Chapter 6: Merchandising

income statement

Cost of inventory is reported on the ___.

they arrive at the buyer's place of business.

FOB destination means that goods are owned by the buyer as soon as ____.

(Net Sales - Cost of Goods sold) / Net Sales * 100

Gross Profit equation

Payment of amounts owed for purchases made on account.

If accounts payable is debited and cash is credited, then the company is recording a ____.

Merchandiser

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 _____.

Inventory

In a perpetual system the _____ account is debited when a company purchases merchandise on account.

plus freight-in

Inventory consists of the purchase price plus ____.

2 Discount Percent 10 the Discount Period 30 When the full amount is due

Parts of a purchase discount: 2/10,n/30 Discount period? Discount Percent? When the full amount is due?

Sales price times the quantity of goods sold.

Sale Revenue reports the _____.

Current assets; Used

Supplies are _____ intended to be _____.

Operating

The ____ cycle is a series of activities that the company undertakes to generate sales and ultimately cash.

Shipping Point

The purchaser of inventory pays for shipping if the shipping terms are FOB _____.

periodic

Under the ____ inventory system, inventory records are updated only at the end of the accounting period.

Perpetual

Under the ____ inventory system, the inventory account is updated every time inventory is bought, sold, or returned. Inventory shrinkage from theft, fraud and error is able to be estimated.

Goods are owned by the buyer when they leave the seller's place of business.

What does FOB shipping point mean?

A higher ratio means that more profit is available to cover operating expenses.

What does the gross profit percentage tell you?

Sell goods that they have made themselves.

What type of goods and services do Manufacturing Companies sell?

Sell goods that have been obtained from a supplier.

What type of goods and services do Merchandising Companies sell?

Sell services rather than physical goods.

What type of goods and services do Service companies sell?

Inventory is reported as a current asset because it will be converted into cash within a year of the balance sheet date.

Why is inventory reported as a current asset?

as a deduction from sales

how should sales discounts appear in the financial statement?

recieved by the customer

if a seller sells it merchandise with the shipping terms FOB destination, it credits Revenue when the merchandise is ____.

Multistep

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