chapter 6 merchandising operations and the multistep income statement

goods

service companies sell services rather than _____

1. sales revenue 2. sales return, allowances and discounts 3. net sales 4. cost of goods sold 5. gross profit

place an income statement in the proper order from top to bottom

service companies

sell services rather than physical goods

-purchase returns -purchases discounts

what would be found on the credit side of the inventory T-account?

-compare one company with another -make comparisons over time

the gross profit percentage measures the percentage of profit earned on each dollar of sales before deducting all expenses other than cost of goods sold. This ratio is used to:

-debit to cost of goods sold -credit to inventory

in a perpetual system, the entry to record the sale of merchandise to a customer on account would include a

merchandising companies

sell goods that have been obtained from a supplier

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

what does FOB shipping point mean?

goods held for sale in the normal course of business

what is a merchandise inventory?

inventory

what line would be found on a merchandiser's balance sheet and to a service firm's?

inventory

in a perpetual system, the _____ account is debited when a company purchases merchandise on account

manufacturing companies

sell goods that they have made themselves

decrease in assets and liabilities

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

-credit to cash -debit to accounts payable

the journal entry to record the payment for merchandise previously purchased on account includes a ____

net sales minus cost of goods sold, then divide by net sales, and multiply by 100

gross profit percentage is calculated as ________

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

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 sale of $3,000. As a result of this error, ____

credit

in a periodic system, the end-of-period adjustment that adjusts cost of goods sold for the amount in ending inventory requires a _______ to cost of goods sold

-a credit to sale revenue of $2,000 - a debit to accounts receivable of $2,000

X company, which uses a perpetual inventory system, sold $2,000 of merchandise on account with credit terms of 2/10,n/30. The journal entry to record the initial sale gross of any discounts will include

$4,900

XYZ company sold merchandise for $5,000, with payment terms of 2/10,n/30. If the customer pays within the discount period and takes the discount, XYZ will receive ______.

current asset; sold

inventory is a _____ intended to be ______

$1090 1000 *.01= 10 1000-10=990 990+100= 1090

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

-assets are understated -stockholders' equity is understated -liabilities are understated

A company's bookkeeper, recorded the purchase of merchandise on account with a debit to cost of goods sold and a credit to cash. As a result, ________

$37,000

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

-gross profit -sales revenue -cost of goods sold

What are reported on the income statement?

-selling inventory for cash -selling inventory on account

What requires a credit to the inventory account in a perpetual inventory system?

$20,000

beginning inventory was $5,000. During the month, the company purchased an additional $25,000 of inventory. At the end of the month, ending inventory was $10,000. Cost of Goods sold equals_____

be split between cost of goods sold and ending inventory

berkley company had beginning inventory of $4,000 and purchases of $20,000. If half of its inventory was sold, Berkley's goods available for sale will

costs needed to get the inventory ready for sale

inventory consists of all

current asset on the balance sheet

inventory is reported as a(n)______

periodic

the ____ inventory system requires that the inventory account be updated only at the end of the accounting period

perpetual; periodic

the ______ inventory system records all inventory-related transactions in the inventory account and reduces inventory at the time of sale. The _____ inventory system uses separate accounts for these items and records cost of goods sold at the end of the accounting period

remain unchanged

the journal entry to record the payment for merchandise previously purchased on account will cause stockholders' equity to _______

revenues

the operating cycle is a series of activities that the company undertakes to generate _____ and ultimately cash

shipping point

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

correct

under a perpetual inventory system, the entry to record the return of goods you had previously purchased on account was recorded with a debit to accounts payable and a credit to inventory. This entry is

-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

what ways does a periodic system differ from a perpetual system?

-purchases -beginning balance -freight- in

what would be found on the debit side of the inventory T-account?