ACCT 2810 – Chapter 4 – Flashcards
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Which of the following businesses is a merchandising business?
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Kohl's
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Gross profit is determined by subtracting the cost of merchandise sold from what?*
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Net sales
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Since merchandise inventory is normally sold within a year, how is it reported on the balance sheet?*
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As a current asset
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Generally, the revenue account for a merchandising business is entitled*
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Sales.
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The difference between sales and cost of merchandise sold for a merchan- dising business is *
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gross profit.
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What is subtracted from sales to arrive at net sales?*
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Both sales discounts and sales returns and allowances
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East, Inc. had beginning inventory of $10,000, purchases of $25,000, and ending inventory of $5,000. What is East's cost of merchandise sold?*
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$30,000
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Which expenses are subtracted from gross profit to arrive at income from operations?*
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Operating expenses
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Which of the following is NOT an example of selling expenses?*
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Office staff salaries
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Which of the following is NOT an administrative expense?*
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Salespersons' salaries
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NBC Company had $32,000 in net sales, $15,000 in cost of merchandise sold, $18,000 in operating expenses, and $2,000 in other income. What is NBC Company's gross profit?*
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$17,000
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For a merchandising firm, the inventory sold is shown on the income statement as?*
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cost of merchandise sold.
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Inventory NOT sold at the end of the period is reported as*
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merchandise inventory.
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Which of the following are subtracted from sales to arrive at net sales?*
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Sales returns
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Gross profit is equal to:*
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sales less (sales discounts and sales returns and allowances) less cost of merchan- dise sold.
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The arrangements between buyer and seller as to when payments for merchandise are to be made are called*
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credit terms.
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If a $20,000 sale is made on January 1, with terms of 2/10, n/30, how much would the discount be if payment is made on January 9?*
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$400
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In credit terms of 1/10, n/30, the "1" represents the
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percent of the cash discount.
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Sales to customers who use bank credit cards such as MasterCard and Visa are usually recorded by a(n):*
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increase in Cash, increase in Credit Card Expense, and increase in Sales
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In recording the cost of merchandise sold for cash using a perpetual inventory system, the effect on the accounts is*
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increase Cost of Merchandise Sold; decrease Merchandise Inventory.
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When merchandise that was sold on account is returned, which accounts are affected?*
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Sales returns, accounts receivable, merchandise inventory, and cost of goods sold
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If merchandise sold on account is returned to the seller, the seller may inform the customer of the details by issuing a
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credit memorandum.
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Merchandise subject to terms 1/10, n/30, FOB shipping point, is sold on account to a customer for $20,000. The seller issued a credit memorandum for $5,000 prior to payment. What is the amount of the cash discount allowable?*
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$150
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Based on the following information, what would be recorded as purchases discount if the invoice is paid within the discount period? 1. $5,000 of merchandise inventory was ordered on April 2, 2010. 2. $2,000 of this merchandise was received on April 5, 2010. 3. On April 6, 2010, an invoice dated April 4, 2010, with terms of 2/10, net 30 for $2,150 which included a $150 prepaid freight cost, was received. 4. On April 10, 2010, $500 of the merchandise was returned to the seller.*
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$30
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In credit terms of 1/10, n/30, the "10" represents the
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number of days in the discount period.
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Under the perpetual inventory system, a retailer's purchase of merchandise inventory:*
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increases Merchandise Inventory; decreases Cash.
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The amount of the total cash paid to the seller for merchandise purchased would normally include:*
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the list price plus the sales tax.
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A sales invoice included the following information: merchandise price, $5,000; terms 1/10, n/eom. Assuming that a credit for merchandise returned of $600 is granted prior to payment, and that the invoice is paid within the discount period, what is the amount of cash received by the seller?*
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$4,356
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A sales invoice included the following information: merchandise price, $6,000; terms 2/10, n/eom. Assuming that a credit for merchandise returned of $600 is granted prior to payment, and that the invoice is paid within the discount period, what is the amount of cash received by the seller?*
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$5,292
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Merchandise subject to terms 1/10, n/30, FOB shipping point, is sold on account to a customer for $17,500. The seller issued a credit memorandum for $4,000 prior to payment. What is the amount of the cash discount allowable?*
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$135
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If the buyer is to pay the delivery expense of delivering merchandise, delivery terms are stated as*
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FOB shipping point.
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If the seller is to pay the delivery expense of delivering merchandise, the delivery terms are stated as*
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FOB destination.
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If title to merchandise purchases passes to the buyer when the goods are shipped from the seller, the terms are*
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FOB shipping point.
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If title to merchandise purchases passes to the buyer when the goods are delivered to the buyer, the terms are*
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FOB destination.
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Merchandise with an invoice price of $6,000 is purchased subject to terms of 2/10, n/30, FOB destination. Transportation costs paid by the seller totaled $125. What is the net cost of the merchandise?*
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$5,880
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Which term indicates that merchandise is free of transportation charges to the buyer?
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FOB destination
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Inventory shortage is recorded when:*
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there is a difference between a physical count of inventory and inventory records.
