Accounting I - Exam 3
How are sales to customers using MasterCard and Visa recorded?
Cash sales
Journalize an adjusting entry for inventory shrinkage
Cost of Merchandise Sold - Merchandise Inventory - Inventory Shrinkage
Which of the three methods of inventory costing will in general yield an inventory cost most nearly approximating current replacement cost?
FIFO
Weighted Average
Find average cost per unit and multiply by units of the last date. Average cost per unit by finding total cost at each date, adding them, dividing by total number of units.
FIFO
In the order in which the costs were incurred
Before inventory purchases are recorded, the receiving report should be reconciled to what documents?
Initial purchase order and the vendors invoice
A manufacturer shipped merchandise to a retailer on a consignment basis. If the merchandise is unsold at the end of the period, in whose inventory should the merchandise be included?
Manufacturer
What account is credited for a return?
Merchandise Inventory
Gross Profit (b)
Merchandise Sold minus Cost of Merchandise Sold
What's the difference between a merchandising business and a service business?
Merchandising businesses purchase products from other businesses to sell them to customers. A service business provides services to customers rather than products.
LIFO
Most record merchandise inventory cost charged against revenue
Will the income statement necessarily report an income?
Not if operating expenses exceed gross profit, there will be a net loss
If Halibut Company pays the invoice within the discount period, what is the amount of cash required for the payment?
Purchase less the discount - return less the discount
Prepare a single step income statement
Revenues:/Total Revenues (credit), Expenses (debit), Total Expenses (credit), Net Income (credit)
Cost of merchandise sold
Sales minus gross profit
Name three accounts that would normally appear in the chart of accounts of a merchandising business but would not appear in the chart of accounts of a service business.
Sales, Cost of Merchandise Sold, Merchandise Inventory
Who bares the freight when the terms of sale are FOB shipping point?
The buyer
Who bares the freight when the terms of sale are FOB destination?
The seller
Why should the employee who handles cash receipts not have the responsibility for maintaining the accounts receivable records? Explain.
To reduce possibility of errors and embezzlement. Functions of operations and accounting should be separate. (Control procedure).
Name the five elements of internal control.
control environment, risk assessment, control procedures, monitoring, and information and communication.
The balance of cash is likely to differ from the bank statement balance. What two factors are likely to be responsible for the difference?
delay or errors by the bank or company in recording transactions.
Risk assessment
evaluating various risks facing the business including competitive threats, regulatory changes, economic factor changes.
Monitoring
evaluation of the internal control system
Gross profit percentage
gross profit divided by sales
Control environment
overall attitude of managers and employees about the importance of controls
Information and Communication
provide management with feedback about internal control.
Control procedures
provide reasonable assurance that business goals will be achieved
PE 7-2
solve
PE 7-3
solve
PE 7-4
solve
What is the meaning of n/eom?
the payment is due by the end of the month
What is the meaning of n/30?
the payment is due within 30 days
What is the meaning of 1/15, n/60?
1% discount if paid within 15 days, net amount due within 60 days
What account is debited for a return?
Accounts Payable