ACG Ch.5

The following information relates to Fantastic​ Clothing, Inc. Net Sales Revenue ​$510,000 Cost of Goods Sold ​260,000 Interest Expense ​4,900 Operating Expenses ​57,000 Calculate the net income.

$188,100

On November​ 1, 2025, Alpha​ Omega, Inc. sold merchandise for $17,000​, FOB​ destination, with payment​ terms, n/30. The cost of goods sold was $5,100. On November​ 3, the customer returns on this sale amounted $6,800 of goods purchased. The company received the balance on November​ 9, 2025. Calculate the cost of goods sold from these transactions.

$3,060

A company using the perpetual inventory system purchased inventory worth​ $520,000 on account with credit terms of​ 2/15, n/45. Defective inventory of​ $70,000 was returned 2 days​ later, and the accounts were appropriately adjusted. If the company paid the invoice 25 days​ later, the journal entry to record the payment would be​ ________.

$450,000 debit to Accounts Payable and​ $450,000 credit to Cash

A company using the perpetual inventory system purchased inventory worth $520,000 on account with credit terms of 3​/15, ​n/45. Defective inventory of $50,000 was returned 3 days​ later, and the accounts were appropriately adjusted. If the company paid the invoice 25 days​ later, the journal entry to record the payment would be​ ________.

$470,000 debit to Accounts Payable and $470,000 credit to Cash

A company using the perpetual inventory system purchased inventory worth $20,000 on account with terms of 3​/10, ​n/30. Defective inventory of $2,000 was returned two days​ later, and the accounts were appropriately adjusted. If the invoice is paid 10 days after the invoice​ date, the amount of the purchase discount that would be available to the company is​ ________.

$540

The following details are provided by Western Wear Merchandisers. The company uses the periodic inventory system. Net Sales Revenue ​$199,000 Purchases ​92,000 Purchase Returns and Allowances ​1,500 Purchase Discounts ​1,600 Freight In ​1,700 Beginning Merchandise Inventory ​63,000 Ending Merchandise Inventory ​37,000 Calculate the amount of net cost of purchases.

$88,900

An invoice of $1,000 for merchandise purchased is showing 3​/15, n/30 as terms of credit. If the invoice is paid on or before the fifteenth day after the invoice​ date, the amount to be paid is​ ________.

$970

The following information relates to Sports​ Bikes, Inc. Net Sales Revenue $195,000 Cost of Goods Sold 150,000 Interest Revenue 10,000 Operating Expenses 42,500 Calculate the operating income.

2,500

What does​ "2/10" mean, with respect to​ "credit terms of​ 2/10, n/30"?

A discount of 2 percent will be allowed if the invoice is paid within 10 days of the invoice date.

A company that uses a perpetual inventory system purchased inventory on account and later returned goods worth $ 100 to the vendor. Which of the following would be the correct journal entry to record these​ returns?

Accounts Payable 100 Merchandise Inventory 100

A company that uses the perpetual inventory system purchased inventory for​ $950,000 on account with terms of​ 3/7, n/20. Which of the following correctly records the payment made 15 days after the date of​ invoice?

Accounts Payable ​950,000 Cash ​950,000

A company sold merchandise with a cost of​ $500 for​ $3,000 on account. The seller uses the perpetual inventory system. The entry to record the sale would​ be:

Accounts Receivable ​3,000 Sales Revenue ​3,000 Cost of Goods Sold 500 Merchandise Inventory 500

Advanced Computer Parts uses the perpetual inventory system. On May​ 5, Advanced sold merchandise with a cost of​ $2500 for​ $4500 to a customer on account with terms of​ 3/10, n/30. Which of the following journal entries correctly records the payment received from the customer on May​ 11?

Cash 4365 Accounts Receivable 4365

Complete Electronics Inc. sells a point−of−sale computer with a two−year service contract. Complete collects​ $1,000 cash for the selling price of the computer and​ $552 for the two−year service contract. How is revenue​ recognized?

Complete will record Sales Revenue of​ $1,000 when the computer is delivered and Service Revenue of​ $23 per month for 24 months.

Which of the following line items will appear on the income statement of a merchandiser but not of a service​ company?

Cost of Goods Sold

The Merchandise Inventory account of a company shows a balance of $30,000 but a physical count of inventory shows $25,000. Which of the following entries is required to record the​ shrinkage? (Assume a perpetual inventory​ system.)

Cost of Goods Sold 5,000 Merchandise Inventory 5,000

When a company that uses the perpetual inventory system sells goods for​ cash, the journal entry to record cost of goods sold​ is:

Cost of Goods Sold XX Merchandise Inventory XX

Which of the following statements is NOT​ correct?

In a periodic inventory​ system, merchandise inventory and purchasing systems are integrated with the records for Accounts Receivable and Sales Revenue.

Which of the following is true of freight​ in?

It is the transportation cost on purchases.

Under the perpetual inventory​ system, when a wholesaler returns goods purchased on​ account, the​ ________ account is credited.

Merchandise Inventory

Which of the following entries would be made to record the purchase of inventory on account for​ $1,000, if a company uses the perpetual inventory​ system?

Merchandise Inventory ​1,000 Accounts Payable ​1,000

Regarding a periodic inventory​ system, which of the following statements is incorrect​?

The periodic inventory system is normally used for relatively expensive goods.

A retailer can buy merchandise either from a manufacturer or a wholesaler.

True

A wholesaler is a merchandiser who buys goods from a manufacturer and then sells the goods to retailers.

True

A company purchased inventory for​ $4,000 from a vendor on​ account, FOB shipping​ point, with terms of​ 2/15, n/30. The company paid​ $200 cash for freight in. The entry to record the payment of the invoice within 15 days of the invoice date by the purchaser would include​ ________. ​ (Assume a perpetual inventory​ system.)

a debit to Accounts Payable for​ $4,000, a credit to Merchandise Inventory for​ $80, and a credit to Cash for​ $3,920

Which of the following entries would be made to record the purchase of inventory on​ account, if a company uses the perpetual inventory​ system?

a debit to Merchandise Inventory and a credit to Accounts Payable

A modern perpetual inventory system​ ________.

achieves better control over inventory

In a periodic inventory​ system, ________.

businesses must obtain a physical count of inventory to determine quantities on hand

Gross profit is calculated as the difference between net sales revenue and​ ________.

cost of goods sold

The main expense of a merchandiser is usually​ ________.

cost of goods sold

Under the perpetual inventory​ system, discounts taken on an invoice by the buyer would be​ ________.

credited to Merchandise Inventory

A company using the perpetual inventory system purchased inventory worth $113,000 on account with credit terms of 4​/15, ​n/30. Defective inventory was​ received, but instead of a​ return, an allowance of $1,100 is given. The allowance is before the invoice is paid. The journal entry to record the payment after the allowance and within the discount period would be​ ________.

debit to Accounts​ Payable; $107,424 credit to Cash and $4,476 credit to Merchandise Inventory

Operating expenses include ​ _______

expenses that occur in an​ entity's major line of business

For a​ merchandiser, the term​ "inventory" refers to​ ________.

goods held for sale to customers

On the balance sheet of a​ retailer, the Merchandise Inventory account ​ ________.

is included in the current assets section

The merchandise that is currently being held by a business to sell to customers is referred to​ as:

merchandise inventory

Merchandise inventory accounting systems can be broadly categorized into two types. They are​ ________.

perpetual and periodic

The gross profit percentage is one of the most carefully watched measures of​ ________.

profitability

Value​ Electronics, Inc. started its operations on January 1 of the current year. Value engages in buying and selling different types of electronic gadgets. The first step in its operating cycle would be to​ ________.

purchase inventory from vendors

On January​ 21, Cressent, Inc. received merchandise from​ Neptune, Inc. On that​ date, Cressent found a few of these goods to be damaged. On January​ 22, Cressent returned the damaged goods to the seller. Such returns will be treated as​ ________ by Cressent.

purchase returns

An entity that buys goods and sells them to consumers at a markup is a​ ________.

retailer

Net sales revenue is calculated by​ ________.

subtracting sales discounts and estimated sales returns and allowances from sales revenue

When a company uses the perpetual inventory​ system, ________.

the Merchandise Inventory account is debited for purchases of goods that the company intends to resell to customers.

Which of the following is NOT recorded in a modern perpetual inventory​ system?

timeliness of vendor deliveries

Given the following information for Franklin​ Jewelers, by how much did the gross profit percentage go up or down from 2024 to​ 2025? 2024 Net Sales ​$36,000 Cost of Goods Sold $27,000 2025 Net Sales ​$21,000 Cost of Goods Sold ​$7,350

up by​ 65%