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Breyer Company bought inventory FOB shipping point from Cellar Company for $4,000 cash, including shipping charges. On December 31, the last day of the accounting year, the goods were on a truck owned by Common Carrier Company, and not expected to arrive until January 3. Which company should include these goods in its December 31 inventory?

Breyer Company should include the $4,000 in its inventory.

Retailers

Buys goods and sells them directly to individuals

Beginning inventory + Purchases - Ending inventory =

Cost of goods sold

Every merchandise sale has 2 components which require an entry in a perpetual inventory system. Select these two components given the sale was made on account to a customer.

Debit Accounts Receivable and credit Sales Revenue in the amount of the selling price times the quantity sold Debit Cost of Goods Sold and credit Inventory in the amount of the cost times the quantity sold

FOB shipping point

Freight terms indicating that ownership of goods passes to the buyer when the public carrier accepts the goods from the seller.

Which of the following costs should be added to the buyer's Inventory account? Multiple choice question.

Freight-in with terms FOB shipping point

What does FOB shipping point mean?

Goods are owned by the buyer when they leave the seller's place of business.

Which of the following are found on the income statement of a merchandiser? (Check all that apply.)

Gross Profit Cost of Goods Sold Sales Revenue

Which of the following are reported on the income statement? (Check all that apply.)

Gross Profit Cost of Goods Sold Sales Revenue

Which line items are found on a multi-step but not on a single-step income statement. (Check all that apply.)

Gross Profit Income from Operations

Any costs incurred to get the merchandise into a condition and location ready for sale should be debited to ______. Multiple choice question.

Inventory

The entry to record the purchase of inventory on account causes ______.

Inventory (A+) Accounts payable (L+) an increase in assets and liabilities

How does a company record the $1,000 purchase of merchandise on account with discount terms of 2/10,n/30? (The company records its purchases gross of the discounts.)

Inventory (A+) 1,000 Accounts payable (L+) 1,000 1000*0.02=20 1000-20= 980 Inventory is increased by $1,000 and is later reduced if payment is made within the discount period.

The net method

a company considers purchase discounts when the goods are first purchased or received

On May 1, Doormart received an order from a customer. The goods were shipped FOB shipping point on May 3. The customer received the goods on May 5 and paid for the merchandise on June 1. When should Doormart record the sale?

may 3

Net Sales on an income statement equals Sales Revenue ______. Multiple choice question.

minus Sales Returns, Allowances and Discounts

the journal entry to record the payment within the discount period for goods previously purchased on account causes _____. (Check all that apply.) Multiple select question.

total assets to decrease total liabilities to decrease

Bijoux Company uses a perpetual inventory system. Its bookkeeper properly recorded a $5,000 sale on account, but forgot to record the related cost of the sale of $3,000. As a result of this error, ______. (Check all that apply.)

total assets will be too high net income will be too high

Bottom, Inc. paid an invoice for $1,000, with discount terms of 1/7, n/30, within the discount period. The net amount paid was ______. Multiple choice question.

990

A sales discount with terms of 1/10,n/30 means the buyer receives a ____________% discount if paid within _____________ days.

Blank 1: 1 or one Blank 2: 10 or ten

Inventory

Current asset on the balance sheet available for sale

Every merchandise sale has 2 components which require an entry in a perpetual inventory system. Select these two components given the sale was made on account to a customer.

Debit Cost of Goods Sold and credit Inventory in the amount of the cost times the quantity sold Debit Accounts Receivable and credit Sales Revenue in the amount of the selling price times the quantity sold

Beginning Inventory + purchases - Cost of goods sold =

Ending inventory

Manufacturing Company

Makes the finished goods

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

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

True or false: When a company sells different types of products, the income statement will report the Cost of Goods Sold for all of the products in one line item.

True

Retailer Ex.

Wal-Mart, Costco

What does the sales discount 2/10, n/30 mean?

You can take a 2% discount if you pay within 10 days, or the full amount is due within 30 days.

In a perpetual inventory system, the buyer of merchandise with the shipping terms FOB shipping point will ______. Multiple choice question.

add the transportation costs to its Inventory account

In a perpetual system, the entry to record a purchase of merchandise on account includes a ______. (Check all that apply

credit to Accounts Payable debit to Inventory

The journal entry to record taking a discount when paying for goods previously purchased on account and recorded using the gross method includes a ______. (Check all that apply.)

debit to a liability account credit to two asset accounts

Merchandisers record revenue when they ______.

fulfill their performance obligations by transferring control of the goods to customers

________________________ sales on an income statement equals Sales Revenue (gross) minus Sales Returns and Allowances minus Sales ________________ . (Enter one word per blank.)

Blank 1: Net Blank 2: Discounts or discount

To ensure the accuracy of inventory accounted for using a perpetual system, physical counts ______. (Check all that apply.)

detect shrinkage detect theft detect bookkeeping errors

Cost of Goods Sold on the income statement reports the ______.

cost times the quantity of goods sold during the period

Boron Company has Net Sales of $60,000; Beginning Inventory of $7,000; Purchases of $35,000 and Ending Inventory of $5,000. The Cost of Goods Sold is ______.

7,000 + 35,000 - 5,000 = x x = 37,000

Wholesaler

Buys goods and sells them to other companies that will then sell them to individuals

Which of the following items are netted against Sales Revenue to arrive at Net Sales (Sales Revenue to net sales)? (Select all that apply.) Multiple select question.

Sales Discounts Sales Allowances Sales Returns

Using a perpetual system, purchasing merchandise on account includes a ______. (Check all that apply.)

credit to Accounts Payable debit to Inventory

Sales Returns and Allowances are reported on the ______. Multiple choice question.

income statement

Using a perpetual inventory system, what is recorded when a customer returns a product and gets the cash back and the product is put back on the store shelf to be resold?

sales allowance and Returns (xR+, R-, SE-) Cash (A-) Inventory (A+) Cost of goods sold (E-, SE+) A debit to Sales Returns & Allowances and a credit to Cash; and a debit to Inventory and a credit to Cost of Goods Sold

A multistep income statement is useful to financial statement users because it ______. (Select all that apply.)

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

If sales returns and allowances are a large dollar amount relative to initial sales revenue, it may mean ______.

there are product quality issues

If sales returns and allowances are a large dollar amount relative to initial sales revenue, it may mean ______. Multiple choice question.

there are product quality issues

The journal entry to record the payment within the discount period for goods previously purchased on account causes _____. (Check all that apply.)

total assets to decrease total liabilities to decrease

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 ______.

x + $23,000 - 20,000 = 6000 23,000 -20,000 -6,000 = -x -3,000 = -x 3,000 = X

Place the income statement line items in the proper order from the top to bottom.

1) Sales Revenue, gross 2) sales returns, allowances and discounts 3) sales Revenue, net 4) Cost of goods sold 5) gross profit

Gross Profit

A subtotal on the income statement and is the amount earned from adding value to the inventory sold

Using a perpetual inventory system, the entry to record the return of goods you previously purchased on account includes a ______. (Check all that apply and answer from the viewpoint of the buyer.)

Accounts Payable (L-) Inventory (A-) credit to Inventory debit to Accounts Payable

Cost of Goods Sold

Cost times the quantity sold

cost of goods sold is an __________________ account

Expense

FOB destination

Freight terms indicating that ownership of goods remains with the seller until the goods reach the buyer.

Service Company

Will typically not have Inventory on its balance sheet or Cost of Goods Sold on its income statement

ABC Corp. sells a product for $1,000 cash that cost $600. The journal entry(ies) for this transaction using a perpetual inventory system include a debit to ______. Multiple choice question.

Cash (A+) 1,000 Cost of Goods sold (A+) 600 sales revenue (R+, SE+) 1,000 Inventory (A-) 600 Cash of $1,000 and a credit to Sales Revenue of $1,000; a debit to Cost of Goods Sold of $600 and a credit to Inventory of $600

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. (Enter only one word per blank.)

multistep

Inventory consists of the purchase price ______.

plus freight-in

Cost of goods sold equals beginning inventory plus ___________________ minus ending inventory. (Enter one word per blank.)

purchases

Sales returns and allowances ______. (Select all that apply.) Multiple select question.

are adjusted 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

the journal entry to record the payment for merchandise previously purchased on account will cause stockholders' equity to ______. Multiple choice question.

debit to accounts payable (L-) credit to cash (A+) remain unchanged

Using the gross method, the journal entry to record taking a discount when paying for goods previously purchased on account includes a(n) _____

decrease in assets and liabilities

Using the gross method, the journal entry to record taking a discount when paying for goods previously purchased on account includes a(n) ______. Multiple choice question.

decrease in assets and liabilities

beginning inventory + purchases =

goods available for sale Still here - inventory sold -cost of goods sold

Sales Returns and Allowances are reported on the ______.

income statement

Accounts Payable ______. (Check all that apply.)

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

Inventory shrinkage as a result of theft, damage or obsolescence that is discovered during a physical inventory count at the end of the accounting period is recorded with a decrease to Inventory ______. Multiple choice question.

only in a perpetual system

gross profit =

sales revenue - cost of goods sold

Beginning inventory was $5,000. During the month, the company purchased an additional $25,000 of inventory and sold goods that cost $20,000. Ending inventory was ______.

5,000 + 25,000 - 20,000 = x x = 10,000

True or false: Gross Profit is a stockholders' equity account and is credited when goods are delivered to customers. True false question.

False

On May 3, Botit Inc. purchased merchandise on account for $1,000, FOB shipping point, with terms 1/10, n/30 from Cellar, Inc. On May 6, Botit received the merchandise, along with an invoice for $1,000. In addition, $100 in shipping costs was owed to We Deliver, Inc. On May 12, Botit paid all amounts owed, which amounted to _____________ .

Inventory (A+) 1,000 Accounts Payable (L+) 1,000 1000 1000*0.01 = 10 1000-10= 1090

Manufacturer Ex.

Mattel, Goodyear

f a seller sells its merchandise with the shipping terms FOB destination, it credits Revenue when the merchandise is _______. Multiple choice question.

received by the customer

A purchaser is offered a 2% discount if the bill is paid within 7 days, otherwise the full amount is due in 30. This purchase discount is expressed on the invoice as follows:

2/7 n/30

_____________________ Sales on an income statement equals Sales Revenue (gross) minus Sales Returns and Allowances minus Sales ____________________

Blank 1: Net Blank 2: Discounts or discount

Alpha Company bought inventory from Omega Company, FOB shipping point. On December 31, the last day of the accounting year, the goods were on a truck owned by Theta, Inc., exactly half-way between Alpha and Omega. Which company should include these goods in its December 31 inventory? Multiple choice question.

Alpha

_____________ is classified as a(n) ________________ asset and reports the amount of merchandise available to sell. (Enter one word per blank.)

Blank 1: Inventory Blank 2: current

The Gross method

Method of recording purchases at the full invoice price without deducting any cash discounts. (will deduct if payment is made in discount period)

Which of the following items are netted against Sales Revenue to arrive at Net Sales (Sales Revenue to net sales)? (Select all that apply.) Multiple select question.

Sales Allowances Sales Discounts Sales Returns

Which of these will require a credit to the inventory account in a perpetual inventory system? (Check all that apply.)

Selling inventory on account Selling inventory for cash

Sales Revenue

Selling price times the quantity sold

Breyer Company bought inventory from Solar Company, FOB destination. On December 31, the last day of the accounting year, the goods were on a truck owned by Common Carrier, Inc., and not expected to arrive until January 2. Which company should include these goods in its December 31 inventory? Multiple choice question.

Solar

In a perpetual inventory system, which of the following statements are true? (Check all that apply)

The purchaser should record freight-in as an asset, Inventory. The seller should record freight-out as a selling expense.

XYZ's journal entry to record the return of merchandise previously purchased on account by XYZ was recorded by debiting Inventory and crediting Accounts Payable. As a result of this entry, ______. (Select all that apply.)

accounts payable debit (L-) inventory credit (A-) assets will be overstated liabilities will be overstated

Alpha Company bought inventory from Omega Company, FOB shipping point. On December 31, the last day of the accounting year, the goods were on a truck owned by Theta, Inc., exactly half-way between Alpha and Omega. Which company should include these goods in its December 31 inventory? Multiple choice question.

alpha

Goods Available for Sale will ______ when sold.

become Cost of Goods Sold on the income statement

sales allowance and returns is a ____________________ account

contra‐revenue account Therefore, sales returns and allowances is considered a contra‐revenue account, which normally has a debit balance.

The Inventory balance on the balance sheet reports the ______.

cost of goods available for sale

Inventory account consists of all ______. Multiple choice question.

costs needed to get the inventory ready for sale

When using the gross method, the journal entry to record taking a discount when paying for goods previously purchased on account includes a ______. (Check all that apply.)

credit to Cash for the amount paid credit to Inventory for the discount amount debit to Accounts Payable for the original cost

The journal entry to record taking a discount when paying for goods previously purchased on account and recorded using the gross method includes a ______. (Check all that apply.) Multiple select question.

credit to two asset accounts debit to a liability account

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

current asset; balance sheet only

Ace Electronics, which uses a perpetual inventory system, recorded a debit to Sales Returns & Allowances and a credit to Accounts Receivable, along with a debit to Inventory and a credit to Cost of Goods Sold. What business event must have taken place?

returns The customer received a damaged product and returned it.

Using a perpetual inventory system, what is recorded when a customer returns a product that was purchased on account, and the product is put back on the store shelf to be resold? Multiple choice question.

sales allowance and returns (L-) Accounts Receivable (a-) Inventory (A+) Cost of goods sold (A-) A debit to Sales Returns & Allowances and a credit to Accounts Receivable; and a debit to Inventory and a credit to Cost of Goods Sold

If a seller sells its merchandise with the shipping terms FOB shipping point, it credits Revenue when the merchandise is _______. Multiple choice question.

shipped from the seller's place of business