Chapter 5

Question 1

Merchandiser

Answer 1

sells goods

Question 2

merchandise inventory

Answer 2

the merchandise that a business sells to customers

asset account

Question 3

wholesaler

Answer 3

an intermediary that buys products from manufacturers or other wholesalers and sells them to retailers or other wholesalers

Question 4

Retailer

Answer 4

An intermediary who sells to consumers

Question 5

Merchandising Business Operating Cycle

Answer 5

need update***

Question 6

sales revenue

Answer 6

money earned from goods

Question 7

cost of good sold

Answer 7

expense of purchasing goods

Question 8

gross profit

Answer 8

sales revenue- cost of goods sold

Question 9

merchandiser net income

Answer 9

gross profit- operating expenses

Question 10

periodic inventory system

Answer 10

requires a business to obtain a physical count of inventory to determine quantity on hand

small businesses, no barcodes IE restaurants

Question 11

perpetual inventory system

Answer 11

computerized, with barcodes. Constantly updates the inventory record and syncs with accounting systems. records purchase quantities & cost, with sales quantities & price.

still need to count inventory annually

Question 12

invoice

Answer 12

seller’s request for payment from a purchaser

bill

Question 13

purchase discount

Answer 13

discount as an incentive for early payment

Question 14

credit terms

Answer 14

terms of payment

Question 15

purchase allowance

Answer 15

a deduction from the sales price granted to the purchaser as an incentive to keep the goods that are not as ordered

Question 16

FOB Shipping Point

Answer 16

Buyer owns the goods after it leaves the warehouse and assumes cost of shipping

Question 17

FOB destination

Answer 17

seller owns goods until transaction is complete, and assumes cost of shipping

Question 18

freight in

Answer 18

cost to ship goods to warehouse

freight on purchased goods

Question 19

freight out

Answer 19

cost to ship goods from warehouse to customer

freight on goods sold

Question 20

sales discounts

Answer 20

reduction in revenue earned on sales for discounts provided to customers

Question 21

Sales Discounts

Answer 21

A Contra-Revenue account used to record discounts given to customers for early payment of their accounts that were not claimed

Question 22

Customer Refunds Payable

Answer 22

A liability account for estimated refunds and allowances that will be paid or granted customers in the future.

Question 23

inventory shrinkage

Answer 23

the loss of inventory that occurs because of theft, damage, and errors

debit to cost of goods sold, credit to inventory

Question 24

single step income statement

Answer 24

lists all revenues together, and all expenses are together

Question 25

multi-step income statement

Answer 25

grouped by relationship: net sales revenue less cost of goods sold- net profit/loss

Question 26

Operating Income

Answer 26

Gross Profit- Total Operating Expenses

Question 27

other income and expenses

Answer 27

revenues or expenses that are outside the normal, day-to-day operations of a business, such as a gain or loss on the sale of plant assets or interest expense such as interest expense, sales discounts forfeited, gain/loss on sale of PPE

Question 28

Net income

Answer 28

operating income- total other income & expenses

Question 29

gross profit percentages

Answer 29

measures the profitability of each sales dollar above the cost of goods sold. gross profit/net sales revenue

Question 30

How do you get net purchases?

Answer 30

Purchases -Purchases returns and allowances-Purchases discounts