chapter 5 accounting part 2

Sales is a(n) ______ account.

revenue

Review the following credit terms and identify the one that states that the buyer will receive a 3% discount if the payment is made within 15 days. Otherwise, full payment is expected within 45 days of the invoice date. Multiple choice question.

3/15, n/45

Identify the statements below which summarize what cash discounts are.

A buyer views a cash discount as a purchase discount. Cash discounts are described in credit terms. A seller views a cash discount as a sales discount. Sellers can grant a cash discount to encourage buyers to pay earlier. A reduced payment applies to the discount period.

What is a purchase return?

A purchase return refers to merchandise a buyer purchases, but then returns to the seller.

what is a sales return

A sales return refers to merchandise that customers return to the seller after a sale.

Select the statements below that correctly describe the flow of costs in a merchandiser's accounting cycle.

Beginning inventory + net purchases = Merchandise available for sale. Merchandise that is sold becomes an expense reported on the income statement. Merchandise that is purchased becomes an asset reported on the balance sheet. Ending inventory + Cost of goods sold = Total merchandise available for sale.

A merchandiser has four closing journal entries at the end of an accounting cycle.

Close the income summary account. Close the withdrawals account. Close expense accounts. Close revenue accounts.

Explain how to determine gross profit on an income statement by selecting the correct statement below.

Cost of goods sold is subtracted from net sales.

Sticky Company's merchandise inventory balance at year end is $15,050, but a physical count reveals that only $15,000 of inventory exists. The adjusting entry to record the shrinkage includes: (Check all that apply).

Credit to Merchandise Inventory for $50 Debit to Cost of Goods Sold for $50

X-Mart purchased $300 of merchandise and paid immediately. Demonstrate the journal entry to record this transaction, assuming the perpetual inventory system is used.

Debit Merchandise Inventory $300; credit Accounts Payable $300.

X-Mart purchased $300 of merchandise and paid immediately. Demonstrate the journal entry to record this transaction, assuming the perpetual inventory system is used.

Debit Merchandise Inventory $300; credit Cash $300.

If the seller is responsible for the shipping costs of merchandise sold, the shipping terms will be specified as:

FOB Destination

If the seller is responsible for the shipping costs of merchandise sold, the shipping terms will be specified as:

FOB destination

A single-step income statement can be identified by which of the following formats?

It shows only one total for all expenses.

Which of the following equations correctly identify the cost flow of a merchandising company?

Net purchases plus beginning inventory equals merchandise available for sale

The buyer and seller of merchandise must agree on who is responsible for paying freight terms. Show your understanding of freight terms by selecting all of the correct statements below. (Check all that apply.)

Revenue for the sale will be recorded after the goods reach their destination, if the goods are shipped FOB destination. Terms FOB shipping point means the buyer accepts ownership when the goods depart the seller's place of business. When the shipping costs are the responsibility of the buyer, then the Merchandise Inventory account is debited for the freight charges

Demonstrate how to prepare a multiple-step income statement by ranking the items below in the order they would appear on a multiple-step income statement of a merchandiser.

Sales Cost of goods sold Gross profit Operating expenses Income from operations Other revenue expenses

Identify the statements below that are correct regarding the closing entries for a merchandiser using the perpetual inventory system.

Sales is closed as a revenue account. Sales Discounts is closed with the expense accounts. The Withdrawals account is closed to Owner, Capital. Cost of goods sold is closed with the expense accounts. Sales Returns and Allowances is closed with the expense accounts.

Identify the statement below that is the correct definition of "shrinkage".

Shrinkage is the term used to refer to the loss of inventory due to theft or deterioration.

Explain what the credit terms of 2/10, n/30 mean.

The buyer can deduct 2% of the invoice amount if payment is made within 10 days of the invoice date. The full payment is due within a 30-day credit period.

A purchase return refers to merchandise a

buyer

he Merchandise Inventory account on a classified balance sheet is reported in the:

current assets section

The formula for the acid-test ratio is computed as (cash + short-term investments + current receivables)/Blank______.

current liabilities

Jo's Market makes a credit sale for $1,000 with terms of 2/10,n/30. The cost of the merchandise is $400. The required journal entry to record the sale and cost of the sale is:

debit Accounts Receivable $1,000; credit Sales $1,000; debit Cost of Goods Sold $400; and credit Merchandise Inventory $400

Jan's Jams makes a credit sale for $300 with terms of 2/10,n/30. The cost of the merchandise is $200. The required journal entry to record the sale and the cost of the sale is:

debit Accounts Receivable $300; credit Sales $300; debit Cost of Goods Sold $200; and credit Merchandise Inventory $200

A multiple-step income statement will have all of the following main parts except:

net sales

sales is an account and is reported on the

revenue and income statement

Gross profit is computed as net minus cost of goods sold.

sales

but then for a refund of the purchase price or reduction in the amount owed.

seller

A single-step income statement shows only one subtotal for expenses.

true