Accounting Chapter 5
Terms in this set (33)
Which of the following is a merchandiser that sells directly to consumers?
sells to another business, which will sell to a consuming customer
A periodic inventory system is when
Companies determine cost of goods sold only at the end of the accounting period
The operating cycle of a merchandising company is ordinarily ___________________ that of a service firm
T/F A perpetual inventory system provides better control over inventories than does a periodic inventory system
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
Cosmos Corporation, which uses a perpetual inventory system, purchased $2,000 of merchandise on July 5 on account. Credit terms were 2/10, n/30. It returned $400 of the merchandise on July 9. Which of the following is one effect when Cosmos pays its bill on July 21?
debit accounts payable and credit cash 1600
Which inventory system will likely be used by a company with merchandise that has a high unit value?
perpetual inventory system
When credit terms of 1/15, n/60 are offered, how long is the discount period?
Marsh, Inc. paid for freight costs on merchandise it shipped to a customer. In what account will Marsh record this cost in a perpetual inventory system?
Martin Company purchases $4,200 of merchandise on March 1, with credit terms of 3/10, n/30. If Martin pays on March 11, what is the cost of this purchase?
(4200 * .03= 126; 4200-126= 4074)
Which of the following items does not result in an entry to the Inventory account under a perpetual system?
Payment of freight costs for goods shipped to a customer
On what amount is a sales discount based?
Invoice price minus returns and allowances
In a perpetual inventory system, which accounts will the seller credit when merchandise is returned by a customer?
accounts receivable and cost of goods sold
Which statement is true for the seller?
The Sales Returns and Allowances account is debited for defective merchandise returned by a customer
Which accounts normally have a debit balance?
sales discounts/sales returns and allowances
A credit sale of $750 is made on June 13, terms 2/10, n/30, on which a return of $50 is granted on June 16. What amount is received as payment in full on June 23?
(750-50=700 * .02= 14; 700-14=686)
when recording the sale of goods for cash in a perpetual inventory system
Two journal entries are necessary: one to record the receipt of cash and sales revenue, and one to record the cost of goods sold and to reduce inventory
What type of accounts are Sales Returns and Allowances and Sales Discounts?
contra revenue accounts
sales revenue - (returns/allowance + discounts)
net sales - cost of goods sold
net income + operating expenses
Which is classified in an income statement as a nonoperating activity?
interest expense/receiving dividend revenue from an investment
Assume that sales are $450,000, sales discounts are $10,000, net income is $35,000, and cost of goods sold is $320,000. How much are gross profit and operating expenses, respectively?
$120,000 and $85,000
Which of the following would appear on both a single-step and a multiple-step income statement?
cost of goods sold
Which will result in the amount of gross profit?
sales revenue-cost of goods sold
If sales revenues totals $400,000, cost of goods sold is $310,000, and operating expenses are $60,000, how much is the gross profit?
cost of goods sold=
beginning inventory + cost of goods purchased - ending inventory
cost of goods available for sale=
beginning inventory + purchases - purchases discounts/returns and allowances + freight-in
Under what system is cost of goods sold determined at the end of an accounting period?
periodic inventory system
gross profit ratio=
gross profit/net sales
profit margin ratio=
net income/net sales
What would affect the gross profit rate if sales remain constant?
an increase in cost of goods sold
Which factor would not affect the gross profit rate?
an increase in operating expenses
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