ACCT 201: Chapter 4 (Connect) - Smith

Green Company purchased merchandise inventory under terms FOB shipping point. How would recognizing the freight costs which were paid in cash affect Green ledger accounts? (Select all that apply.)

- The inventory account will increase. - The cash account will decrease.

How will recognizing transportation-in costs that are paid in cash affect the income statement? (Select all that apply.)

- The total amount of expenses is not affected. (Expense is not recognized until the inventory is sold.) - The total amount of revenue is not affected. - The total amount of net income is not affected.

How will recognizing transportation-in costs that are paid in cash affect the balance sheet? (Select all that apply.)

- The total amount of stockholders' equity is not affected. - The total amount of assets is not affected. - The total amount of liabilities is not affected.

The entry to recognize inventory shrinkage will cause the balance in the Merchandise Inventory account to...

- decrease and the balance of the Cost of Goods Sold account to increase.

Ron Company sold land that cost $150,00 for $160,000. Also, the company sold inventory that cost $60,000 for $85,000. Based on this information, the company would report: (Select all that apply.)

- gross margin of $25,000. - a gain of $10,000.

Freight costs are titled transportation-______ when the buyer is responsible for shipping costs and transportation-______ when the seller is responsible.

- in - out

Inventory shrinkage may be caused by: (Select all that apply.)

- shoplifting - lost or damaged inventory.

To calculate the cost of goods sold under the periodic inventory system, ____________ (subtract/add) the amount of ____________ (beginning/ending) inventory from the amount of cost of goods available for sale.

- subtract - ending

Product costs are also called __________ costs.

Inventory

The Candis Company purchased $4,000 merchandise inventory under terms 2/10,, n/30. Candis returned $100 of the merchandise bc it was damaged. The entry to record the return would cause the...

Merchandise Inventory account and the Accounts Payable account to decrease by $100.

Berry Company sold merchandise inventory under the terms 2/10, n/30. How will recognizing the sales discount affect the ledger accounts if collection is made within 10 days? (Select all that apply.)

The balance in the Accounts Receivable account will decrease and the balances in the Sales Revenue account will decrease.

Gains and Loses are shown _________ (before/after) operating income on a multistep income statement.

after

Cost of goods available for sale minus ___________ (beginning/ending) inventory equals cost of goods sold.

ending

When inventory is purchased under the perpetual inventory system, the balance in the inventory account...

increases.

When a company returns merchandise inventory that was previously purchased on account, cash flow from operating activities...

is not affected.

When a company returns merchandise inventory that was previously purchased on account, the amount of net income...

is not affected.

Selling and administrative costs are normally expensed in the?

period in which they are incurred.

Gross profit is equal to the amount of...

sales revenue minus the amount of cost of goods sold.

Purchase discount terms 2/15, n/45 mean that the total amount due must be paid within _______ days and a 2% discount will be granted on any payment made within ______ days.

- 45 - 15

When a company, using the perpetual inventory system, purchases inventory on account, the balance in the: (select all the apply.)

- Accounts Payable account increases. - Inventory account increases.

A company granted a sales discount under the terms 2/10, n/30. How will recognizing the sales discount affect the balance sheet? (Select all that apply.)

- Assets will decrease. - Stockholder's equity will decrease.

Merchandise Inventory appears on which of the following financial statements?

- Balance Sheet

When a company, using the perpetual inventory system, pays cash to purchase inventory, the balance in the: (Select all that apply.)

- Cash account decreases. - Inventory account increases.

Which of the following items will appear in the operating activities section of the statement of cash flows? (Select all that apply.)

- Cash inflow from the sale of merchandise inventory. - Cash outflow for the purchase of merchandise inventory.

When a company sells merchandise inventory for cash, the: (Select all that apply.)

- Inventory account decreases. - Cash account increases. - Cost of Goods Sold account increases. - Sales Revenue account increases.

How will recognizing inventory shrinkage affect the income statement? (Select all that apply.)

- Net Income will decrease. - Revenue will not be affected. - Expenses will increase.

A company payed cash for transportation-out costs. How will these costs affect the company's ledger accounts? (Select all that apply.)

- Operating Expenses will increase. - The total amount of assets will increase.

Assume that the cost of goods available for sale is $60,000, that the beginning inventory is $10,000 and that ending inventory is $12,000. Based on this information, cost of goods sold is...

$48,000 ($60,000 cost of goods available for sale - $12,000 ending inventory = 48,000 cost of goods sold)

How many accounts are affected when a company accepts a return of merchandise inventory from one of its customers?

4

A company sold merchandise inventory under the terms 2/10, n/30. If the collection is made within 10 days, recognizing the sales discount will cause a(n) ________________ (increase/decrease) in the Accounts Receivable account and a(n) _________________ (increase/decrease) in the Sales Revenue account.

BOTH decrease

When a company returns merchandise inventory that was previously purchased on account, the balance in the inventory account ______________ (increases/decreases) and the balance in the Accounts Payable account _____________ (increases/decreases).

BOTH decrease

When a company occurs selling and administrative expenses on account, selling and administrative expenses _____________ (increases/decreases) and the accounts payable _____________ (increases/decreases).

BOTH increase.

The cost of goods available for sale is equal to...

Beginning inventory balance plus the cost of inventory purchased.

The cost of administrative salaries is a ____________ cost.

Period

The cost of obtaining and making inventory ready for sale are?

Product Costs

Merchandising businesses generate revenue by?

Selling goods to customers

A company experienced an accounting event that caused accounts receivable and revenue to increase, inventory to decrease, and cost of goods sold to increase. Which of the following events could have caused these effects?

Sold inventory on account.