study for acct test #2

For a recent year, TechMart reported sales of $44,257 million. Its gross profit was $12,392 million. What was the amount of TechMart's cost of goods sold? (Enter answer in millions.)

$44,257-$12,392= $31,865 (million)

The Stationery Company purchased merchandise on account from a supplier for $6,800, terms 1/10, n/30. The Stationery Company returned merchandise with an invoice amount of $900 and received full credit. a. If The Stationery Company pays the invoice within the discount period, what is the amount of cash required for the payment?

$6800-900=$5900 $5900*(1-0.01)=$5841 $5841

determining amounts to be paid on invoices

(invoice amount with discount applied - refund w discount applied) + shipping if there is any

to find gross profit percentage

(revenue - cost of revenue or sales) / revenue aka gross profit / sales

How to do a multi-step income statement

1. Find the gross profit: Sales - CGS = Gross Profit 2. Add the expenses to find to find Total Expenses but do not include insurance exp yet: EX) Selling expense + Admin expenses = Total exps 3. Find Operating Income: Gross Profit - Total Expenses = Operating Income 4. Subtract insurance expenses last Operating Income - Insurance exp = Net Income

what does 2/10, n/30 mean?

2% discount if paid within 10 days, otherwise net amount due within 30 days

what's the entry for a sale of 10,000 on credit?

Debit Accounts Receivable 10,000 Credit Sales 10,000

How to keep sales up when facing competition?

Drop your price. This increases sales but your gross margin decreases. Investors focus on gross margin so it can look bad to them

how to do a credit term entry Example: Apple sells $20,000 on credit. Their credit term they give is 2/15, n/60 (2% off of 20,000 if paid w/in 15 days, otherwise 20,000 is due within 60 days)

Entry on the day of sale would be: Debit AR for $20,000 Credit Sales for $20,000 If they pay before the credit term is up then the Entry is modified to this: Debit Cash $19,600 (because they got the 2% off) Debit Sales Discount $400 (bc that what 2% of 20,000 is) Credit Accounts Receivable $20,000

Net Income for a service business

Fees Earned - Operating Expense = Net Income

How can big companies bring down operating expenses?

Firing people

What is a major advantage of the multiple-step income statement over the single-step income statement?

It shows the relationship of gross profit to sales

For manufacturing or merchandising companies, the two biggest components of the financial statements

Largest asset on balance sheet is inventory Largest expense item on the Income Statement is Cost of Goods Sold

Will the income statement always report an operating income?

No

Net Income for a merchandising business

Sales - CGS = Gross Profit THEN Gross Profit - Operating Exp = Net Income

How to find Gross Profit

Sales - Cost of goods sold = gross profit

purpose of credit terms

in order to encourage the buyer to pay before the end of the credit period the seller may offer a discount

The Stationery Company purchased merchandise on account from a supplier for $6,800, terms 1/10, n/30. The Stationery Company returned merchandise with an invoice amount of $900 and received full credit. b. Under a perpetual inventory system, what account is credited by The Stationery Company to record the return?

inventory Any discounts or returns are recorded directly by the buyer who reduces the balances of Accounts Payable and Inventory, using a debit memo based on the net cost of the merchandise.

Time Value of Money

the principle that a dollar received today is worth more than a dollar received in the future because you can go ahead and invest the $1 if you have it with you right now