AC 210-003: Chapter 6 Learn Smart

d) both a and c

A multistep income statement is useful to financial statement users because it.... a) separates income statement items into meaningful components b) provides the amount of resources available to use in the future c) separates cost of goods sold from other operating expenses, which allows the calculation of gross profit d) both a and c

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

Create an income statement in the proper order form the top to bottom

a) deduction from sales

Sales discounts should appear in the financial statements as an.... a) deduction from sales b) part of current liabilities c) addition to sales d) addition to inventory e) operating expense

credit to Cash and debit to Accounts Payable

The journal entry to record the payment for merchandise previously purchased on account includes a _____

manufacturing

______ companies sell goods that they have produced

merchandising companies

sell goods that have been obtained from a supplier

manufacturing companies

sell goods that they have made themselves

service companies

sell services rather than physical goods

b) Sellar

Beyer Company bought inventory from Sellar Company, FOB destination. On December 31, the last day of the accounting year, the goods were on a truck owned by Common Carrier, Inc., and not expected to arrive until January 2. Which company should include these goods in its December 31 inventory? a) Common Carrier b) Sellar c) Beyer d) None of them should include these goods in inventory

$400

Acme, Inc. had cost of goods sold of $2,000. If beginning inventory was $2,100 and ending inventory was $500, Acme's purchases must have been $....

c) low gross profit percentages

Corporations with high sales volume, such as Walmart, usually have _____ a) high gross profit percentages b) the same gross profit percentage as high-end retailers c) low gross profit percentages

one asset to increase and another asset to decrease

In a perpetual inventory system, the journal entry to record the payment of cash for the shipping costs of purchased merchandise will cause.....

debit to Inventory and credit to Accounts Payable

In a perpetual system, the entry to record a purchase of merchandise on account includes a....

less Sales Returns & Allowance less Sales Discounts

Net Sales on an income statement equals Sales Revenue......

a) balance sheet and not the income statement

Purchase transactions affect the ____ a) balance sheet and not the income statement b) income statement and the balance sheet c) income statement and not the balance sheet

a) cost of goods available for sale

The Inventory balance on the balance sheet reports the _____ a) cost of goods available for sale b) cost of goods that have been delivered to customers during the period c) price times the quantity of goods sold d) cost of merchandise purchased during the period

operating

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

a) $360,000

The income statement for ABC Company shows Gross profit of $144,000; Operating expenses of $130,000; and Cost of goods sold of $216,000. What is net sales revenue? a) $360,000 b) $490,000 c) $246,000 d) $274,000

a, c, and d

To ensure the accuracy of inventory accounted for using a perpetual system, physical counts _____ a) detect theft b) are not needed when a perpetual system is used c) detect bookkeeping errors d) detect shrinkage

a) goods are owned by the buyer when they leave the seller's place of business

What does FOB shipping point mean? a) goods are owned by the buyer when they leave the seller's place of business b) goods are owned by the buyer as soon as the sales contract is signed c) goods are owned by the buyer as soon as they arrive at the buyer's place of business

net sales minus cost of goods sold

gross profit equals

the customer received a damaged product and returned it

Ace Electronics, which uses a perpetual inventory system, recorded a debit to Sales Returns & Allowances and a credit to Accounts Receivable, along with a debit to Inventory and a credit to Cost of Goods Sold. What business event must have taken place?

d) $20,000

Beginning inventory was $5,000. During the month, the company purchased an additional $25,000 of inventory. At the end of the month, ending inventory was $10,000. Cost of Goods sold equals....? a) $50,000 b) $5,000 c) $0 d) $20,000

b) $30,000

Bijoux Company has sales of $40,000, beginning inventory of $5,000, purchases of $25,000, and ending inventory of $7,000. The goods available for sale for the period equals.... a) $70,000 b) $30,000 c) $25,000 d) $23,000 e) $37,000 f) $17,000

a) plus freight in

Inventory consists of the purchase price..... a) plus freight in b) less freight in c) plus freight out d) less freight out

`d) current asset; sold

Inventory is a _____ intended to be _____ a) current liability; sold b) stockholders' equity account; sold c) stockholders' equity account; used d) current asset; sold

c) current asset; balance sheet only

Inventory is reported as a ____ on the ____ a) expense; balance sheet b) expense; income statement c) current asset; balance sheet only d) current asset; balance sheet and income statement

purchases + freight in - purchase returns and allowances - purchase discounts

Under a periodic inventory system, net purchases equal....

periodic

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

both a and c

Using a perpetual inventory system, when a company records a sale of merchandise, it must also record _____ a) a decrease in its inventory b) an increase in its inventory c) cost of goods sold, which will be reported on the income statement d) cost of goods sold, which will be reported on the balance sheet

a) cost of goods sold b) gross profit d) sales revenue

Which of the following are reported on the income statement? a) cost of goods sold b) gross profit c) inventory d) sales revenue e) goods available to sell