intro to accounting chapter 5

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cost of goods sold is determined only at the end of the accounting period in

a periodic inventory system

paden company purchased merchandise from emmet company with freight terms of FOB shipping point. the freight costs will be paid by the

buyer

a perpetual inventory system would likely be used by each of the following except a. candy store. b. hardware store. c. grocery store. d. automobile dealership

c. grocery store.

financial analysts emphasize operating income over other non-operating activities because it's

considered sustainable

two categories of expenses for merchandising companies are

cost of goods sold and operating expenses

Which of the following expressions is incorrect? a. Gross profit - operating expenses = net income b. Sales revenue - cost of goods sold - operating expenses = net income c. Net income + operating expenses = gross profit d. Operating expenses - cost of goods sold = gross profit

d. Operating expenses - cost of goods sold = gross profit

sales revenue less cost of goods sold is called

gross profit

net sales-cogs

gross profit=

sales - cogs

gross profit=

freight costs paid by a seller on merchandise sold to customers will cause an increase

in operating expenses for the seller

a buyer would record a payment within the discount period under a perpetual inventory system by crediting

inventory

in a perpetual system, the amount of discount allowed for paying for merchandise purchased within the discount period is credited to

inventory

the journal entry to record a return of merchandise purchased on account under a perpetual inventory system would credit

inventory

under the perpetual system, cash costs incurred by the buyer for the transporting of goods are recorded in

inventory

under a perpetual inventory system, acquisition of merchandise for resale is debited to the

inventory account

if a purchaser using a perpetual system agrees to freight terms of FOB shipping point, then the

inventory account will be increased

the freight cost incurred by the seller on outgoing merchandise

is an operating expense

after gross profit is calculated, operating expenses are deducted to determine

net income

gross profit-operating expenses

net income=

Income from operations is gross profit less

operating expenses

Gross profit will result if

operating expenses are less than net income

if a company is given terms of 2/10, n/30 it should

pay within the discount period and recognize a savings

the inventory account is used in each of the following except the entry to record a. goods purchased on account. b. the return of goods purchased. c. payment of freight on goods sold. d. payment within the discount period

payment of freight on goods sold

a physical count is required at the end of the year in

periodic

detailed records of goods held for resale are not maintained under a

periodic inventory system

this inventory system requires more detailed inventory records

perpetual

Crain Department Store uses a perpetual inventory system. At year-end, the balance in the Merchandise inventory account is $1,500,000. Assuming that the inventory records have been maintained properly, a year-end physical inventory

probably will indicate less than $1,500,000 in merchandise on hand.

a perpetual inventory system, inventory is credited when a

purchase discount is taken

a merchandising company that sells directly to customers is a

retailer

an enterprise which sells goods to customers is known as a

retailer

under the perpetual inventory system in a merchandising company, account that must be closed include

sales returns & allowances

What type of firm would not be considered a merchandising company?

service firm

single step income statement arrives at the net income by

subtracting total expenses from all revenues

the primary source of revenue for a wholesaler is

the sale of merchandise

if a company determines cost of goods sold each time a sale occurs, it

uses a perpetual inventory system

in a perpetual inventory system, cost of goods sold is recorded

with each sale


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