Buisness chapter 5

The following amounts relate to Amato Company for the current year: Beginning Inventory, $20,000; Ending Inventory, $28,000; Purchases, $166,000; Purchase Returns, $4,800; and Freight-Out, $6,000. The amount of Cost of Goods Sold for the period is

$153,200.

As a result of a thorough physical inventory, Railway Company determined that it had inventory worth $180,000 at December 31. This count did not take into consideration the following facts: Rogers Consignment store currently has goods worth $35,000 on its sales floor that belong to Railway but are being sold on consignment by Rogers. The selling price of these goods is $50,000. Railway purchased $13,000 of goods that were shipped on December 27, FOB destination, that will be received by Railway on January 3. Determine the correct amount of inventory that Railway should report.

$215,000.

If beginning inventory is $60,000, cost of goods purchased is $380,000, and ending inventory is $50,000, cost of goods sold is

$390,000.

Baden Shoe Store has a beginning merchandise inventory of $15,000. During the period, purchases were $70,000; purchase returns, $2,000, and freight-in $5,000. A physical count of inventory at the end of the period revealed that $10,000 was still on hand. The cost of goods available for sale was

$88,000

If Sales Revenue is $400,000, Cost of Goods Sold is $310,000, and Operating expenses are $60,000, the Gross profit is

$90,000.

Company A purchases $1,200 of merchandise from Company B on July 1 with credit terms 2/10, n/30. Company A returns $200 of the merchandise on July 5. On July 11, Company B received full payment from Company A. The amount of the payment on July 11 is

$980.

Which of the following accounts will normally appear in the ledger of a merchandising company that uses a perpetual inventory system?

Cost of Goods Sold.

Which of the following appears on both a single-step and a multiple-step income statement?

Cost of goods sold.

FOB destination means that the seller places the goods free on board the common carrier and the buyer pays the freight costs. (True or False)

False

In a periodic inventory system, companies keep detailed inventory records of the goods on hand throughout the period. (True or False)

False

Sales revenue less cost of goods sold is called net profit. (True or False)

False

Some argue that the use of FIFO in a period of inflation enables a company to avoid reporting paper (phantom) profit as economic gain. (True or False)

False

When the terms of sale are FOB shipping point, ownership of the goods remains with the seller until the goods reach the buyer.(True or False)

False

collects (True or False)

False

Income from operations is

Gross profit less Operating expenses.

Which of the following accounts is not closed to Income Summary?

Inventory

Which of the following accounts will appear in the trial balance of a merchandising company but not a service company?

Inventory.

Which of the following is shown on both a multiple-step and a single-step income statement?

Net sales

Which of the following expressions is incorrect?

Operating expenses less Cost of goods sold equals Gross profit.

Which of the following appears on both the income statements of merchandising and service companies?

Operating expenses.

Cash equivalents include each of the following except

Petty cash.

All of the following are contra revenue accounts except

Sales Revenue.

In a periodic inventory system the entry to record the sale of merchandise on account affects which of the following accounts?

Sales Revenue.

Gross profit is

Sales revenue less Cost of goods sold.

A merchandiser using a perpetual system will require one additional adjusting entry to make the records agree with the actual inventory on hand. (True or False)

True

The results under FIFO in a perpetual system are the same as in a periodic system. (True or False)

True

Under a periodic system, the company uses separate accounts to record freight costs, returns, and discounts. (True or False)

True

If a check correctly written and paid by the bank for $638 is incorrectly recorded on the company's books at $683, the appropriate treatment on the bank reconciliation would be to

add $45 to the book's balance.

In a worksheet, Inventory is shown in the following columns

adjusted trial balance debit and balance sheet debit.

Companies using a periodic inventory system take a physical inventory for each of the following purposes except to determine the

amount of inventory lost due to shoplifting or employee theft

perpetual and a periodic inventory system?

cash received on account with a discount

All of the following are classified as cash except

commercial paper.

Cost of goods available for sale consists of two elements: beginning inventory and

cost of goods purchased.

Under a perpetual inventory system, which of the following is not part of the journal entries made when merchandise is sold on credit?

credit the Cost of Goods Sold account.

A company that maintains a perpetual inventory system has an inventory account balance of $50,000. The physical count of goods on hand totals $49,600. Which of the following adjusting entries is correct?

debit Cost of Goods Sold and credit Inventory.

In a period of rising prices, FIFO will have

lower cost of goods sold than LIFO.

The party who issues a check is the

maker

The gross profit method can be used for all of the following reasons except

preparation of annual financial statements.

Under a perpetual inventory system, when goods are purchased for resale by a company

purchases on account are debited to Inventory.

When a company has a net negative balance in its bank account, it is

reported as a current liability.

With respect to the income statement,

sales discounts are included in the calculation of gross profit.

A bank may issue a debit memorandum for all of the following except

the collection of a note receivable by the bank for the depositor.

In a perpetual inventory system, the Cost of Goods Sold account is used

whenever there is a sale of merchandise or a return of merchandise sold.