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Juan sells $75,000 of TVs to a customer.The credit terms state a 2% discount if paid in 7 days and a 1% discount if paid in 8-14 days.The customer pays in 12 days.How much cash does Juan receive?


A) $75,000
B) $73,500
C) $74,250
D) $1,500

E) A) and D)
F) C) and D)

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Devonshire,Inc.sold merchandise inventory on account at a price of $16,000 with payment terms of 1/10,n/30.The merchandise cost Devonshire $11,000.If the customer paid for the merchandise 5 days after receiving the invoice,how much cash was collected by Devonshire?


A) $11,000
B) $15,840
C) $10,890
D) $16,000

E) A) and D)
F) A) and C)

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Inventory is reported as a(n) ________ on the ________.


A) current asset;balance sheet
B) current asset;balance sheet and income statement
C) expense;income statement
D) expense;balance sheet

E) A) and B)
F) C) and D)

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When inventory is sold,the cost of the inventory is removed from inventory and reported on a multistep the income statement as:


A) inventory expense.
B) cost of goods sold.
C) selling,general,and administrative expenses.
D) operating expenses.

E) A) and D)
F) B) and D)

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Match the term to the appropriate definition.There are more definitions than terms. -Inventory


A) Presents important subtotals,such as gross profit,to help distinguish core operating results from other,less significant items that affect net income.
B) A reduction in the cost of inventory purchases associated with unsatisfactory goods.
C) Refunds and price reductions given to customers after goods have been sold and found unsatisfactory.
D) A ratio indicating the percentage of profit earned on each dollar of sales,after considering the cost of products sold.
E) Net sales minus cost of goods sold.It is a subtotal,not an account.
F) A sales price reduction given to customers for prompt payment of their account balance.
G) The sum of beginning inventory and purchases for the period.
H) A cash discount received for prompt payment of a purchase on account.
I) Assets acquired for resale to customers.
J) The cost of inventory lost to theft,fraud,and error.

K) F) and G)
L) E) and J)

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Sales Revenue is a(n) ________ account and ________ is an expense account.


A) asset;Sales Discounts
B) revenue;Sales Returns and Allowances
C) revenue;Cost of Goods Sold
D) liability;Gross Profit

E) C) and D)
F) None of the above

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Willetta Company purchases inventory for $10,000 with terms 3/10,n/30.It then returns $2,000 of the inventory purchased to the supplier and also receives an allowance for defective inventory of $100.The company pays the amount due within the discount period.What is the amount of the discount that will be taken?


A) $300
B) $237
C) $240
D) $297

E) All of the above
F) None of the above

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Match the term to the appropriate definition.There are more definitions than terms. -Purchase Returns and Allowances


A) Presents important subtotals,such as gross profit,to help distinguish core operating results from other,less significant items that affect net income.
B) A reduction in the cost of inventory purchases associated with unsatisfactory goods.
C) Refunds and price reductions given to customers after goods have been sold and found unsatisfactory.
D) A ratio indicating the percentage of profit earned on each dollar of sales,after considering the cost of products sold.
E) Net sales minus cost of goods sold.It is a subtotal,not an account.
F) A sales price reduction given to customers for prompt payment of their account balance.
G) The sum of beginning inventory and purchases for the period.
H) A cash discount received for prompt payment of a purchase on account.
I) Assets acquired for resale to customers.
J) The cost of inventory lost to theft,fraud,and error.

K) F) and J)
L) F) and H)

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Monte Vista uses the perpetual inventory system.At the beginning of the quarter,Monte Vista has $60,000 in inventory.During the quarter the company purchases $15,800 of new inventory from a vendor,returned $1,400 of inventory to the vendor,and took advantage of discounts from the vendor of $400.At the end of the quarter the balance in inventory is $53,000.What is the cost of goods sold?


A) $21,000
B) $22,800
C) $7,000
D) $23,800

E) None of the above
F) A) and C)

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Polk Company uses a perpetual inventory system and had the following transactions during November: November 6-Purchased $8,700 of inventory on account,terms 2/10,n/30. November 8-Returned $1,200 of defective units and received full credit. November 15-Paid the amount due. What journal entry will be recorded by Polk Company on November 15?


A) Debit Accounts Payable and credit Cash for $7,350
B) Debit Accounts Payable for $7,500,credit Purchase Discount for $150,and credit Cash for $7,350
C) Debit Accounts Payable for $7,500,credit Inventory for $150,and credit Cash for $7,350
D) Debit Accounts Payable for $7,350,credit Inventory for $150,and credit Cash for $7,200

E) All of the above
F) B) and D)

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Which one of the following statements regarding sales discounts is correct?


A) If a company offers a discount to encourage prompt payment and the discount is taken,the discount reduces the amount of net sales.
B) Credit terms of "2/10,n/30" means that if payment is made in two days,a 10% discount may be taken;if not paid within two days,the full invoice price will be due in thirty days.
C) The terms "sales discounts" and "purchase discounts" are used interchangeably by a company.
D) A sales discount is subtracted from Sales Revenue whereas a purchase discount is added to Cost of Goods Sold.

E) All of the above
F) B) and D)

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A company sells goods at a selling price of $20,000.The cost of the goods is $15,000.Under a perpetual inventory system,the journal entries prepared to record the credit sale will include one with a debit to:


A) Inventory and a credit to Sales Revenue for $15,000.
B) Cost of Goods Sold and a credit to Inventory for $15,000.
C) Inventory and credit to Sales Revenue for $20,000.
D) Cost of Goods Sold and a credit to Sales Revenue for $15,000.

E) All of the above
F) None of the above

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Sales Returns and Allowances are reported on the:


A) income statement only.
B) balance sheet only.
C) both the income statement and the balance sheet.
D) statement of cash flows only.

E) None of the above
F) A) and D)

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Match the term to the appropriate definition.There are more definitions than terms. -FOB Destination


A) The sum of beginning inventory and purchases for the period.
B) Presents important subtotals,such as gross profit,to help distinguish core operating results from other,less significant items that affect net income.
C) A term of sale indicating that goods are owned by the seller until they are delivered to the buyer.
D) Sells goods that have been obtained from a supplier.
E) Inventory records are updated every time inventory is bought,sold,or returned.
F) A sales price reduction given to customers for prompt payment of their account balance.
G) Inventory records are updated at the end of the accounting period.To determine how much merchandise has been sold,inventory must be physically counted at the end of the period.
H) A term of sale indicating that goods are owned by the buyer the moment they leave the seller's premises.
I) Sells services rather than physical goods.
J) Assets acquired for resale to customers.

K) B) and G)
L) D) and H)

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If a merchandiser offers a sales discount of 2/10,net/30 on a sale of $2,000,the amount due in 10 days is the net amount of $1,960.

A) True
B) False

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Inventory shrinkage is the difference between inventory in the warehouse and inventory counted.

A) True
B) False

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The following is a listing of all of the income statement accounts for Mulberry Street Sportswear as they appear on the adjusted trial balance as of December 31.  Advertising Expense $12,000 Cost of Goods Sold 89,000 Delivery Expense 6,000 Insurance Expense 1,000 Income Tax Expense 2,000 Rent Expense 12,000 Interest Expense 5,000 Sales Revenue 160,000 Sales Discounts 11,000 Sales Returns & Allowances 19,000\begin{array}{lr}\text { Advertising Expense } & \$ 12,000 \\\text { Cost of Goods Sold } & 89,000 \\\text { Delivery Expense } & 6,000 \\\text { Insurance Expense } & 1,000 \\\text { Income Tax Expense } & 2,000 \\\text { Rent Expense } & 12,000 \\\text { Interest Expense } & 5,000 \\\text { Sales Revenue } & 160,000 \\\text { Sales Discounts } & 11,000 \\\text { Sales Returns \& Allowances } & 19,000\end{array} Required: a.Prepare a multistep income statement. b.Compute the gross profit percentage.

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a.
*Selling,General,and Administrative E...

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A company reported the following:  Cost of Goods Sold $200,000 General, Selling, and Administrative Expenses 52,800 Income Tax Expense 3,600 Inventory 12,000 Net Income 22,560 Sales Revenue 284,000 Sales Discounts 2,720 Sales Returns & Allowances 2,320\begin{array}{lr}\text { Cost of Goods Sold } & \$ 200,000 \\\text { General, Selling, and Administrative Expenses } & 52,800 \\\text { Income Tax Expense } & 3,600 \\\text { Inventory } & 12,000 \\\text { Net Income } & 22,560 \\\text { Sales Revenue } & 284,000 \\\text { Sales Discounts } & 2,720\\\text { Sales Returns \& Allowances }&2,320\end{array} What is the amount of gross profit?


A) $75,360
B) $78,960
C) $84,000
D) $26,160

E) A) and D)
F) None of the above

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Mitchell uses a perpetual inventory system.Mitchell sells a computer from inventory for $1,198 on credit.Mitchell originally bought the computer from IBM for $790.What journal entry (entries) will Mitchell prepare to record the sale?


A) Debit Cash and credit Sales Revenue for $1,198;debit Cost of Goods Sold and credit Inventory for $790.
B) Debit Accounts Receivable for $1,198,credit Inventory for $790,and credit Gross Profit for $408.
C) Debit Accounts Receivable and credit Sales Revenue for $1,198;debit Cost of Goods Sold and credit Inventory for $790.
D) Debit Inventory for $790,debit Cost of Goods Sold for $408,and credit Accounts Receivable for $1,198.

E) A) and B)
F) A) and D)

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Elm Corporation is a merchandising company.The year began with inventory of $35,100,Purchases for the year were $67,600,and the Ending Inventory was $18,200.What is the Cost of Goods Sold that would be reported on the income statement?


A) $120,900
B) $50,700
C) $14,300
D) $84,500

E) B) and D)
F) C) and D)

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