Chapter 6 Learn-smarts Practice

Sales returns and allowances ______. (Select all that apply.)

are adjusted for at the end of the accounting period for estimated returns and allowance expected to occur in the following months reduce the amount the seller expects to receive from customers are typically recorded after the initial sale when the actual return or allowance occurs

Beginning inventory was $5,000. During the month, the company purchased an additional $25,000 of inventory. At the end of the month, ending inventory was $10,000. Cost of Goods sold equals

$20,000

The Cost of Goods Sold equation is _

Beginning Inventory + Purchases - Ending Inventory

Which of the following are found on the income statement of a merchandiser? (Check all that apply.)

Cost of Goods Sold Gross Profit Sales Revenue

Which of the following are reported on the income statement? (Check all that apply.)

Cost of Goods Sold Sales Revenue Gross Profit

Beginning Inventory + Purchases - Ending Inventory is found on the what?

Cost of Goods Sold on the income statement

Cost of Goods Sold and Gross Profit

Cost of Goods Sold- Cost times the quantity sold Gross Profit - A subtotal on the income statement and is the amount earned from adding value to the inventory sold

In which of these situations would a merchandiser record revenue?

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.

Inventory and Sales Revenue -

Inventory - Current asset on the balance sheet available for sale Sales Revenue- Selling price times the quantity sold

The journal entry to record the payment for merchandise previously purchased on account includes a ______. (Select all that apply.)

credit to Cash debit to Accounts Payable

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

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 ______.

$37,000 Reason: Goods available for sale equals $30,000 (= beginning inventory of $5,000 plus purchases of $25,000).

Boron Company has Net Sales of $60,000; Beginning Inventory of $7,000; Purchases of $35,000 and Ending Inventory of $5,000. The Cost of Goods Sold is ______.

$42,000, Reason: Cost of Goods Sold = $7,000 Beginning Inventory + 35,000 Purchases - 5,000 Ending Inventory

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

add the transportation costs to its Inventory accoun

In a perpetual system, the entry to record a purchase of merchandise on account includes a ______.

debit to Inventory credit to Accounts Payable

Inventory consists of the purchase price

plus freight-in

Cost of goods sold equals beginning inventory plus Sales Revenue ------- minus ending inventory. (Enter one word per blank.)

purchases

In a perpetual inventory system, the return of merchandise XYZ recently purchased on account will have the following effects on XYZ's accounting equation. (Check all that apply.)

Assets will decrease. Liabilities will decrease.

Which of these will require a credit to the inventory account in a perpetual inventory system? (Check all that apply.)

Selling inventory for cash Selling inventory on account

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

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

Any costs incurred to get the merchandise into a condition and location ready for sale should be debited to

Inventory

Berkley Company had beginning inventory of $4,000 and purchases of $20,000. If half of its inventory is sold, Berkley's total goods available for sale for the period will

be split between cost of goods sold and ending inventory

Berkley Company had beginning inventory of $4,000 and purchases of $20,000. If half of its inventory is sold, Berkley's total goods available for sale for the period will ______.

be split between cost of goods sold and ending inventory

Inventory is reported as a(n) ______ on the ______.

current asset; balance sheet only

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

remain unchanged

Goods Available for Sale will ______ when sold.

become Cost of Goods Sold on the income statement, but Inventory when not sold on the Balance Sheet.

Sales Returns & Allowances is a ______ account and is ______ when goods are returned by customers for a refund.

contra-revenue; debited

Merchandisers record revenue when they

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

Inventory shrinkage as a result of theft, damage or obsolescence that is discovered during a physical inventory count at the end of the accounting period is recorded with a decrease to Inventory

only in a perpetual system

Sales Revenue reports the

sales price times the quantity of goods sold

Alpha Company bought inventory from Omega Company, FOB shipping point. On December 31, the last day of the accounting year, the goods were on a truck owned by Theta, Inc., exactly half-way between Alpha and Omega. Which company should include these goods in its December 31 inventory?

Alpha, The terms FOB shipping point means ownership transfers at the seller's place of business. Thus, Omega will exclude the goods from its inventory since it has been sold.