ACC101 (Ch 5 & 6)

Question 1

Cost of goods sold is a(n) ______ account an has a normal _______ (dr/cr) balance.

Answer 1

expense; dr

Question 2

Cost of good sold is reported on the _______ (financial statement.)

Answer 2

Income Statement

Question 3

FOB shipping point means that the _______ (buyer/seller) pays shipping and records shipping to the _______ account.

Answer 3

buyer; inventory

Question 4

FOB destination means that the _______ (buyer/seller) pays shipping and records shipping to the _______ account.

Answer 4

seller; freight-out (expense) or delivery expense

Question 5

A sales return is recorded by the seller in the ________ account which has a normal ________ (dr/cr) balance.

Answer 5

sales returns & allowances; debit (it is a contra-revenue account.)

Question 6

A sales discount is recorded by the seller in the ________ account which has a normal ________ (dr/cr) balance.

Answer 6

sales discount; debit (it is a contra-revenue account.)

Question 7

A return is recorded by the buyer in the ________ account which has a normal ________ (dr/cr) balance.

Answer 7

inventory; debit

Question 8

A discount is recorded by the buyer in the ________ account which has a normal ________ (dr/cr) balance.

Answer 8

inventory; debit

Question 9

A purchase of inventory on account is recorded with a debit to ______ and a credit to ______.

Answer 9

DR Inventory
CR Accounts payable

Question 10

A return of inventory (purchased on account) is recorded with a debit to ______ and a credit to ______.

Answer 10

DR Accounts payable
CR Inventory

Question 11

Payment of freight costs by the buyer is recorded with a debit to ______ and a credit to ______.

Answer 11

DR Inventory
CR Cash

Question 12

To record payment (of inventory) on account within the discount period, debit the ______ account(s) and credit the ______ account(s).

Answer 12

DR A/P (purchase - return)
CR Inventory (discount)
CR Cash (A/P bal - discount)

Question 13

A sale of inventory on account is recorded with a debit to ______ account(s) and a credit to ______ account(s).

Answer 13

DR A/R
CR Sales Revenue
DR COGS
CR Inventory

Question 14

Accepting a return of inventory (sold on account) is recorded with a debit to ______ account(s) and a credit to ______ account(s).

Answer 14

DR Sales Returns & Allowances
CR A/R
DR Inventory
CR COGS

Question 15

Payment of freight costs by the seller is recorded with a debit to ______ and a credit to ______.

Answer 15

DR Freight out (or delivery exp)
CR Cash

Question 16

When the seller records receipt/collection of payment (of inventory) on account within the discount period, debit the ______ account(s) and credit the ______ account(s).

Answer 16

DR Cash (A/R bal - discount)
DR Sales Discount (discount)
CR A/R (sale - return)

Question 17

How do you calculate gross profit?

Answer 17

Sales revenue (less Sales R&A and Sales Discounts)
- COGS

Question 18

What is the basic format of the multiple step income statement?

Answer 18

Sales
- COGS
= Gross Profit
- Operating Expenses
= Net income (loss)

Question 19

How do you calculate net sales?

Answer 19

Sales Revenue
- Sales Returns & Allowances
- Sales Discounts
= Net Sales

Question 20

How much discount does the terms 3/10, n/30 offer?

Answer 20

3%

Question 21

How many days does the terms 3/10, n/30 allow a discount?

Answer 21

10 days

Question 22

What is the JE for closing revenues for a merchandising company?

Answer 22

DR Sales Revenue
CR Income Summary

Question 23

What is the JE for closing expenses for a merchandising company?

Answer 23

DR Income Summary
CR COGS
CR Sales Returns & Allow.
CR Sales Discounts
CR Freight Out(delivery exp)
CR all other exp accounts

Question 24

What is the JE for closing income summary with a profit for a merchandising company?

Answer 24

DR Income Summary
CR Retained Earnings

Note> retained earnings is increased by net income

Question 25

What is the JE for closing income summary with a loss for a merchandising company?

Answer 25

DR Retained Earnings
CR Income Summary

Note> retained earnings is decreased by net loss

Question 26

What is the JE for closing dividends for a merchandising company?

Answer 26

DR Retained Earnings
CR Dividends

Note> retained earnings is decreased dividends

Question 27

Inventory is a(n) ________ account and has a normal _____ (dr/cr) balance.

Answer 27

asset; debit

Question 28

3/1 inv is 5 units at $1,
3/10 Purch. 10 units at $2
3/15 Purch. 8 units at $3
Ending inventory is 6 units.

How many units were sold?

Answer 28

17 (5+10+8=23-6)

Question 29

3/1 inv is 5 units at $1,
3/10 Purch. 10 units at $2
3/15 Purch. 8 units at $3
Ending inventory is 6 units.

Using FIFO, what is COGS?

Answer 29

5 x $1 = $5
10 x $2 = $20
2 x $3 = 6
Total = $31

Question 30

3/1 inv is 5 units at $1,
3/10 Purch. 10 units at $2
3/15 Purch. 8 units at $3
Ending inventory is 6 units.

Using FIFO, what is ending inventory?

Answer 30

6 x $3 = $18

Question 31

3/1 inv is 5 units at $1,
3/10 Purch. 10 units at $2
3/15 Purch. 8 units at $3
Ending inventory is 6 units.

Using LIFO, what is COGS?

Answer 31

8 x $3 = $24
9 x $2 = $18
Total = $42

Question 32

3/1 inv is 5 units at $1,
3/10 Purch. 10 units at $2
3/15 Purch. 8 units at $3

Ending inventory is 6 units.
Using LIFO, what is Ending Inventory?

Answer 32

5 x $1 = $5
1 x $2 = $2
Total = $7

Question 33

3/1 inv is 5 units at $1,
3/10 Purch. 10 units at $2
3/15 Purch. 8 units at $3
Ending inventory is 6 units.

Using average-cost, what is the average cost of each unit (round to 3 digits)?

Answer 33

$49 / 23 = 2.130

Question 34

3/1 inv is 5 units at $1,
3/10 Purch. 10 units at $2
3/15 Purch. 8 units at $3
Ending inventory is 6 units.

Using average-cost, what is the cost of ending inventory (round to 3 digits)?

Answer 34

$49 / 23 = 2.130

6 units (EI) x 2.130 = $12.78

Question 35

3/1 inv is 5 units at $1,
3/10 Purch. 10 units at $2
3/15 Purch. 8 units at $3
Ending inventory is 6 units.

Using average-cost, what is cost of goods sold (round to 3 digits)?

Answer 35

$49 / 23 = 2.130
17 units sold x 2.130 = $36.21

Question 36

What is the formula for inventory (cost of goods sold)?

Answer 36

Beginning Inventory
+ Purchases
= Goods available for sale
- Ending Inventory
= Cost of goods sold

Question 37

A company has 20 widgets in inventory that cost $5 and now have a net realizable value of $4. How much should the inventory be reported at?

Answer 37

$4 (lower amount) x 20 = $80 total

Question 38

A company has 20 widgets in inventory that cost $5 and now have a net realizable value of $6. How much should the inventory be reported at?

Answer 38

$5 (lower amount) x 20 = $100 total