Chapter 6 Flashcards
Inventory is reported as a blank on the blank
Current asset/ balance sheet only
Selling inventory on account and selling inventory for cash will – – – the inventory account
Decrease
In a perpetual system, the – – – account is debited when a company purchases merchandise on account
Inventory
Type of company that sells services rather than physical goods
Service companies
Type of company that sells goods that have been obtained from a supplier
Merchandising company’s
Type of company that sells goods that they have made themselves
Manufacturing companies
A company has net sales of $60,000, beginning inventory of $7000, purchases of $35,000 and ending inventory of $5000. The cost of goods sold is – – –
$37,000
Purchases, freight in, beginning balance, would all be found on the — side of the inventory T account
Debit
What is the formula for cost of goods sold
Beginning inventory plus purchases minus ending inventory
The journal entry to record the payment for merchandise previously purchased on account includes a – – – / – – –
Credit to cash/debit two accounts payable
Sales discounts should appear in the financial statement as a – – –
Deduction from sales
Under the – – – inventory system, the inventory account is updated every time inventory is spot, sold, or returned.
Perpetual
In a perpetual inventory system, the purchaser should record freight in as – – –
An asset, inventory
In a perpetual inventory system, the seller should record freight out as
A selling expense
Purchase transactions affect the – – –
Balance sheet and not the income statement
In a perpetual inventory system, the return of merchandise recently purchased on account will have the following affects on the accounting equation
Assets will decrease/liabilities will decrease
When a company provides $1000 of service to a customer on account with payment terms of 2/10, n/30, the entry it records when it record the sales include a debit to – – – and a credit to – – –
Accounts receivable for $1000/sales for $1000
A company had cost of goods sold of $2000. If beginning inventory was $2100 and ending inventory was $500, the companies purchases must have been – – –
$400
A multistep income statement is useful to financial statement users because it —
Separate cost of goods sold from other operating expenses, which allows the calculation of gross profit
Goods are owned by the buyer when they leave the sellers place of business
FOB shipping point
True or false: gross profit is a stockholders equity account and is credited with goods are delivered to customers
False
A companies bookkeeper record of the purchase of merchandise on account with a debit to cost of good sold and a credit to cash. As a result – – –/– – –/– – –
Liabilities are understated/assets are understated/stockholders equity is understated
On May 3 Botit purchase merchandise on account for $1000, FOB shipping point, with terms 1/10, n/30 from Cellar. On May 6 Botit receive the merchandise, along with an invoice for $1000. In addition, $100 in shipping cost was owed to We Deliver. On May 12 Botit paid all amounts owed, which amounted to – – –
$1090
Company B bought inventory from company S, FOB destination. On December 31 the last day of the accounting year, the goods were on a truck owned by Company C, and not expected to arrive until January 2. Which company should include these goods and it’s December 31 inventory?
Company S
– – – Consists of all costs needed to get the inventory ready for sale
Inventory
In a perpetual system, the entry to record a purchase of merchandise on account includes – – –/– – –
Credit two accounts payable/debit to inventory
Inventory records are updated only at the end of the accounting period in the — inventory system
Periodic
A company has sales of $50,000, cost of good sold of $30,000, and selling expenses of $5000. It’s gross profit is —
$20,000
True or false: inventory and supplies are interchangeable account titles and have the same meaning
False
A company sold merchandise for $5000, with payment terms of 2/10, n/30. If the customer pays within the discount period and take the discount, the company will receive – – –
$4900
In a perpetual system, the – – – account is debited went up company purchases merchandise on account.
Inventory
The recording of a company’s purchase returns and purchases allowances are similar in that both may result in a – – –/– – –
Decrease in accounts payable/decrease in inventory
A company that uses a perpetual inventory system recorded a debit to sales returns and 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
The operating cycle is a series of activities that the company under takes to generate – – – and, ultimately, cash.
Sales
A companies journal entry to record the return of merchandise previously purchased on account by the company was recorded by debiting inventory and crediting accounts payable. As a result of this entry, – – –/– – –
Liabilities will be overstated/assets will be overstated
A company uses a perpetual inventory system. On May first, beginning inventory was $100,000. During May, the company purchased $35,000 of inventory and sold $71,000 of inventory. After the store closed on May 31, employees counted the inventory in the store and found that $60,000 of inventory remained unsold. What was the companysinventory shrinkage?
$4000
In a perpetual system, the entry to record the sale of merchandise to a customer on account would include a –/–/–/–/.
Credit sales revenue/debit to cost of goods sold/credit to inventory/debit to accounts receivable
