ACCT 200 Lecture Notes - Lecture 18: Income Statement

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ivorysea-lion839

30 Aug 2018

School

University of Arizona

Department

Accounting

Course

ACCT 200

Professor

All

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Document Summary

2. low inventory levels may lead to lost sales. Common causes: failure to count or price inventory correctly, not properly recognizing the transfer of legal title to goods in transit, or misclassifying consignment goods. Errors affect both the income statement and balance sheet. The primary source of revenues is referred to as sales revenue or sales. Cost of goods sold is the total cost of merchandise sold during the period. Sales revenue - cost of goods sold = gross profit. Freight out is not an inventory cost because the seller pays, freight in is an inventory charge because the buyers pays.

Related Questions

1. Wild's Flowers sells $400 of flowers for a wedding and thecustomer pays with a bank credit card (e.g., VISA). Wild's Flowersmust pay 3% to the credit card company for credit cardtransactions. Which one of the following statement is correct(true) with respect to the recording of this sale on the books ofWild's Flowers?

a) Sales is debited $400
b) Sales is credited $388.
c) Credit Card Discounts is debited $12.
d) Sales Discounts is debited $12.

2. Which one of the following is correct (true) with respect toinventory?

a) inventory is normally reported on the 3rd line, after A/R, inthe current asset section of a classified balance sheet
b) a manufacturing firm has only one type of inventory, which isfinished goods
c) if a company sells goods and agrees to pay the freight cost,this freight cost would be included in the COGS section of thecompany's income statement
d) goods in-transit at the end of the period, which were sold underterms FOB destination, should be included in the inventory of thebuyer (and not the seller)

coralyak631

1. Inventory is classified on the balance sheet as a

a.current liability

b.long-term asset

c.current asset

d.long-term liability

2. What is the term applied to the excess of sales over the cost of goods sold?

a.net income

b.gross profit

c.operations

d.gross sales

3. The inventory system employing accounting records that continuously disclose the amount of inventory is called

a.periodic

b.retail

c.perpetual

d.physical

4. Calculate the gross profit for Jefferson Company based on the following:

Sales $764,000

Selling Expenses $42,500

Cost of Goods Sold $538,000

a.$183,500

b.$721,500

c.$495,500

d.$226,000

5. Calculate income from operations for Jonas Company based on the following data:

Sales $764,000

Selling Expenses $52,500

Cost of Goods Sold $538,000

a.$226,000

b.$711,500

c.$485,500

d.$173,500

6. The primary difference between the periodic and perpetual inventory systems is that a

a.periodic system keeps a record showing the inventory on hand at all times

b.periodic system determines the inventory on hand only at the end of the accounting period

c.periodic system records the cost of the sale on the date the sale is made

d.periodic system provides an easy means to determine inventory shrinkage

7. In credit terms of 3/15, n/45, the "3" represents the

a.percent of the cash discount

b.full amount of the invoice

c.number of days when the entire amount is due

d.number of days in the discount period

8. Which of the following accounts has a normal credit balance?

a.Inventory

b.Accounts Receivable

c.Sales

d.Delivery Expense

9. Using a perpetual inventory system, the entry to record the purchase of $30,000 of merchandise on account would include a

a.debit to Inventory

b.debit to Accounts Payable

c.credit to Sales

d.credit to Inventory

10. Which of the following accounts usually has a debit balance?

a.Sales

b.Inventory

c.Accounts Payable

d.Sales Tax Payable

11. If title to merchandise purchases passes to the buyer when the goods are shipped from the seller, the terms are

a.n/30

b.consigned

c.FOB shipping point

d.FOB destination

12. When goods are shipped FOB destination and the seller pays the freight charges, the buyer

a.does not take a discount

b.journalizes a reduction for the cost of the merchandise

c.makes no journal entry for the freight

d.journalizes a reimbursement to the seller

13. When the perpetual inventory system is used, the inventory sold is debited to

a.Supplies Expense

b.Cost of Goods Sold

c.Sales

d.Inventory

14. Generally, the revenue account for a merchandising business is entitled

a.Gross Sales

b.Sales

c.Gross Profit

d.Fees Earned

lemonpug879

1. Beginning inventory plus purchases equals:

a) cost of goods sold

b) goods available for sale

c) net purchases

d) ending inventory

2. Accounts receivable:

a) arise from the purchase of goods or services on credit

b) are amounts owed to a business by its customers.

c) are reported on the income statement.

d) will be collected within the discount period or when due.

3. A perpetual inventory system will always give updated balances for:

a) goods available for sale and sales revenue

b) inventory and cost of goods sold

c) accounts receivable and inventory

d) Inventory and sales revenue

4. What is the primary goal of internal controls for cash payments?

a) To make payments as quickly as possible

b) To ensure that payments are made only for properly authorized transactions

c) To independently verify cash payments

d) To ensure the lowest prices possible are paid

olivecrocodile635

ACCT 200 Lecture Notes - Lecture 18: Income Statement

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