Exam 2

Question 1

Inventory systems graphic

Answer 1

Net purchases + Beginning Inventory=
Merchandise Available for Sale=
Cost of Good Sold + Ending Inventory

Question 2

Purchase without discount journal entry

Answer 2

Debit Merchandise Inventory 500
Credit Cash 500

Question 3

2/10, n/30

Answer 3

Discount Percent/# days available,
net/credit period

Question 4

Purchase with discount journal entry

Answer 4

Debit Merchandise Inventory 500
Credit Accounts Payable 500

Question 5

Payment within discount period journal entry

Answer 5

Debit Accounts Payable 500
Credit Merchandise Inventory 10
Credit Cash 490

Question 6

Purchase allowance/return journal entry

Answer 6

Debit Accounts payable
Credit Merchandise Inventory

Question 7

FOB shipping point

Answer 7

Paid by buyer
Debit Merchandise Inventory 500
Credit Cash 500

Question 8

FOB destination

Answer 8

Paid by seller
Debit Delivery Expense 500
Credit Cash 500

Question 9

Gross Profit computation

Answer 9

Net sales-cost of goods sold

Question 10

Record sale journal entries

Answer 10

Debit Accounts Receivable 1000
Credit Sales 1000

Debit Cost of Goods Sold 300
Credit Merchandise Inventory 300

Question 11

Sales with discount:
Buyer pays within period journal entry

Answer 11

Debit Cash 980
Debit Sales Discounts 20
Credit Accounts Receivable 1000

Question 12

Record sales payment journal entry

Answer 12

Debit Cash 1000
Credit Accounts Receivable 1000

Question 13

Sales return for defective goods/sales allowance journal entry (sold for $15, cost $9)

Answer 13

Debit Sales returns and allowances 15
Credit Cash 15

Question 14

Sales return for not defective good journal entry (sold $15, cost $9)

Answer 14

Debit Merchandise Inventory 9
Credit Cost of Goods Sold 9

Question 15

Merchandising cost flow effects

Answer 15

Cost of goods sold- affects income statement
Ending inventory- affects balance sheet

Question 16

Adjusting entry for shrinkage

Answer 16

Debit COGS 250
Credit Merch Inventory 250

Question 17

Closing entries for merchandisers

Answer 17

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

Question 18

Multi-step income statement

Answer 18

Gross profit-expenses+-other=net income

Question 19

Single-step income statement

Answer 19

Revenues
Net sales + other
Expenses
COGS
Selling expenses
Operating expenses
Other
Net Income

Question 20

Acid-test ratio

Answer 20

Acid test ratio= quick assets/current liabilities
Quick assets= cash+short-term investments+receivables

Question 21

Gross Margin ratio

Answer 21

GM ratio= net sales- COGS/net sales

Question 22

Adjusting entry from inventory cost to market

Answer 22

Debit COGS 30,000
Credit Merch Inventory 30,000

Question 23

Inventory turnover

Answer 23

IT=COGS/Average Inventory
(AI=Beg.-End./2)

Question 24

Days’ Sales in Inventory

Answer 24

Ending Inventory/COGSx365

Question 25

In a period of declining prices, _ produced the highest gross profit

Answer 25

LIFO

Question 26

FIFO financial statements effects

Answer 26

Ending inventory approximates current cost

Question 27

LIFO financial statement effects

Answer 27

COGS on income statement approximates current costs