ACCT 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?
$360,000 (net sales revenue + $144,000 + $216,000 = $360,000)
XYZ Company sold merchandise for $5,000, with payment terms of 2/10, n/30. If the customers pays within the discount period and takes the discount, XYZ will receive (blank).
$4,900
A sales discount with terms of 1/10, n/30 means the buyer receives a (blank) % discount if paid within (blank) days.
1 10
In which company would you rather invest?
A company with high gross profit percentage and high sales volume
Gross Profit
A subtotal on the income statement and is the amount earned from adding calue to the inventory sold
Cost of Goods sold
Cost times the quantity sold
Inventory
Current assets on the balance sheet available for sale
Which line items are found on a multi-step but not on a single-step income statement
Income from operations Gross profit
Using a perpetual inventory system, the effect on the accounting equation of purchasing merchandise on account includes a (blank)
Increase in assets Increase in liabilities
(blank) companies sell goods that they have produced
Manufacturing
On May 1, Doormat 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 Doormat record the sale?
May 3
Gross profit percentage is calculated as (blank)
Net sales minus cost of goods sold, then divide by net sale and multiply by 100
Which inventory system requires that the inventory account be updated at the time merchandise is sold?
Perpetual System
Sales Revenue
Selling price times the quantity sold
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, (blank).
Stockholders' equity is understated. Assets are understated. Liabilities are understated.
True or False: In a periodic inventory system, Cost of Goods Sold is recorded at the end of the accounting period.
True
The inventory balance on the balance sheet reports the (blank).
cost of goods available for sale
In the perpetual system, the entry to record the sale of merchandise to a customer on account would include a (blank)
credit Sales Revenue Debit to Cost of Goods Sold Credit to Inventory Debit to Accounts Receivable
Using a perpetual inventory system, the journal entry to record a sale on account will include a (blank)
debit to accounts receivable. debit to cost of goods sold. credit to inventory. a credit to sales revenue.
Using the gross method, the journal entry to record taking a discount when paying for goods previously purchased on account includes a (blank)
decrease in assets and liabilities
Merchandisers record revenue when they (blank)
fulfill their performance obligations by transferring control of the goods to customers
Corporations with high sales volume, such as Walmart, usually have (blank).
low gross profit percentages
A multistep income statement is useful to financial statement users because it (blank)
separates cost of goods sold from other operating expenses, which allows the calculation of gross profit. Separates income statement items into meaningful components.
A multistep income statement is useful to financial statement users because it (blank).
separates cost of goods sold from other operating expenses, which allows the calculation of gross profit. separates income statement items into meaningful components.
What are the two stages of accounting for a purchase discount using the gross method?
the purchase is first recorded at full cost. The inventory account is later reduced if payment is made within the discount period.
Bijoux Company uses a perpetual inventory system. Its bookkeeper properly recorded a $5,000 sale on account but forgot to record the related cost of the sale of $3,000. As a result of this error, (blank)
total assets will be too high. net income will be too high.
