LearnSmart CH 6

Inventory is reported as a?

current asset on the balance sheet

Under a perpetual inventory system, the entry to record the return of goods you previously purchased on account would be recorded with a?

debit to Accounts Payable and a credit to Inventory

Sales transactions affect the?

income statement and balance sheet

The Inventory Account may be credited for?

purchase returns and allowances

The journal entry to record the payment for merchandise previously purchases on account will cause stockholders equity to?

remain unchanged

Berkeley company had beginning inventory of $20,000. If half of its inventory is sold, Berkeley's total goods available for sale for the period will be?

split between cost of goods sold and ending 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.

Boron company has net sales of $60,000, Beginning Inventory of $35,000, and ending inventory of $5000. The cost of goods sold is?

$37,000 (BI+P-EI=CSG)

Blogg Inc. has sales of $50,000, Cost of Goods Sold of $30,000, and selling expenses of $5,000. Its gross profit is?

-20,000 (gross profit=sales revenue-cost of goods sold)

ABC company had beginning inventory of $20,000, purchases of $84,000, and ending inventory of $24,000. Sales revenue was $160,000. What is ABC's gross profit margin?

-52% (BI+P-EI=CGS) (Net Sales-CGS/Net Sales=Gross Profit Percentage)

What kind of company would you want to invest in?

-A company with a high gross profit percentage and high sales volume.

After performing a physical count of inventory at the end of the accounting period, it was discovered that the amount of inventory on hand was less than the account records recorded. Then entry to record this inventory shrinkage includes?

-A debit to Cost of Goods Sold -A credit to Inventory

Which items are netted against Sales Revenue arrive as Net Sales?

-Sales Returns -Sales Discounts -Sales Allowances

What would be found on the income statement of a merchandiser?

-Sales Revenue -Cost of Goods Sold -Gross Profit

What will require a credit to the inventory account in a perpetual inventory system?

-Selling Inventory for cash Selling Inventory on account

ACME Enterprises, which uses a perpetual inventory system, recorded a debit to Sales Returns and Allowances and a credit to Accounts Receivable. What business event must have taken place?

-The customer received a damaged product, but kept the product and asked for a reduction in price.

What are the income statement line items?

1. Sales Revenue, Gross 2. Sales Returns, Allowances, and discounts 3. Sales Revenue, Net 4.Cost of Goods Sold 5. Gross Profit

What is the description of the purchase discount 2/10,n/30

2-discount percentage 10-the discount period 30- when the full amount is due

Breyer Company bought inventory FOB shipping point from Cellar Company for $4000 cash including shipping charges. On December 31st, the last day of the accounting year, the goods were on a truck owned by Common Carrier Company and not expected to arrive until January 3rd. Which company should include these goods in its inventory?

Breyer Company

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

Contra-Revenue, Debited

What cost should be added to the buyers Inventory account?

Freight In with terms FOB Shipping Point.

Inventory consists of the purchase price plus?

Freight in

Service companies sell services rather than?

Inventory

In a perpetual system, the ________________ is debited when a company purchases merchandise on account?

Inventory Account

Gross Profit=

Net Sales - COGS

If Accounts Payable is debited, and cash is credit then the company is recording a?

Payment of amounts owed for purchases made on account.

A benefit of the _________________ is that inventory shrinkage from theft, fraud, and error is able to be estimated.

Perpetual Inventory System

Under the __________________, the inventory account is updated every time inventory is bought, sold or returned.

Perpetual Inventory System

__________________________________ are accounted for with a credit to inventory and a debit to cash or Accounts Payable?

Purchase, Returns, and Allowances

The operating cycle is a series of activities that the company undertakes to generate ________________ which ultimately leads to cash.

Revenues

Which line item would be found on a service firms income sheet and NOT a merchandisers?

Service Revenue

Translate 2/10,n/30?

You can take a 2% discount if you pay within 10 days, or the full amount is due within 30 days.

What situation would a merchandiser record revenue?

-Goods were send FOB Shipping point but have not yet arrived at the buyers place of business. -The obligation has been fulfilled and control of the goods has been transferred to the customer.

Bijoux Company uses a perpetual inventory system. Its bookkeeper properly recorded a $5000 sale on account, but forgot to record the related cost of the sale of $3000. As a result of the error _____________?

-Net income will be to high -Total assets will be to high

Inventory is a ______________ intended to be __________.

Current Asset, Sold

The entry to record a sales return that results in the issuing of a gift ccard is recorded with a debit to Sales Revenue, and a credit to _______________ and also a debit to _____________ and a credit to cost of goods sold.

Deferred Revenue, Inventory

What is reported on the income statement?

Gross Profit, Cost Of Goods Sold, Sales Revenue

If inventory is on the balance sheet under current assets and cost of goods sold is on the income statement then this company is most likely a?

Merchandiser

A ________________ income statement shows how much profit is earned from product sales without being clouded by other operating expense and separates other items that are not core to the operations of the company.

Multistep

Under the ___________________ inventory records are updated only at the end of the accounting period?

Periodic Inventory System

FOB destination means that goods are owned as soon as?

they arrive at the buyers place of business

The journal entry to record the payment of cash to FedEx for shipping costs for inventory purchased FOB Shipping Point includes?

-A debit to Inventory -A credit to Cash

When a company provides $1000 of services to a customer on account with payment terms of 2/10,n/30, the entry to record the sale using the gross method includes a debit to ____________ and a credit to ________________?

-Account Receivable for $1000, Service Revenue for $1000

Which line item would be found on a merchandisers income sheet and not on a service firms?

-Cost of Goods Sold -Sales Revenue

In the perpetual inventory system what is true?

-The purchaser should record freight in as an asset, Inventory -The seller should record freight out as a selling expense

The journal entry to record taking a discount when paying for goods previously purchased on account and recorded using the gross method includes a?

-debit to a liability account -a credit to two asset accouts

The gross profit percentage is used to?

-make comparisons over time -compare one company with another

The journal entry to record the payment within the discount period for goods previously purchased on account and recorded using the net method causes?

-total assets to decrease -total liabilities to decrease