compute cost of goods sold by subtracting inventory from goods available for sale

Gross Profit Percentage

tells you the percentage of profit earned on each dollar of sales after considering the cost of products sold. A higher ratio means that greater profit is available to cover operating and other expenses.

Cost

the cost that incurred to initially buy the merchandise is removed from inventory and reported as an expense called cost of goods sold

FOB Shipping Point

the sale is recorded when the goods leave the sellers shipping department

FOB Destination

the sale is recorded when the goods reach their destination (the customer)

gross profit

also called gross sales minus cost of goods sold. It is a subtotal, not an account

perpetual records assets liabilties and se

assets: inventory, acct receivable, inventory liabilities: accounts payable SE: sales revenue, cost of goods sold

Periodic records assets liabilities and se

assets: purchases+, acct receivable, inventory, purchases-, inventory liabilities: accounts payable se: sales revenue, cost of goods soles -, cost of goods sold +

allowance granted (on account) journal entry summary

buyer: Accounts payable debit cost Inventory credit cost seller: Sales returns allowances debit sp accounts receivable credit paid

sumary for journal entry for payment within discount period

buyer: accounts payable debit cost cash credit paid inventory credit cost% seller: cash debit paid sales discounts debit sp% accounts receivable credit sp

Perpetual records

a records purchases b. records sales and costs of goods sold c. record end of period adjustments

Purchase and Returns Allowance

a reduction in the cost of inventory purchases associated with unsatisfactory goods

sales discount

a sale price reduction given to customers for prompt payment on their account balance