question

Worksheet

answer

NOT A REQUIRED REPORT`

question

current items

answer

are those expected to come due(both collected an owed)within the longer of one year or the companies normal operating cycle

question

What must be equal in a post closing trial balance

answer

total debts and credits

question

Merchandising companies sell___ to earn revenue.

answer

products

question

operating cycle for a merchandiser begins with...?

answer

the purchase of merchandise

question

The operating cycle for a merchandiser ends with...?

answer

the collection of cash from the sale of merchandise

question

Perpetual system

answer

continually update accounting records for merchandising transactions

question

Periodic systems

answer

accounting records relating to merchandise transactions are updated only at the end of the accounting period

question

trade discounts

answer

used by manufactured and wholesalers to offer better prices for greater quantities purchased

question

purchase discounts

answer

a deduction from the invoice price granted to induce early payment of the amount due

question

purchase return

answer

merchandise returned by the purchaser to the supplier

question

purchase allowance

answer

A reduction in the cost of defective or unacceptable merchandise received by a purchaser from a supplier

question

FOB shipping point

answer

buyer pays for transportation and owns product as soon as it is on carrier

question

FOB destination

answer

seller pays for transportation once goods are delivered they are owned by the buyer

question

each sales transactions for a seller of merchandise involves two parts

answer

1 .revenue received in the form of an asset from a customer 2.recognition of the cost of merchandise sold to customer

question

How can sales discounts on credit benefit a seller

answer

by decreasing the delay in receiving cash and reducing future collection efforts

question

sales returns

answer

merchandise that customers return to the seller after the sale

question

sales allowances

answer

refer to the reduction in the selling price of the merchandise sold to customers

question

merchandise inventory

answer

all goods that a company owns and holds for sale, regardless of where the goods are located when the inventory is counted

question

items requiring special attention are...

answer

goods in transit, goods on consignment, goods damaged or obsolete

question

goods on consignment

answer

merchandise is included in the inventory of the consignor, the owner of the inventory

question

damaged or obsolete goods

answer

are not counted in the inventory if they cannot be sold

question

If damaged goods can be sold...

answer

cost should be reduced to the NET REALIZABLE VALUE if they can be sold

question

What must be included when deterring inventory costs?

answer

all expenditures necessary to bring an item to a salable condition and location

question

FIFO

answer

assumes cost flow in the order incurred

question

LIFO

answer

assumes cost flow in the reverse order incurred

question

Weighted Average

answer

Assumes cost flow at an average of the cost available

question

Weighted Average advantage

answer

smoothes out price changes

question

FIFO advantage

answer

ending inventory approximated current replacement cost

question

LIFO advantage

answer

better matches cost in cost of goods sold with revenue

question

consistency principle

answer

required a company to use the same accounting meths periods after period so that financial statements are comparable across periods.

question

lower of cost or market

answer

inventory must be reported at market value when market is lower than cost

question

current replacement cost

answer

or lower of cost or market can be applied in 3 ways 1. separately to each individual item 2.to major categories of assets 3.to the whole inventory

question

the closing process

answer

applies only to temporary accounts

question

Income Summary is a temporary account only used for the closing process.

answer

true

question

A classified balance sheet organizes assets and liabilities into important subgroups that provide more information to decision makers.

answer

true

question

Revenue accounts should begin each accounting period with zero balances.

answer

true

question

A company has current assets of $15,000 and current liabilities of $9,500. Its current ratio is 1.6.

answer

true Current Ratio = Current Assets/Current Liabilities Current Ratio = $15,000/$9,500 = 1.6

question

A work sheet is a tool to help organize information needed in adjusting the accounts and preparing the financial statements.

answer

true

question

When closing entries are made:

answer

All temporary accounts are closed but not the permanent accounts.

question

Assets, liabilities, and equity accounts are not closed; these accounts are called:

answer

Permanent accounts

question

Merchandise inventory consists of products that a company acquires to resell to customers.

answer

true

question

A wholesaler is an intermediary that buys products from manufacturers or other wholesalers and sells them to consumers.

answer

false

question

A company had sales and cost of goods sold of $350,000 and $200,000, respectively. Its gross profit equals $150,000.

answer

true

question

gross profit is also called margin

answer

true

question

Purchase allowances refer to merchandise a buyer acquires but then returns to the seller.

answer

false

question

Credit terms of 2/10, n/30 imply that the seller offers the purchaser a 2% cash discount if the amount is paid within 10 days of the invoice date. Otherwise, the full amount is due in 30 days.

answer

true

question

The seller is responsible for paying shipping charges and bears the risk of damage or loss in transit if goods are shipped FOB destination.

answer

true

question

A company purchased $4,000 worth of merchandise. Transportation costs were an additional $350. The company later returned $275 worth of merchandise and paid the invoice within the 2% cash discount period. The total amount paid for this merchandise is:

answer

Cash Paid = [($4,000 - $275) * .98] + $350 = $4,000.50

question

A company has net sales and cost of goods sold of $825,000 and $547,000, respectively. Its net income is $98,500. The company's gross margin and operating expenses are ________ and ____________, respectively.

answer

Gross Margin = Net Sales - Cost of Goods Sold; $825,000 - $547,000 = $278,000 Operating Expenses = Gross Margin - Net Income; $278,000 - $98,500 = $179,500

question

The cost of an inventory item includes its invoice cost minus any discount, and plus any added or incidental costs necessary to put it in a place and condition for sale.

answer

true

question

Goods on consignment are goods shipped by their owner, called the consignee, to another party called the consignor.

answer

false

question

Incidental costs often added to the costs of inventory include import duties, freight, storage, and insurance.

answer

true

question

The consistency concept prescribes that a company use the same accounting methods period after period, so that financial statements are comparable across periods.

answer

true

question

A company has inventory with a market value of $217,000 and a cost of $241,000. According to the lower of cost or market, the inventory should be written down to $217,000.

answer

true

question

Damaged and obsolete goods that can be sold:

answer

Are included in inventory at their net realizable value.

question

An advantage of LIFO is that it assigns the most recent costs to cost of goods sold, and does a better job of matching current costs with revenues on the income statement.

answer

true

question

Tops had cost of goods sold of $9,421 million, ending inventory of $2,089 million, and average inventory turnover of $1,965 million. Its days' sales in inventory equals:

answer

Days' Sales in Inventory = Ending Inventory/Cost of Goods Sold * 365 Days' Sales in Inventory = $2,089/$9,421 * 365 = 80.9 days

question

Merchandise inventory includes:

answer

All goods owned by a company and held for sale.

question

Goods in transit are included in a purchaser's inventory:

answer

When the purchaser is responsible for paying freight charges.

question

Permanent accounts report on activities related to ____ future accounting periods, and they carry their ending balance into th next period

answer

one or more

question

____accounts include all income statement accounts, the withdrawals account, and the income summary report

answer

temporary

question

_____accounts generally consist of all balance sheet accounts and these accounts are NOT closed

answer

permanent

question

Temporary accounts accumulate data related to ____ accounting period

answer

one

RETL261 – Sales – Flashcards

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