Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Acct 229 > Exam 3 > Flashcards

Exam 3 Flashcards

1
Q

What is the cost of the merchandise inventory that the business has sold to customers?

A

Cost of goods sold

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

And amount granted to the purchaser as an incentive to keep goods that are not as ordered.

A

Purchase allowance

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

A type of merchandiser that buys merchandise either from a manufacturer or a wholesaler and then sells those goods to customers.

A

Retailer

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

A situation in which the buyer takes ownership at delivery destination point.

A

FOB destination

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

A type of merchandiser that buys goods from manufactures and sells them to retailers.

A

Wholesaler

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

A discount the businesses offer to purchasers as an incentive for early payment.

A

Purchase discount

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

A situation in which the buyer takes title to the goods after the goods leave the sellers place of business.

A

FOB shipping point

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

The terms of purchase or sale as stated on the invoice.

A

Credit terms

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

A sellers request for cash from the purchaser.

A

Invoice

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

When receiving an allowance from the wholesaler how are accounts affected?

A

You debit your accounts payable, and credit merchandise inventory

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

How do you prepare a single step income statement?

A

By adding up your net sales revenue and interest revenue, then subtracting total expenses with cost of goods sold, giving you your net income or loss.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What is gross profit?

A

sales revenue minus cost of goods sold.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Gross profit minus operating expenses equals?

A

Operating income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Gross profit percentage equals?

A

Gross profit divided by net sales revenue

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What is the cost of ending inventory?

A

The dollar amount of your inventory left

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Name some commonly used accounts regarding purchase and sales transactions.

A

Accounts receivable merchandise inventory accounts payable sales revenue sales discounts forfeited cost of good sold

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What does

2/10, n/30 mean?

A

2% discount if payment is within 10 days of sales invoice, otherwise net amount due within 30 days of sales invoice

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

FOB

A

Free on board

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What does FOB shipping point mean?

A

Purchaser pays the shipping cost (Freight in)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What does FOB destination point mean?

A

Seller pays transportation cost (freight out)

21
Q

Service revenue minus operating expenses equals

A

Net income

22
Q

Gross profit minus operating expenses equals

A

Net income

23
Q

Sales revenue minus cost of goods sold equals

A

Gross profit

24
Q

What is inventory shrinkage?

A

The loss of inventory that occurs because of theft damage and errors.

25
Q

Businesses take a physical count of inventory at least once a year to account for

A

Inventory shrinkage

26
Q

How do you adjust for inventory shrinkage?

A

By finding the actual difference and debiting cost of good sold in crediting merchandise inventory

27
Q

Single step and multi step is in reference to

A

Income statements

28
Q

Which format of income statement is the most common?

A

Single step

29
Q

What’s the difference in a single step and multi step format?

A

The multi step form at separates operating revenue and expenses from non-operating revenue and expenses

30
Q

Describe the single step income statement breakdown

A

list revenues i.e. sales and interest revenue and get the total for total revenue. Then you less expense including your cost of good sold all expenses and get the total expense amount. Then subtract total expense from total revenue to get net income.

31
Q

Describe the process for a multi step income statement.

A

Start off with net sales revenue and subtract cost of goods sold to acquire gross profit. Then you less operating expense i.e. administrative, salaries, depreciation, utilities, rent for a total administrative expense. Then you less all selling expenses and add total selling expenses to total admin expenses.Then you subtract total operating expenses from gross profit to acquire income before other revenue and expenses. Then you list other revenue expenses such as interest revenue and interest expense, that would be the total net other revenue expense. You then subtract the net other revenue expense from the income before other revenue and expense to acquire net income.

32
Q

Explain FIFO

A

The first unit cost into the inventory account is the first unit cost out of the inventory account

33
Q

Describe LIFO

A

The last unit cost into the inventory account is the last unit cost out of the inventory account

34
Q

How do you calculate average cost

A

By finding the total cost divided by the total number of units

35
Q 
assuming inflation, describe the characteristics of the following if using LIFO instead of FIFO
Ending inventory account 
Cost of good sold
Net income
Income tax expense 
Cash flow
A 
Less
More
Less
Less
Improved
36
Q

Assuming deflation, describe the characteristics of the following when using LIFO instead of FIFO

Ending inventory account 
Cost of goods sold
Net income
Income tax expense 
Cash flow
A 
More
Less
More
More
Disfavorable
37
Q

When using FIFO/LIF04 tax, what must be used for financial?

A

Whatever one you were using for tax

38
Q

_______ Is most used in accounting practices.

A

FIFO

39
Q

Why do some businesses use LIFO?

A

Because the cost of goods sold is higher so they were can report less taxes.

40
Q

_______ Has higher cost of goods sold during inflation

A

LIFO

41
Q

_____ Has higher costs of goods sold during deflation

A

FIFO

42
Q

The average method always comes out

A

In between LIF0 and FIFO

43
Q

Which method is least likely to apply lower of cost or market rule?

A

LIFO

44
Q

What is the lower of cost or market rule?

A

Rule that merchandise inventory should be reported in the financial statements at whichever is lower – – – – – it’s historical cost or its market value.

45
Q

Would the lower of cost or market rule apply if cost is $390 and market value is $435?

A

No

46
Q

What are the two inventory systems?

A

Physical (periodic) inventory and perpetual inventory

47
Q

Which inventory system accounts for shrinkage?

A

Perpetual

48
Q

Which inventory system allows for more level of management control?

A

Perpetual

49
Q

As far as journal entries are concerned, what is different between the two inventory systems?

A

Since the perpetual inventory system is continuous, upon a sale you have to debit cost of good sold in credit merchandise inventory. As far as purchases are concerned both systems journalize the same by debiting merchandise inventory and crediting Accounts Payable.

Acct 229 (4 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions