ch 6 learnsmart

the journal entry to record the payment for merchandise previously purchased on account includes a debit to _____ and a credit to _____

accounts payable; cash

Ace Electronics had Cost of Goods Sold of $20,000. if purchases of inventory were $23,000 and ending inventory was $6,000, Ace's beginning inventory must have been

$3,000

a _______ income statement shows how much profit is earned from product sales without being clouded by other operating expenses and separates other items that are not core to the operations of the company

multistep

a benefit of the periodic inventory system is that inventory shrinkage from theft, fraud and error is able to be estimated

perpetual

sales revenue reports the

sales price times the quantity of goods sold

Inventory is reported as a(n) ______ on the _____

current asset, balance sheet only

which inventory system requires that the purchase of merchandise on account be debited to purchases

periodic system

what are the two stages of accounting for a purchase discount using the gross method?

- the purchase is first recorded at full cost - the inventory account is later reduced if payment is made within the discount period

in a perpetual inventory system, the entry to record the sale includes a debit to ______ and a credit to _____

cost of goods sold inventory

which step must happen first when determining cost of goods sold using a periodic inventory system

count the number of units on hand

The income statement for ABC Company shows gross profit of $144,000; operating expenses of $130,000 and cost of goods sold of $216,000. What is the net sales revenue?

net sales revenue - cost of goods sold = gross profit. to solve for sales, rearrange the equation as gross profit + cost of goods sold = net sales revenue 144,000 + 216,000 = 360,000

sales returns and allowances

- are required for at the end of the accounting period for estimated returns and allowance expected to occur in the following months - reduce the amount the seller expects to receive from customers - are typically recorded after the initial sale when the actual return or allowance occurs

Berkley Company had beginning inventory of $4,000 and purchases of $20,000. if half its of its inventory sold, Berkley's total goods available for sale for the period will

be split between cost of goods sold and ending inventory

goods available for sale will ____ when sold

become cost of goods sold on the income statement

the gross profit percentage is the ratio to watch if you are worried about increased competition. if the company lowers its prices to retain market share without lowering its cost of goods sold, its gross profit percentage will ______

decrease

the seller of inventory pays for shipping if the shipping terms are FOB

destination

which line are found on a multi-step but not a single-step income statemnt

income from operations gross profit

in a periodic system, for cost of goods sold to be updated, which of the following must occur?

compute cost of goods sold by subtracting ending inventory from goods available for sale take a physical count of inventory

in which of the following ways does a periodic system differ from a perpetual system? (check all that apply)

cost of goods sold is not updated until the end of the accounting period in a periodic system inventory is not updated until the end of the accounting period in a periodic system

beginning inventory + purchases - ending inventory=

cost of goods sold on the income statement

using the gross method, the journal entry to record taking a discount when paying for goods previously purchased on account includes

decrease in assets in liabilities

when using the gross method, the journal entry to record taking a discount when paying for goods previously purchased on account includes a

-credited to cash for the amount paid -debit to accounts payable for the original cost -credit to inventory for the discount amount

Boopsie Agin, the company's bookkeeper, recorded the purchase of merchandise on account with a debt to cost of goods sold and a credit to cash. As a result, ____

Liabilities are understated Stockholders' equity is understated Assets are understated

Accounts Payable _____________. (Check all that apply)

is debited when the amounts owed are paidis credited for purchases made on account

a ______ inventory system records the cost of goods sold with a debit to Cost of goods sold and a credit to inventory at the time of the sale (enter one word per blank)

perpetual

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

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

which inventory system required purchases of merchandise to be recorded in the inventory account instead of the purchases account?

the perpetual inventory system

What are the two stages of accounting for a purchase discount using the gross method? (Check all that apply.)

the purchase is first recorded at full cost the inventory account is later reduced if payment is made within the discount period