ACC 201 Chp 6 LS

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, n30

Sales revenue reports the ______

Sales price times the quantity of goods sold

Beginning inventory was $5,000. During the month, the company purchases an additional $25,000 of inventory. At the end of the month, ending inventory was $10,000. Cost of Goods sold equals ______

$20,000

Ace Electronics had cost of goods sold of $20,000. If purchases were $23,000 and ending inventory was $6,000, Ace's beginning inventory must have been _______

$3,000

Acme, Inc. had cost of goods sold of $2,000. If beginning inventory was $2,100 and ending inventory was $500, Acme's purchases must have been $______

$400 ($500 + $2,000 - $2,100 =$400)

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

$990 ($1,000 x 1%= $10 discount)

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:

1 Make comparisons over time 2. Compare one company with another

Walmart sells a bike that cost $100 to a customer for $250 cash. The entry to record the sale includes a debit to _____ and credit to ______ for $250. The entry to record the cost of the sale includes a debit to cost of goods sold and a credit to _______ for $100

1. Cash 2. Sales revenue 3. Inventory

Which line item would be found on a merchandiser's income sheet and not on a service firm's?

1. Sales revenue 2. Cost of goods sold

Which of the following are found on the income statement of a merchandiser?

1. Sales revenue 2. Gross profit 3. Cost of goods sold

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

1. Sales revenue, gross 2. Sales return, allowances and discounts 3. Sales revenue, net 4. Cost of goods sold 5. Gross profit

Match the financial statement line item with the appropriate description Gross Profit

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

Purchase transactions affect the ______

Balance sheet and not the income statement

Match the type of company with the appropriate description Retailers

Buys good and sells them directly to individuals

Match the type of company with the appropriate description Wholesaler

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

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 ______

Correct

Beginning Inventory + purchases - ending inventory= ______

Cost of goods sold on the income statement

Match the financial statement line item with the appropriate description Cost of Goods sold

Cost times the quantity sold

Match the financial statement line item with the appropriate description Inventory

Current asset on the balance sheet available for sale

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

Current asset; balance sheet only

Inventory is a(n) ______ intended to be _______

Current asset; sold

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

Destination

Match the description for each part of the purchase discount 2/10, n/30 2

Discount percentage

Beginning inventory + purchases= ______

Goods available for sale

Sales returns and allowances are reported on the ______

Income statement

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

Inventory

Match the type of company with the appropriate description Manufacturing company

Makes the finished goods

Gross profit equals ______

Net sales minus cost of goods sold

In a perpetual inventory system, the journal entry to record the payment of cash for the shipping costs of purchases merchandise will cause _______

One asset to increase and another asset to decrease

The ______ cycle is a series of activities that the company undertakes to generate sales and ultimately cash

Operating

Under the ______ inventory system, inventory records are updated only at the end of the accounting period

Periodic

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

Perpetual

Cost of goods sold equals beginning inventory plus _____ minus ending inventory

Purchases

The journal entry to record the payment for merchandise previously purchases on account will cause stockholders' equity to ______.

Remain unchanged

Purchase _____ and allowances are accounted for with a credit to inventory and a debit to cash or accounts payable

Returns

When a seller fulfills its performance obligation, it credits ______

Revenue

Match the financial statement line item with the appropriate description Sales Revenue

Selling price times the quantity sold

FOB ______ is the term used when ownership of the goods transfers to a buyer as soon as the goods leave the seller's place of business

Shipping point

To determine cost of goods sold for the period requires ______

Subtracting ending inventory from the goods available to sell, which is the beginning inventory plus purchases

Match the description for each part of the purchase discount 2/10, n/30 10

The discount period

FOB destination means that goods are owned by the buyer as soon as ______

They arrive at the buyer's place of business

Match the description for each part of the purchase discount 2/10, n/30 30

When the full amount is due

Match the type of company with the appropriate description Service Company

Will typically not have inventory on its balance sheet or cost of goods sold on its income statement

What does the sales discount 2/10, n30 mean?

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

In the perpetual system, the entry to records a purchase of merchandise on account includes a ______

1. Credit to accounts payable 2. Debit to inventory

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

1. Credit to cash 2. Debit to accounts payable

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

1. Debit to cost of goods sold 2. Credit sales revenue 3. Credit to inventory 4. Debit to accounts receivable

Using a perpetual inventory system, the effect on the accounting equation of purchasing merchandise on accounts includes a(n) ______

1. Increase in assets 2. Increase in liabilities

The entry to record the revenue recognized from the service portion of a bundle sale that was collected in advance is recorded with a debit to ______ and a credit to _____

Deferred Revenue; Service revenue

In a perpetual system, the entry to record a purchase of merchandise on account includes a ______

1. Debit to inventory 2. Credit to accounts payable

Which of the following should be debited to inventory

1. Purchases of merchandise on account 2. Freight-in if shipped FOB shipping point

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

1. The inventory account is later reduced if payment is made within the discount period 2. The purchase is first recorded at full cost

In a perpetual inventory system, which of the following statements are true?

1. The purchaser should record freight-in as an asset, Inventory. 2. The seller should record freight-out as a selling expense

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, ______

1. Total assets will be too high 2. Net income will be too high