accounting Unit exam 2 notes chapter 4

A seller uses a perpetual inventory system and on April 4 it sells $5,000 in merchandise with a cost of $2,400 to a customer on credit terms of 3/10, n/30.

general journal: DEBIT ACCOUNTS RECEIVABLE $5,000 CREDIT: SALES $5000 2nd general journal DEBIT COST OF GOODS SOLD $2,400 CREDIT MERCHANDISE INVENTORY $2,400

Peron Company uses a perpetual inventory system and the net method of recording invoices. The company purchased merchandise on November 4 at a $2,000 invoice price with terms of 2/10, n/30.

general journal: DEBIT MERCHANDISE INVENTORY $1960 CREDIT ACCOUNTS PAYABLE $1960 (Explanation $2000 X .2%=40 2000-40=1960

On December 31, the company estimates future sales refunds to be $900. As of that date, the company has an unadjusted debit balance in Accounts Receivable of $25,000 and an unadjusted credit balance of $300 in Sales Refunds Payable.

general journal: DEBIT SALES RETURNS AND ALLOWANCES $600 CREDIT SALES REFUND PAYABLE $600 (EXPLANATION 900-300=600

A seller uses a periodic inventory system, and on April 4, it sells $5,000 in merchandise on credit (when its cost is $2,400) to a customer on credit terms of 3/10, n/30. On April 5, the customer returns merchandise for a cash refund of $500.

general journal: DEBIT sales and allowances $500 CREDIT cash $500

Roberto Company uses a perpetual inventory system. On December 1, the company purchased $3,300 of merchandise for cash.

general journal: debit Merchandise inventory $3,300 credit cash $3,300

initially records an invoice at the full amount

gross method

When a classified balance sheet is prepared, merchandise inventory is:

Reported as a current asset

A company reports net sales of $600,000, cost of goods sold of $200,000, and net income of $100,000. Its gross profit equals:

400,000 ( explanation: gross margin= net sales minus costs of goods sold. Gross margin= 600,000-200,000=400,000)

A company has the following selected account balances: Sales $250,000 Sales Discounts1 $1,500Sales Returns and Allowances $2,300 Sales Salaries Expense $56,000 Store Supplies Expense $15,000 Advertising Expense $8,000 Cost of Goods Sold $125,000 **What is the gross profit that would appear on a multiple-step income statement:**

$121,200 explanation: $250,000 − $1,500 − $2,300 − $125,000 = $121,200.

a company reports the following information beginning inventory $11,000 Ending inventory 13,000 Expenses 7,000 Net purchases 23,000 Net sales 38,000. The company costs of goods sold equals:

$21,000 (Explanation: Beginning Inventory of $11,000 + Net Purchases of $23,000 = Cost of Goods Available for Sale of $34,000. Then, Cost of Goods Available for Sale of $34,000 (from above) − Ending Inventory of $13,000 = Cost of Goods Sold of $21,000.

beginning inventory $11,000 Ending inventory 13,000 Expenses 7,000 Net purchases 23,000 Net sales 38,000. THE COMPANY'S COST OF GOODS AVAILABLE FOR SALE EQUALS:

$34,000 (Explanation: Beginning inventory of $11,000 + Net purchases of 23,000= costs available for sale of 34,000

A company reports the following information: Invoice cost of merchandise purchases$ 110,000 Purchase discounts 15,000 Purchase returns and allowances 7,000 Transportation costs 3,000. The company's total cost of merchandise purchases equals:

$91,000 explanation: Invoice cost of $110,000 minus discounts of $15,000 and minus returns and allowances of $7,000 plus transportation costs of $3,000 equals $91,000.

Operating Cycle for a Merchandiser

1. cash purchases of merchandise 2. inventory for sale 3. credit sales 4. accounts receivable 5. receipts of cash from credit sales

Which statement is correct regarding the closing process of a merchandiser?

Both the Sales Discounts and the Sales Returns and Allowances accounts are credited during the closing process. Correct

The company's adjusted trial balance includes the following accounts balances: Cash, $15,000; Equipment, $85,000; Accumulated Depreciation, $25,000; Accounts Payable, $10,000; Retained earnings, $63,500; Dividends, $2,000; Sales, $56,000; Sales Returns and Allowances, $3,000; Sales Discounts, $1,500; Depreciation Expense, $25,000; and Salaries Expense, $23,000. All accounts have normal balances. ***(add all this for income summary total** Prepare the second closing entry by selecting the account names from the pull-down menus and entering dollar amounts in the debit and credit columns.

GENERAL JOURNAL ENTRY: DEBIT: INCOME SUMMARY $52,500 (depreciation expense $25,000 + Salaries expense $23,000 + sales discounts $1,500 + sales and returns an allowances $3,000 = total income of $52,500) Credit sales discounts $1,500, sales returns and allowances $3,000, depreciation expense $25,000 salaries expense $23,000

A buyer uses a perpetual inventory system, and it purchased $4,000 of merchandise on credit terms of 2/10, n/30 on December 5. Later, on December 15, the buyer pays the invoice in full.

General Journal: Debit Accounts payable $4000 Credit: Cash $3920 Credit: Merchandise Inventory $80 Explanation:$4000 X .2% discount.=80 dollars discount 4000-3920=80

A seller uses a perpetual inventory system, and on April 18, a customer discovers that merchandise previously purchased is defective. The buyer decides to keep the defective merchandise and the seller allows a $15 price reduction, paid in cash to the buyer.

General journal entry: DEBIT SALES RETURNS AND ALLOWANCES $15 CREDIT CASH $15

A buyer uses a perpetual inventory system, and on December 7, it contacts its supplier to report that some of the merchandise purchased on December 5 was defective. The seller offered to reduce the merchandise price by $400. The buyer agreed to keep the defective merchandise under those terms.

General journal: DEBIT ACCOUNTS PAYABLE $400 CREDIT: MERCHANDISE INVENTORY $400

A seller uses a perpetual inventory system and on April 4 it sells $5,000 in merchandise to a customer on credit terms of 3/10, n/30. On April 13, the seller receives payment from the customer.

General journal: DEBIT CASH $4,850 DEBIT SALES DISCOUNTS $150 CREDIT ACCOUNTS RECEIVABLE $5,000 explanation 3% discount 5000-150 discount which is the 3%= 4850

A buyer uses a perpetual inventory system, and it purchases merchandise on terms of FOB shipping point. On December 20, the shipping company sends an invoice for $125 to the party responsible for the freight charges, and cash payment is made immediately.

General journal: DEBIT MERCHANDISE INVENTORY $125 CREDIT: CASH $125

The company has an unadjusted debit balance in Accounts Receivable of $25,000 and an unadjusted credit balance of $10 in Allowance for Sales Discounts as of December 31. Of the $25,000 of receivables, $10,000 are within a 2% discount period that the company expects the buyers to take.

General journal: DEBIT SALES AND DISCOUNTS $190 Credit allowance for sale discounts $190 (Explanation the current sales allowance for discount is $10 Step 2 sales discounts should be $200 credit computed as the receivables $10,000 X 2%= 200-10=190

A company sells merchandise on November 2 at a $4,000 invoice price with terms of 2/10, n/30. The goods cost $2,000. The company uses the net method to record invoices. The customer pays the balance due on November 30.

General journal: DEBIT cash $4,000 CREDIT ACCOUNTS RECEIVABLE $3920 CREDIT INTEREST REVENUE $80 (4000-80=3920) $80 dollars is the 2% discount of $4,000

A buyer uses a periodic inventory system, and it purchases $4,000 of merchandise on credit terms of 2/10, n/30 on December 5. On December 15, it pays the invoice in full.

General journal: Debit Accounts payable $4,000, CREDIT purchases discounts $80 which is 2%, CREDIT, cash $3,920

A buyer uses a periodic inventory system, and on December 5, it purchases $4,000 of merchandise on credit terms of 2/10, n/30.

General journal: Debit purchases $4,000, credit Accounts payable $4,000

A company uses a periodic inventory system and during the December 31, year-end physical inventory count discovered that they have incurred a $300 shrinkage in inventory.

NO JOURNAL ENTRY REQUIRED

A multiple-step income statement will have the following totals and subtotals

Net sales, cost of goods sold, gross profit, total selling expenses, total operating expenses, income from operations and net income.

Which of the following statements is correct regarding inventory shrinkage?

Shrinkage refers to the loss of inventory. Shrinkage can be caused by theft or deterioration. Shrinkage is computed by comparing a physical count of inventory with the recorded amount. Shrinkage is recorded by debiting the Cost of Goods Sold. All of the statements are correct. Correct

a periodic inventory system updates the accounting records

at the end of the period

Merchandise inventory includes:

costs to purchase, shipping costs, costs to prepare for sale

Gross Profit

equal to net sales less costs of goods sold.

A seller uses a perpetual inventory system, and on April 17, a customer returns $1,000 of merchandise previously purchased on credit on April 13. The seller's cost of the merchandise returned was $480. The merchandise is not defective and is restored to inventory. The seller has not yet received any cash from the customer.

first general journal entry DEBIT SALES RETURNS AND ALLOWANCES $1,000 CREDIT ACCOUNTS RECEIVABLE $1000 2nd journal entry, DEBIT MERCHANDISE INVENTORY $480 CREDIT COST OF GOODS SOLD $480

A perpetual inventory system updates the accounting records

for each purchase and sale

initially records an invoice at the full amount less any cash discounts.

net method

single-step income statement

reports the same amount of income as that reported on a multiple-step income statement.

Credit terms of "2/10, n/60" means:

the company will receive a 2 percent discount if paid within 10 days. Correct

Under a periodic inventory system:

the merchandise inventory balance reflects the beginning inventory.

Which of the following totals and subtotals are not found on a multiple-step income statement?

total current assets