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BA 99.1 > Merchandising Operations and Inventory Systems > Flashcards

Merchandising Operations and Inventory Systems Flashcards

1
Q

company that buys and sells merchandise

A

merchandising company

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2
Q

merchandising company that sell directly to consumers

A

retailers

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3
Q

merchandising company that sell to retailers

A

wholesalers

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4
Q

primary source of revenue for merchandising companies

A

sales of merchandise
sales revenue
sales

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5
Q

total cost of merchandise sold during the period

A

cost of goods sold

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6
Q

enumerate the income measurement process for a merchandising company

A

sales revenue - cost of goods sold = gross profit - operating expenses = net income/net loss

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7
Q

operating cycle of a service company

A

perform services -> accounts receivable -> receive cash -> cash

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8
Q

operating cycle of a merchandising company

A

buy inventory -> inventory (asset) -> sell inventory -> accounts receivable -> receive cash -> cash

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9
Q

enumerate the flow of costs of a merchandising company

A

beginning inventory + cost of goods purchased = cost of goods available for sale

cost of goods available for sale -> ending inventory, cost of goods sold

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10
Q

define perpetual inventory system

A

continuously monitored
companies keep detailed records of the cost of each inventory purchase and sale
a company determines the cost of goods sold each time a sale occurs

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11
Q

define periodic inventory system

A

end of the period physical count

no detailed inventory records of goods on hand throughout the period

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12
Q

steps in determining the cost of goods sold under a periodic inventory system

A
  1. add cost of goods on hand to cost of goods purchased

2. subtract cost of goods on hand (after physical inventory count) at the end of the accounting period

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13
Q

advantage of a perpetual inventory system

A

records are continuously recorded (y)

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14
Q

gross profit equation

A

sales revenue - cost of goods sold (COGS IS THE EXPENSE)

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15
Q

cost of goods available for sale is made up of what

A

beginning inventory + cost of goods purchased

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16
Q

how are cash purchases recorded

A

increase in inventory (ASSET) and a decrease in cash

increase decrease asset

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17
Q

entry on the journal for a purchase made on credit

A

debit increase in INVENTORY and a credit increase in Accounts Payable (liability)

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18
Q

FOB Shipping Point

A

BUYER pays for the freight costs

once the goods are placed in the carrier, the goods are already OWNED BY THE BUYER

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19
Q

FOB Destination

A

SELLER pays for the freight costs

goods are Still owned by the seller until it reaches the destination

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20
Q

freight costs incurred by the buyer are part of the cost of merchandise purchased (fob shipping point)

when buyer incurs transportation costs, these costs are considered PART OF THE COST OF PURCHASING INVENTORY

give the journal entry

A

debit increase in inventory
credit decrease in cash

increase decrease asset

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21
Q

freight costs incurred by the seller are OPERATING EXPENSES of the seller

increases expense account titled FREIGHT OUT (delivery expense)

give the journal entry

A

debit increase freight out (delivery expense)

credit decrease cash

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22
Q

define purchase return

A

dissatisfied customer
return the goods to the seller for credit
cash refund if cash

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23
Q

define purchase allowance

A

keep the merchandise if the seller is willing to grant an allowance (DEDUCTION) from the purchase price

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24
Q

stereo returned goods costing 300 pesos to audio on may 8. what is the journal entry for stereo when they purchased it on account?

A

initial: debit increase inventory
credit increase accounts payable

after return:
debit decrease accounts payable
credit decrease inventory

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25
Q

stereo kept the goods after being granted a 50 peso allowance by studio

A

debit decrease in accounts payable

credit decrease in inventory

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26
Q

cash discount for prompt payment

A

purchase discount

27
Q

specifies the amount of the cash discount and time period in which it is offered

A

credit terms

28
Q

stereo pays balance due of 3500 on may 14 (last day of discount period) with the terms 2/10 n/30

how much is the cash discount?

A

3500 x 2% = 70

3500 - 70 = 3430

29
Q

what is the journal entry of the purchase discount made by stereo? SELLER POV

A

debit increase in cash
debit increase in expenses
credit decrease in accounts receivable

30
Q

what if the buyer failed to take the discount of 70 pesos from their 3500 purchase?

A

debit increase in inventory by 3500

credit increase in accounts payable by 3500

31
Q

create a t-account summary of stereo’s purchases - INVENTORY

purchase may 4 - 3800
freight in may 6 - 150
purchase return may 8 - 300
purchase discount may 14 - 70

A

debit increase in inventory - purchase 3800
debit increase in inventory - freight in 150
credit decrease in inventory - purchase return of 300
credit decrease in inventory - discount of 70
debit balance of 3580

32
Q

recording sales under perpetual inventory system

identify the two entries made under this system

A
  1. records of sale

2. records of the cost of merchandise sold

33
Q

records of the sale entry

A

debit increase in accounts receivable (if paid on credit) debit increase in cash
credit increase in sales revenue

34
Q

cost of the merchandise sold entry

A

debit increase in cost of goods sold (expense)

credit decrease in inventory (nabawasan ang inventory)

35
Q

illustrate a credit sales transaction of supply records

may 4 sale of 3800 to sauk stereo
merchandise cost of 2400 by supply records

A

accounts receivable 3800
sales revenue 3800
(to record credit sale to sauk stereo)

cost of goods sold 2400
inventory 2400
(to record cost of merchandise sold to sauk stereo)

36
Q

transactions where the seller either accepts the goods from the buyer (return) or grants a reduction in the purchase price (allowance) -> the good is kept

A

SALES RETURNS AND ALLOWANCES

37
Q

audio supply to record credit for returned good amounting to 300 pesos

A

sales returns and allowances DI 300
accounts receivable CD 300
(To record credit granted to stereo for returned goods) — or decrease in cash if paid in cash

38
Q

returning of goods worth 140 (TAKE NOTE: SELLER!!!!!!!! not buyer)

A

inventory DI 140
cost of goods sold CI 140
(To record cost of goods returned)

39
Q

Entry: goods or not returned but the seller grants the buyer an allowance by reducing the purchase rpice

A

debit increase in sales returns and allowances

credit decrease accounts receivable for the allowance

40
Q

AN ALLOWANCE HAS NO IMPACT ON INVENTORY OF COGS

A

sales returns and allowances is a contra asset account to sales revenue

debit balance - debit increase, credit decrease for returns and allowances
- EITHER RECEIVABLE OR CASH YUNG PARTNER

41
Q

sales discounts formul

A

invoice price - returns and allowances

42
Q

what is sales discounts

A

contra revenue account to sales revenue
debit balance
debit increase, credit decrease

43
Q

what is sales returns and allowances

A

contra asset account to sales revneue
debit balance
debit increase, credit decrease

44
Q

enumerate audio supply’s entry to recrod cash receipt with 70-peso discount (3500 price)

A

cash debit increase 3430
sales discount debit increase 70 (REVENUE ACCOUNT ITO HA)
accounts receivable 3500
(to recrod collection within 2/10, n/30 discount period from sauk stereo)

to record discount collection

45
Q 
summarize the following t-accounts:
sales revenue 3800
sales return and allowances 300
sales discounts 70
net sales?
A

credit increase sales revenue 3800
debit increase sales return and allowances 300
debit increase sales discounts 70
= 3430 credit balance net sales

46
Q

adjusting entries

enter the adjusting entry when audio supply has an adjusted balance of 40,500 in the inventory through a physical count, audio supply determined that the actual merchandise inventory at december 31 is 40,000

A

cost of goods sold debit increase 500
inventory (40500-40000) credit decrease 500
(to ADJUST INVENTORY to physical count)

47
Q

CLOSING ENTRY

A

Dr. SR, Cr. IS
Dr. IS, Cr. E
Dr. IS, Cr. OC / Dr. OC, Cr. IS
Dr. OC, Cr. OD

48
Q

how do you get the gross profit + percentage

A

gross profit = net sales - cost of goods sold
gross profit / net sales = gross profit rate

(net sales - cost of goods sold) / net sales = gross profit rate

49
Q

DETERMINING COST OF GOODS SOLD UNDER A PERIODIC SYSTEM

Define periodic system again

A

does not determine the cost of goods sold until the end of the period

  • at the end of the period, the company performs a count to determine the ending balance of inventory
50
Q

how is COGS calculated at a periodic inventory?

A

COGS = Cost of Goods Available for Sale - Ending Inventory

51
Q

The perpetual system directly adjusts the inventory account for any transaction that affects inventory (freight costs, returns, & discounts)

What does periodic do?

A

It creates a different account for purchases, costs, returns, and discounts

52
Q

does periodic inventory record revenue from the sale of merchandise when sales are made like perpetual inventory system?

A

YES. SALES REVENUE ARE RECORDED WHEN IT’S MADE.

However, it DOES NOT RECORD THE COST OF MERCHANDISE SOLD (only at the end of the period when they do physical count)

53
Q

to which account does periodic inventory record its purchases?

A

PURCHASES ACCOUNT

perpetual inventory records their purchases in the inventory account (asset)

54
Q

RECORDING PURCHASES OF MERCHANDISE SCENARIO TYPE QUESTIONS XOXO PERIODIC INVENTORY!!!!!!!!!!!!!!!!!

A

take a breather u can do this bitch

55
Q

Sauk stereo purchases 3800 on account

A

purchases 3800
accounts payable 3800
(To record GOODS PURCHASED ON ACCOUNT)

56
Q

sauk stereo pays freight company 150 for freight charges when it purchased its audio supply in cash

A

Freight-IN 150
cash 150
(to record payment of freight on goods purchased)

57
Q

what is freight in a part of? is it part of cost of goods sold?

A

NO. Freight in is part of COST OF GOODS PURCHASED. freight costs are not subject to a purchase discount.

58
Q

sauk stereo returns goods costing 300 to PW Audio Supply. Record entry for sauk stereo

A

accounts payable 300 (debit decrease)
Inventory 300 credit decrease
(to record return of goods purchased)

59
Q

on may 14, sauk stereo pays the balance due on account to PW Audio Supply worth 3500, taking the 2% cash discount allowed by Audio Supply for payment within 10 days. Record stereo’s transaction

A

Accounts payable (3800 - 500) 3500 debit decrease
purchase discounts (3500 x 0.02) 70 credit increase
cash 3430 credit decrease
(to record payment within the discount period)

60
Q

RECORDING SALES OF MERCHANDISE

PW Audio Supply’s POV

A

refer to the previous cards

61
Q

PW Audio Supply records the sale of 3800 merchandise to sauk stereo

A

accounts receivable 3800
sales revenue 3800
(to record credit sales to sauk stereo)

62
Q

to record the returned goods received from sauk stereo on may 8

300 sales return

A

sales returns and allowances 300 (contra asset)
accounts receivable 300 - credit decrease
(to record credit granted to sauk stereo for returned goods)

63
Q

3500 price
audio supplu receives payment of 3,430 on account from sauk stereo. pw audio supply honors 2% cash discount and records the payment of sauk stereo

A 
cash 3430 (debit increase)
sales discounts (3500 x 0.02) 70 debit increase [contra asset] -> discounts are a credit
accounts receivable (3800-300) 3500
(to record collection within 2/10, n/30 discount period from sauk stereo)
64
Q

steps in journalizing and posting closing entries

A
  1. beginning inventoryis DEBITED to income summary and CREDITED to inventory
  2. ending inventory is DEBITED to INVENTORY and credited to INCOME summary
income summary (debit)
inventory (credit)
to close beginning invenotry

iventory (debit)
income summary (credit)
to close ending inventory

BA 99.1 (7 decks)

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