Exam 2 Flashcards
Inventory systems graphic
Net purchases + Beginning Inventory=
Merchandise Available for Sale=
Cost of Good Sold + Ending Inventory
Purchase without discount journal entry
Debit Merchandise Inventory 500
Credit Cash 500
2/10, n/30
Discount Percent/# days available,
net/credit period
Purchase with discount journal entry
Debit Merchandise Inventory 500
Credit Accounts Payable 500
Payment within discount period journal entry
Debit Accounts Payable 500
Credit Merchandise Inventory 10
Credit Cash 490
Purchase allowance/return journal entry
Debit Accounts payable
Credit Merchandise Inventory
FOB shipping point
Paid by buyer
Debit Merchandise Inventory 500
Credit Cash 500
FOB destination
Paid by seller
Debit Delivery Expense 500
Credit Cash 500
Gross Profit computation
Net sales-cost of goods sold
Record sale journal entries
Debit Accounts Receivable 1000
Credit Sales 1000
Debit Cost of Goods Sold 300
Credit Merchandise Inventory 300
Sales with discount:
Buyer pays within period journal entry
Debit Cash 980
Debit Sales Discounts 20
Credit Accounts Receivable 1000
Record sales payment journal entry
Debit Cash 1000
Credit Accounts Receivable 1000
Sales return for defective goods/sales allowance journal entry (sold for $15, cost $9)
Debit Sales returns and allowances 15
Credit Cash 15
Sales return for not defective good journal entry (sold $15, cost $9)
Debit Merchandise Inventory 9
Credit Cost of Goods Sold 9
Merchandising cost flow effects
Cost of goods sold- affects income statement
Ending inventory- affects balance sheet
Adjusting entry for shrinkage
Debit COGS 250
Credit Merch Inventory 250
Closing entries for merchandisers
Close sales account (debit sales, credit income summary)
Close expense accounts (debit income summary, credit sales discounts, returns & allowances, COGS, and other expenses)
Close income summary
Close dividends
Multi-step income statement
Gross profit-expenses+-other=net income
Single-step income statement
Revenues
Net sales + other
Expenses
COGS
Selling expenses
Operating expenses
Other
Net Income
Acid-test ratio
Acid test ratio= quick assets/current liabilities
Quick assets= cash+short-term investments+receivables
Gross Margin ratio
GM ratio= net sales- COGS/net sales
Adjusting entry from inventory cost to market
Debit COGS 30,000
Credit Merch Inventory 30,000
Inventory turnover
IT=COGS/Average Inventory
(AI=Beg.-End./2)
Days’ Sales in Inventory
Ending Inventory/COGSx365
In a period of declining prices, _ produced the highest gross profit
LIFO
FIFO financial statements effects
Ending inventory approximates current cost
LIFO financial statement effects
COGS on income statement approximates current costs
