ACC Chapter 4, 5, 6

Goods Available for Sale

the sum of beginning inventory and purchases for the period

Prepaid Rent

Balance Sheet, Current Asset, Debit

When a company sells different types of products, the income statement will report the Cost of Goods Sold for all of the products in one line item

True

CREDITS

accounts payable, accumulated amortization & depreciation, common stock, deferred revenue, income tax payable, notes payable, retained earnings, sales revenue

Accumulated Depreciation

Balance Sheet, Current Asset, Credit

On May 1, Doormart received an order from a customer. The goods were shipped FOB shipping point on May 3. The customer received the goods on May 5 and paid for the merchandise on June 1. When should Doormart record the sale?

May 3rd

Inventory account consists of all ______.

costs needed to get the inventory ready for sale

Amortization Expense

Income Statement, Expense, Debit

Interest Expense

Income Statement, Expense, Debit

In a perpetual system, the entry to record the sale of merchandise to a customer on account would include a ______.

credit to inventory & sales revenue debit to cost of goods sold & accounts receivable

Record the entry for depreciation for a hauling van purchased by the company on July 2021. Depreciation for July-December 2021, estimated to total $3,150, has not been recorded.

debit depreciation expense, credit accumulated depreciation

adjusted journal entry

Revenues And expenses are recorded when they occur. Must include at least one income statement account and at least one balance sheet account. make ALL values negative put payables under liability, make liability + and equity -

When using the gross method, the journal entry to record taking a discount when paying for goods previously purchased on account includes a ______. (Check all that apply.)

debit to accounts payable credit to cash credit to inventory

Which line items are found on a multi-step but not on a single-step income statement.

income from operations gross profit

What does the sales discount 2/10, n/30 mean?

You can take a 2% discount if you pay within 10 days, or the full amount is due within 30 days.

DEBITS

accounts receivable, cash, all expenses, equipment, prepaid rent, software, supplies

bank reconciliation

bank statement: + deposit in transit, - outstanding checks cash: + interest earned, - NSF check, bank service charge

The Inventory balance on the balance sheet reports the ______.

cost of goods available for sale

What does FOB shipping point mean?

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

if nothing has been recorded/none

leave number the same

things that haven't happened yet (deposit in transit, outsanding checks)

no jounal entry required

retained earnings on balance sheet

original retained earnings+revenues-expenses-dividends

Inventory consists of the purchase price ______.

plus freight-in

current assets

prepaid insurance, cash, accounts receivable

If a seller sells its merchandise with the shipping terms FOB destination, it credits Revenue when the merchandise is _______.

received by the customer

If a seller sells its merchandise with the shipping terms FOB shipping point, it credits Revenue when the merchandise is _______.

shipped from the sellers place of business

The store purchased delivery equipment at the beginning of the year. The estimated depreciation for 2021 is $3,000, although none has been recorded yet.

leave number the same DEBIT depreciation expense (3000) CREDIT accumulated depreciation (3000)

to adjust an unadjusted trial balance

use other data not yet recorded

On October 25, Yacht Doc received $200,000 for a yacht valued at $180,000 and a 4-month service contract. During November, the yacht was delivered and 1 month of the service contract was performed. The remaining services are to be performed evenly over the next 3 months. What is the entry Yacht Doc should record on October 25?

Debit Cash; Credit Deferred Revenue

On December 31, 2021, the unadjusted balance in Prepaid Insurance was $3,600. This was the amount paid in the middle of the year for a two-year insurance policy with coverage beginning on July 1, 2021. The unadjusted balance in Insurance Expense was $900, which was the cost of insurance from January 1 to June 30, 2021.

cost of insurance: prepaid (3600)*middle of year (6) divided by 2 years (24)=$900 DEBIT insurance expense (900), CREDIT prepaid insurance (900)

Deferred Revenue

Balance Sheet, Current Liabilities, Credit

retained earnings

Balance Sheet, Stockholder Equity, Credit

retailers

Buy goods from wholesalers or directly from the manufacturers and resell to the consumer

The journal entry to record the payment for merchandise previously purchased on account includes a debit to ______ and a credit to ______.

accounts payable, cash

noncurrent assets

accumulated depreciation, equipment

In a perpetual inventory system, the buyer of merchandise with the shipping terms FOB shipping point will ______.

add the transport costs to its inventory account

The entry to record the purchase of inventory on account causes ______.

an increase in assets & liabilities

The gross profit percentage measures the percentage of profit earned on each dollar of sales before deducting all expenses other than cost of goods sold. This ratio is used to: (Check all that apply.) Multiple select question.

compare one company with another make comparisons over time

Which of the following are found on the income statement of a merchandiser?

gross profit revenue cost of goods sold

Sales Returns and Allowances are reported on the ______.

income statement

Which of the following items are netted against Sales Revenue to arrive at Net Sales

sales returns, allowances, discounts

multistep 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

Cost of Goods Sold

starting inventory+purchases-ending inventory

Record the entry for supplies expense if, at the end of 2021, the unadjusted balance in the Supplies account was $1,000. A physical count of supplies on December 31, 2021, indicated supplies costing $380 were still on hand.

subtract 1000-380, debit supplies expense, credit supplies

Bijoux Company uses a perpetual inventory system. Its bookkeeper properly recorded a $5,000 sale on account, but forgot to record the related cost of the sale of $3,000. As a result of this error, ______. (Check all that apply.)

total assets & net income will be too high

A portion of the store's basement is now being rented for $1,200 per month to K. Frey. On November 1, 2021, the store collected six months' rent in advance from Frey in the amount of $7,200. It was credited in full to Deferred Revenue when collected. The unadjusted balance in Rent Revenue was $0 at December 31, 2021.

total rent= $7,200 1. divide months of rent used (Nov 1-Dec 31=2) by total months of rent (6) (2/6), multiply by 7,200= $2,400 DEBIT deferred revenue, CREDIT rent revenue

NET Sales on an income statement equals Sales Revenue (gross) minus Sales Returns and Allowances minus Sales DISCOUNT

true

On July 1, 2021, a two-year insurance premium on equipment in the amount of $792 was paid and debited in full to Prepaid Insurance on that date. Coverage began on July 1.

divide 792 by 4 = 198 debit insurance expense 198, credit prepaid insurance 198

Jaworski's store did some ski repair work for Frey. At the end of December 31, 2021, Frey had not paid for work completed amounting to $850. This amount has not yet been recorded as Service Revenue. Collection is expected during January 2022.

leave number the same DEBIT accounts receivable (850) CREDIT service revenue (850)

Fes Company is making adjusting journal entries for the year ended December 31, 2021. In developing information for the adjusting journal entries, you learned the following: a. A two-year insurance premium of $6,900 was paid on January 1, 2021, for coverage beginning on that date. As of December 31, 2021, the unadjusted balances were $6,900 for Prepaid Insurance and $0 for Insurance Expense. b. At December 31, 2021, you obtained the following data relating to supplies. Unadjusted balance in Supplies on December 31: $13,500 Unadjusted balance in Supplies Expense on December 31: $69,000 Supplies on hand, counted on December 31: $8,800

1. Of the $6,900 paid for insurance, what amount should be reported on the 2021 income statement as Insurance Expense? What amount should be reported on the December 31, 2021, balance sheet as Prepaid Insurance? divide 6900 by 2 for both (2 years)=$3450 2. What amount should be reported on the 2021 income statement as Supplies Expense? What amount should be reported on the December 31, 2021, balance sheet as Supplies? subtract unadjusted supply balance (13,500) by supplies on hand (8,800)=$4,700 debit supplies expense (+4,700), credit supplies (-4,700) 3. Indicate the accounting equation effects of the adjustment required for (a) insurance and (b) supplies. prepaid insurance=-3450 asset, insurance expense=-3450 stock equity supplies=-4700 asset, supplies expense=-4700 stock equity

adjusted journal entry prepaid insurance

1. divide months of coverage by months of use 2. 24 months of coverage/6 months (December 31-July 1) 3. divide step 1 by prepaid insurance to get adjusting 4. credit prepaid insurance, debit insurance expense

income statement line items

1. gross sales revenue 2. sales returns, allowances & discounts 3. net sales revenue 4. cost of goods sold 5. gross profit

adjusted journal entry

1. subtract original cost and on hand cost 2. on T account, credit asset and debit expense