Questions Chapter 5

If beginning inventory is $60,000, cost of goods purchased is $380,000, sales revenue is $800,000 and ending inventory is $50,000, how much is cost of goods sold under a periodic system?

$390,000 Cost of goods sold = Beginning inventory + cost of goods purchased - ending inventory

Net income is $15,000, operating expenses are $20,000, and net sales total $75,000. How much is cost of goods sold?

$40,000 (Net income + Operating expenses(Gross Profit) -net sales )

A company makes a credit sale of $750 term 2/10 , on which it grants a return of $50 on June. What is received as payment in full on June 23?

$686 ($750-$50)-[$750-$50)x2%]

Bufford Corporation had reported the following amounts at December 31, 2014: sales revenue $184,000; ending inventory $11,600; beginning inventory $17,200; purchases $60,400; purchase discounts $3,000; purchase returns and allowances $1,100; freight-in $600; freight-out $900. Calculate the cost of goods available for sale.

$74,100

If net sales are $400,000, cost of goods sold is $310,000, and operating expenses are $60,000, what is the gross profit?

$90,000 (Net sales-cost of goods sold)

Jax Company uses a perpetual inventory system and on November 30 purchased merchandise for which it must pay the shipping charges. Which of the following is one part of the required journal entry when Jax pays the shipping charges of $200?

A debit to Inventory for $200

What would affect the gross profit rate ?

An increase in cost of good sold -Sales revenue, sales returns and allowances, sales discounts, or cost of goods sold will affect the ratio

The multiple-step income statement for a merchandising company shows each of these features except a. gross profit b. cost of goods sold c. a sales section d. an investing activities section

An investing activities section

In a periodic inventory system, when is the cost of the merchandising sold determined?

At the end of the period

Which of the following statements about periodic inventory system is true? a. Companies determine cost of goods sold only at the end of the accounting period b. Companies continuously maintain detailed records of the cost of each inventory purchase and sale c. The periodic system provides better control over inventories than a perpetual system d. The increased use of computerized systems has increased the use of periodic system

Companies determine cost of goods sold only at the end of the accounting period

That Operating Cycle of a merchandising company is ordinarily _______ that of a service firm

Longer than

The gross profit rate is equal to

Net sales minus cost of goods sold, divided by net sales

Under a perpetual inventory system, when goods are purchased for resale by a company

Purchases on account are debited to Inventory

When goods are purchased for resale by a company using a periodic inventory system:

Purchases on account are debited to purchases

Which sales account normally have a debit balance ?

Sales Discounts and Sales Returns and Allowance

Which one of the following will result in gross profit? a. operating expenses less cost of goods sold b. operating expenses less net income c. Sales revenue less operating expenses d. Sales revenue less cost of goods sold

Sales revenues less cost of goods sold

To record the sales of goods for cash in a perpetual inventory system;

Two journal entry are necessary: one to record the receipt of cash and sales revenue, and one to record the cost of goods sold and reduction of inventory

profit margin

net income/net sales

Gross profit will result if:

net sales are greater than cost of goods sold

A quality of earnings ratio

that is less than 1 indicates that a company might be using aggressive accounting tactics. (Quality of earnings= Net cash provided by operating activities / Net income

The operating cycle of merchandising company is ordinarily shorter than that of a service company True/False

False