Principles of Accounting - Chapter 6 Inventory and Cost of Goods Sold
The definition of inventory includes which of the following items?
Materials used currently in the production of goods to be sold Items held for resale Items currently in production for future sale
Gross Profit is
Net Sales Revenue minus Cost of Goods Sold.
Which of the following costs are recognized in work in process for a manufacturing company?
Overhead Raw materials Direct labor
Major differences between service companies and retail or manufacturing companies is that retailers and manufacturers must account for
cost of goods sold. inventory.
Where is inventory classified in the financial statements?
current asset in the balance sheet
On a multiple step income statement, the category of revenues and expenses reported immediately after operating income is referred to as ____ revenues and expenses.
nonoperating, non-operating, or other
true or false: When goods are sold, the cost of the goods is transferred from the Inventory account to the Cost of Goods Sold account.
true
____ companies purchase inventory that is primarily in finished form and ready for resale to customers.
Merchandising, Merchant, Retail, Wholesale, or Merchandise
Prather Inc. has sales of $100,000, sales returns of $5,000, cost of goods sold of $60,000, and selling expenses of $3,000. Calculate gross profit.
$35,000 Net sales is $95,000 ($100,000 - 5,000). Net sales of $95,000 less cost of goods sold of $60,000 = $35,000. Selling expenses are deducted after gross profit.
Beginning inventory is $60,000. Purchases of inventory during the year are $100,000. Cost of goods sold is $120,000. What is ending inventory?
$40,000
Beginning inventory is $20,000. Purchases of inventory during the year are $100,000. Ending inventory is $50,000. What is cost of goods sold?
$70,000. $20,000 + $100,000 - $50,000 = $70,000.
The cost of goods not yet sold is recorded in the______ account, whereas the cost of goods that are sold to customers is recorded in ______.
Inventory; Cost of Goods Sold