ACTG 2010 Chapter Six

Boopsie Agin, the company's bookkeeper, recorded the purchase of merchandise on account with a debit to Cost of Goods Sold and a credit to Cash. As a result:

Assets are understated Liabilities are understated Stockholder's Equity are understated.

Berkley Company had beginning inventory of $4000 and purchases of $20000. If half of it's inventory is sold, Berkley's goods available for sale will:

Be split between Costs of Goods Sold and ending Inventory.

Sales Returns and Allowances is a ______ account and is _______ when goods are returned by customers for a refund.

Contra-revenue and debited.

Inventory consists of all:

Costs needed to get the Inventory ready for sale.

Which of the following are reported on the income statement?

Costs of Goods Sold, Sales Revenue and Gross Profit.

Inventory is reported as a(n):

Current asset on the balance sheet.

True of False: Inventory and Supplies are interchangeable account titles and have the same meaning.

False.

Inventory shrinkage as a result of theft, damage or obsolescence that is discovered during a physical inventory count at the end of the accounting period is recorded with a decrease to inventory:

Only in a perpetual system.

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

Periodic.

Under the ___________ inventory system, the inventory account is updated every time inventory is bought, sold or returned.

Perpetual.

Services companies sell services rather than:

Products

Cost of Goods Sold equals Beginning Inventory plus _______ minus Ending Inventory.

Purchases.

Income Statement in order:

Sales Revenue --> Sales Returns, Allowances and Discounts --> Net Sales --> Cost of Goods Sold --> Gross Profit

The operating cycle is a series of activities that the company undertakes to generate ______ and ultimately, cash.

Sales.

A multistep income statement is useful to financial statements users because it:

Separates income statement items into meaningful components Separates cost of goods sold from other operating expenses, which allows the calculation of gross profits.

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

True.

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

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

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

credit to Accounts Payable debit to Inventory

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

debit to Accounts Payable credit to Cash

After performing a physical count of inventory at the end of the accounting period, it was discovered that the amount on hand was less than the accounting records of reported. The entry of record this inventory shrinkage includes:

debit to Cost of Goods Sold credit to Inventory

Using a perpetual inventory system, the effect on the accounting equation of purchasing merchandise on account includes:

increase in Liabilities increase in Assets