ACG2021 Chapter 4 Smartbook

If the seller is responsible for the shipping costs of merchandise sold, the shipping terms will be specified as:

FOB destination

Select all the apply. Cost of goods sold is characterized by which of the following statements?

cost of goods sold is used to figure gross profit. cost of goods sold is also called cost of sales. cost of goods sold is an expense reported on the income statement. cost of goods sold includes the expenses of buying and preparing an item for sale.

Review the following credit terms and identify the one that states that the buyer will receive a 3% discount if the payment is made within 15 days. Otherwise, full payment is expected within 45 days of the invoice date.

3/15,n/45

What is a purchase return?

a purchase return refers to merchandise a buyer acquires, but then returns to the seller.

Merchandise inventory that is still available for sale is considered a(n) _____________ (asset/expense/revenue) and is reported on the _____________ (balance sheet/income statement) and merchandise that is sold during the period is considered a(n) _______________ (asset/expense/liability) and reported on the __________ (balance sheet/income statement)

asset; balance sheet; expense; income statement

Determine which statements below are correct regarding merchandise available for sale during a period.

beginning inventory + net purchase = merchandise available for sale ending inventory + cost of goods sold = merchandise available for sale

Cost of goods sold is characterized by which of the following statements?

cost of goods sold includes the expenses of buying and preparing an item for sale cost of goods sold is used to figure gross profit cost of goods sold is also called cost of sales cost of goods sold is an expense reported on the income statement

Which of the statements below are correct regarding cost of goods sold?

cost of goods sold is the expense of buying and preparing merchandise

Jo's Market makes a credit sale for $1,000 with terms of 2/10,n/30. The cost of the merchandise is $400. The required journal entry to record the sale and cost of the sale is:

debit accounts receivable $1,000; credit sales $1,000; debit cost of goods sold $400; and credit merchandise inventory $400.

Select all that apply. Merchandise inventory can be described as:

products that a company owns and intends to sell. an account increased with a debit. an account appearing on a balance sheet of a merchandiser. an asset account.

Sale is a(n) _________ (expense/revenue/asset) account and is reported on the _________ (income/balance) _____________ (statement/sheet)

revenue; income; statement

Gross profit is computed as net ___________ minus cost of goods sold.

sales

Merchandise inventory can be described as:

an account increased with a debit an asset account an account appearing on a balance sheet of a merchandiser products that a company owns and intends to sell

A purchase return refers to merchandise a _________ (buyer/seller/creditor) purchased, bu then returns to the _________ (buyer/seller/creditor) for a refund for the purchase price or reduction in the amount owed.

buyer; seller

Select all that apply. Dogs R US uses the perpetual inventory system to account for its merchandise. A customer returned merchandise. Assuming that the purchase was originally bought on credit for $400 with a cost to Dogs R US of $100, demonstrate the required journal entry of Dogs R US to record the return by selecting all of the correct actions below.

debit merchandise inventory $100 credit cost of goods sold $100 debit sales returns and allowances $400 credit accounts receivable $400

X-Mart purchased $300 of merchandise on account. Demonstrate the journal entry to record this transaction, assuming the perpetual inventory system is used.

debit merchandise inventory $300; credit accounts payable $300

To compute net income for a merchandiser, you will start with net sales, subtract cost of goods sold and subtract other _________.

expenses

Which statement below correctly explains what merchandise inventory is?

merchandise inventory is an asset reported on the balance sheet and contains the cost of products purchased for sale.

Toys R Fun purchased $4,000 of merchandise and paid immediately. To record this transaction, Toys R Fun's accountant would debit the ___________ (merchandise inventory/accounts payable/cash) account and credit the __________ (cash/merchandise inventory/accounts payable) account.

merchandise inventory; cash

Explain what the credit terms of 2/10, n/30 mean.

the buyer can deduct 2% of the invoice amount if the payment is made within 10 days of the invoice date. the full payment is due within a 30-day credit period.