chapter 6: merchandising operations and the multistep income statement
biopsies 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, _____
assets are understated liabilities are understated stockholders' equity is understated
Walmart sells a bike that cost $100 to a customer for $250 cash. using a perpetual inventory system, the entry to record the sale includes ad debit to _____ and credit to _____ for $250. the entry to record the cost of the sale includes a debit to cost of goods sold and a credit to _____ for $100.
cash; sales revenue; inventory
in a perpetual system, the entry to record a purchase of merchandise on account includes a _____
credit to accounts payable debit to inventory
inventory is reported as a(n) _____
current asset on the balance sheet
the journal entry to record the payment for merchandise previously purchased on account includes a _____
debit to accounts payable credit to cash
the entry to record the revenue recognized from the service portion of a bundle sale that was collected in advance is recorded with a debit to _____ and a credit to _____
deferred revenue; service revenue
merchandisers record revenue when they _____
fulfill their performance obligations by transferring control of the goods to customers
_____ companies sell goods that have been obtained from other companies
merchandising
a _____ income statement shows how much profit is earned from product sales without being clouded by other operating expenses and separates other times that are not core to the operations of the company
multistep
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, _____
net income will be too high total assets will be too high
the _____ cycle is a series of activities that the company undertakes to generate sales and ultimately cash
operating
under the _____ inventory system, inventory records are updated only at the end of the accounting period
periodic
under the _____ inventory system, the inventory account is updated every time inventory is bought, sold, or returned
perpetual
the inventory account may be credited for _____
purchase returns and allowances
cost of goods sold equals beginning inventory plus _____ minus ending inventory
purchases
when a seller fulfills its performance obligation, it credits _____
revenue
which of these will require a credit to the inventory account in a perpetual inventory system?
selling inventory for cash selling inventory on account
the purchaser of inventory pays for shipping if the shipping terms are FOB _____
shipping point
what does the sales discount 2/10, n/30 mean?
you can take a 2% discount if you pay within 10 days, or the full amount is due within 30 days
gotit inc. paid an invoice for $1,000 of merchandise plus shipping of $100. if the terms were 2/10, n/30, and the bill was paid within one week of receipt, how much cash was paid?
$1,080 =($1,000 x (100% - 2%)) + $100)
bijoux company has net sales of $40,000. beginning inventory of $5,000, purchases of $25,000 and ending inventory of $7,000. cost of goods sold equals _____
$23,000
inventory consists of the purchase price _____
plus freight-in
which of the following are found on the income statement of a merchandiser?
cost of goods sold gross profit sales revenue
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 fo the goods has been transferred to the customer
any costs incurred to get the merchandise into a condition and location ready for sale should be debited to _____
inventory
in a perpetual system, the _____ account is debited when a company purchases merchandise on account
inventory
the gross profit percentage measures the percentage of profit earned on each dollar of sales before deducting all expenses other than cost of goods sold. this ratio is used to:
make comparisons over time compare one company with another
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
if accounts payable is debited and cash is credited, then the company is recording a _____
payment of amounts owed for purchases made on account
match each type of company with the type of goods or services it sells
service companies- sell services rather than physical goods merchandising companies- sell goods that have been obtained from a supplier manufacturing companies- sell goods that they have made themselves
FOB _____ is the term used when ownership of the goods transfers to a buyer as soon as the goods leave the seller's place of business
shipping point
place the income statement line items in the proper order from the top to the bottom
1. sales revenue, gross 2. sales returns, allowances and discounts 3. sales revenue, net 4. cost of goods sold 5. gross profit
XYZ's journal entry to record 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, _____
assets will be overstated liabilities will be overstated
in a perpetual inventory system, the return of merchandize XYZ recently purchased on account will have the following effects on XYZ's accounting equation
assets will decrease liabilities will decrease
match the financial statement line item with the appropriate description
inventory- current asset on the balance sheet available for sale sales revenue- selling price times the quantity sold cost of goods sold- cost times the quantity sold gross profit- a subtotal on the income statement and is the amount earned form adding value to the inventory sold
which line item would be found on a merchandiser's income sheet and not on a service firm's?
sales revenue cost of goods sold
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