SB 6 accounting MGH

__1___is classified as a(n) ___2_____asset and reports the amount of merchandise available to sell. (Enter one word per blank.)

1. Inventory 2.current

Bijoux Company has sales of $40,000, beginning inventory of $5,000, purchases of $25,000, and ending inventory of $7,000. The goods available for sale for the period equals ______.

30,000

In which company would you rather invest?

A company with high gross profit percentage and high sales volume

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 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

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

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

Inventory

In a perpetual system, the __________ account is debited when a company purchases merchandise on account. (Enter one word per blank.)

Inventory

companies sell goods that they have produced. (Enter one word per blank.)

Manufacturing

A sales allowance that results in issuing store credit rather than a cash refund is recorded with a debit to ______.

Sales Revenue and a credit to Deferred Revenue

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

Shipping Point

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

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

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.

Using a perpetual inventory system, the journal entry to record a sale on account will include a ______

debit to Accounts Receivable a credit to Sales Revenue credit to Inventory debit to Cost of Goods Sold

The operating cycle involves ______.

generating revenues and collecting from customers

Sales Revenue reports the ______.

sales price times the quantity of goods sold

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

Freight-in with terms FOB shipping point

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.)

1. total assets will be too high 2. net income will be too high

Merchandisers record revenue when they

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

If a seller sells its merchandise with the shipping terms FOB destination, it credits Revenue when the merchandise is _______.

received by the customer

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

Net Sales on an income statement equals Sales Revenue

minus Sales Returns, Allowances and Discounts

The ________cycle is a series of activities that the company undertakes to generate sales and ultimately cash. (Enter only one word per blank.)

operating

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?

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

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

Which line items are found on a multi-step but not on a single-step income statement..

Gross Profit Income from Operations

Under the ______ , Incorrect Unavailable inventory system, the inventory account is updated every time inventory is bought, sold, or returned. (Enter one word per blank.)

perpetual

inventory consists of the purchase price ______.

plus freight-in

On October 25, Yacht Doc received $200,000 for a yacht valued at $180,000 and a 4-month service contract. During November, the yacht was delivered and 1 month of the service contract was performed. The remaining services are to be performed evenly over the next 3 months. In what month should the $180,000 for the yacht be recognized as revenue?

November

Acme Enterprises, which uses a perpetual inventory system, recorded a debit to Sales Returns & Allowances and a credit to Accounts Receivable. (No other accounts were affected.) What business event must have taken place?

The customer received a damaged product, but kept the product and asked for a reduction in the price.

Which inventory system updates the inventory account only at the end of the accounting period?

Periodic

What does the sales discount 2/10, n/30 mean? Multiple choice question.

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

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

an increase in assets and liabilities

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:

compare one company with another. make comparisons over time.

The journal entry to record the payment of cash to FedEx for shipping costs for inventory purchased FOB shipping point includes a ______. (Select all that apply.)

debit to Inventory credit to Cash

Sales Returns and Allowances are reported on the ______.

income statement

Using a perpetual inventory system, the effect on the accounting equation of purchasing merchandise on account includes a(n) ______. (Check all that apply.) increase in liabilities decrease in assets increase in assets decrease in stockholders' equity

increase in liabilities increase in assets

Corporations with high sales volume, such as WalMart, usually have?

low gross profit percentages

The Inventory account may be credited for ______.

purchase returns and allowances

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

purchases

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

remain unchanged

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

$1,090 or 1090

Ace Electronics uses a perpetual inventory system. On May 1, beginning inventory was $10,000. On May 3, Ace purchased $3,000 of inventory and sold $1,500 of inventory for $5,000. At the end of business on May 3, the balance in Ace's Inventory account was ______.

$11,500

The income statement for ABC Company shows Gross profit of $144,000; Operating expenses of $130,000; and Cost of goods sold of $216,000. What is net sales revenue?

$360,000

Sales Returns and Allowances

- are adjusted for at the end of the accounting period for estimated returns and allowance expected to occur in the following months - are typically recorded after the initial sale when the actual return or allowance occurs - reduce the amount the seller expects to receive from customers

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 ______. Multiple choice question.

37000

A multistep income statement is useful to financial statement users because it ______.

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

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?

A debit to Sales Returns & Allowances and a credit to Cash; and a debit to Inventory and a credit to Cost of Goods Sold

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

Accounts Payable; Cash

_______Sales on an income statement equals Sales Revenue (gross) minus Sales Returns and Allowances minus Sales ________

Blank 1: Net Blank 2: Discounts or discount

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.)

Blank 1: multistep or multi-step

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.

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

cost times the quantity of goods sold during the period

Inventory account consists of all ______. Multiple choice question.

costs needed to get the inventory ready for sale

inventory is reported as a(n) ______.

current asset on the balance sheet

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

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

What does FOB shipping point mean?

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

Place the income statement line items in the proper order from the top to bottom. 1. Gross Profit 2. Sales Revenue, net 3. Sales Returns, Allowances and Discounts 4. Cost of Goods Sold 5. Sales Revenue, gross

1. Sales Revenue, net 2. . Sales Returns, Allowances and Discounts 3. Sales Revenue, net 4. Cost of Goods Sold 5. Gross Profit

Match the type of company with the appropriate description. 1.Service Company 2.Retailers 3, Wholesaler 4Manufacturing Company

1. Will typically not have Inventory on its balance sheet or Cost of Goods Sold on its income statement 2.Buys goods and sells them directly to individuals 3. Buys goods and sells them to other companies that will then sell them to individuals 4.Makes the finished goods

Match the description for each part of the purchase discount 2/10,n/30. 2. 10 30 the discount period discount percentage when the full amount is due

2 discount percentage 10 the discount period 30 when the full amount is due

Bijoux Company has Net Sales of $40,000; Beginning Inventory of $5,000; Purchases of $25,000 and Ending Inventory of $7,000. Cost of Goods Sold equals ______. Multiple choice question.

23,000

A sales return that results in issuing store credit rather than a cash refund is recorded with a credit to a liability called ______.

Deferred Revenue

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

False

The purchaser's entry to record the payment for transportation costs on the purchase of merchandise sold FOB shipping point is debited to ______. Multiple choice question.

Inventory

Why is inventory reported as a current asset?

Inventory is reported as a current asset because it will be converted into cash within a year of the balance sheet date.

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? Multiple choice question.

May 3

Which inventory system records a change in the Inventory account every time goods are bought, sold or returned?

Perpetual

A benefit of the ______ inventory system is that inventory shrinkage from theft, fraud and error is able to be estimated. (Enter one word per blank.)

Perpetual.

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?

The customer received a damaged product and returned it.

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

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

The journal entry to record the payment within the discount period for goods previously purchased on account causes _____.

total liabilities to decrease total assets to decrease