1. During the current year, merchandise is sold for $4,500,000. The cost of the merchandise sold is $1,900,000.
a. What is the amount of the gross profit?
b. Compute the gross profit percentage (gross profit divided by sales).
c. Will the income statement necessarily report a net income? Explain.
2 For a recent year, a company reported revenue of $58,765 million. Its gross profit was $19,065 million. What was the amount of the companies cost of merchandise sold?
3 Identify the items missing in determining cost of merchandise sold. a. Purchase -______________ + Purchase returns and allowances = Net purchases
b. Net purchases + ____________ = Cost of merchandised purchased c. Merchandise inventory (beginning) + Cost of merchandise purchased = ____________
d. Merchandise available for sale - __________ = Cost of merchandise sold
2 For the fiscal year, sales were $12,090,000, sales discounts were $240,000, sales returns and allowances were $70,000, and the cost of merchandise sold was $6,000,000. If you want to learn more check out What are angiosperms?
a. What was the amount of net sales? (11,780,000)
b. What was the amount of gross profit? (5,780,000)
2 Advertising expenses, Depreciation expenses on store equipment, Salary of sales manager, and sales supplies used are categorized as
2 Insurance expense on office equipment, Rent expense on office building, and Salaries of office personnel are categorized as
2 Sales is $360,000, Sales discounts is 30,000, Net sales is 290,000, Gross profit is 115,000.
a. What is Sales returns and allowances?
b. What is Cost of merchandise sold?
2 Merchandise is sold on account to a customer for $15,000 , terms FOB shipping point, 2/10, n/30. The seller paid the freight of $100. Determine the following
a. Amount of the sale
b. Amount debited to Accounts Receivable
c. Amount of the discount for early payment
d. Amount due within the discount period
2 A company purchased merchandise on account from a supplier for $15,000, terms 1/10, n/30. The company returned $3,500 of the merchandise before payment was made and received full credit.We also discuss several other topics like What are stem plots?
a. If the company pays the invoice within the discount period, what is the amount of cash required for the payment?
b. Under a perpetual inventory system, hat account is decreased by the company to record the returns?
2 A retailer is considering the purchase of 100 units of a specific item for either of two suppliers. Their offers are as follows. What of the two offers, a or b, yields the lower price?
a. $290 a unit, total of $29,000, 1/10, n/30, plus freight of $750 b. $300 a unit, total of $30,000, 2/10, n/30, no charge for freight 2
FOB shipping point, 1/10, n/30
FOB shipping point, 2/10, n/30
FOB destination, n/30
FOB shipping point, 2/10, n/30
FOB destination, 2/10, n/30
Which of the following is not an element of internal control? a Control environment
c Compliance with laws and regulations
d Control procedures
2 The bank erroneously charged a company account for $340.50 for a check that was correctly written and recorded by the company as $430.50. To reconcile the bank account of the company at the end of the month you would
a Add $90 to the cash balance according to the bank statement b Deduct $90 to the cash balance according to the company's records c Add $90 to the cash balance according to the bank statement d Deduct $90 to the cash balance according to the company's records
2 In preparing a bank reconciliation, the amount of checks outstanding would be a Added to the cash balance according to the bank statement b Deducted from the cash balance according to the bank statement c Added to the cash balance according to the company's records d Deducted from the cash balance according to the company's records Don't forget about the age old question of What is the study of change and continuity in behavior and mental states during lifespan?
2 Adjustment to the company's records based on the bank reconciliation are required for:
a Additions to the cash balance according to the company's records b Deductions from the cash balance according to he company's records c Both a and b
d Neither a nor b
2 Petty cash fund is:
a Used to pay relatively small amounts
b Established by estimating the amount of cash needed for disbursements of relatively small amounts during a specified period We also discuss several other topics like What are the steps of muscle contraction?
c Reimbursed when the amount of money in the fund is reduced to a predetermined minimum amount
d All of the above
January 5 $40,000 9%
March 22 $9,000
Determine the due date and the amount of interest due at maturity on the above notes.
For a recent year, a company reported accounts and notes receivable of $678,987,000 and allowance of doubtful account of $116,106,777. Compute the percentage of the allowance for doubtful accents to the accounts and notes receivable for the company.
For a recent year, a company reported accounts and notes receivable of $11,435,000,000 and allowance of doubtful account of $256,000,000. Compute the percentage of the allowance for doubtful accents to the accounts and notes receivable for the company.
A the end of the current year, the accounts receivable account has a balance of $1,800,00 and net sales for the year total $22,600,000. Determine the amount of the adjusting entry to provide for doubtful accounts under each of the following assumptions:
a The allowance account before adjustment has a negative balance of - $15,000. Bad debt expense is estimated at 3/4 of 1% of sales
b The allowance account before adjustment has a negative balance of - $15,000. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $155,000
c The allowance account before adjustment has a positive balance of $20,000. Bad debt expense is estimated at 1/2 of 1% of sales d The allowance account before adjustment has a positive balance of $20,000. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $120,000
2 What are the 3 different inventories?
3 Assume that a firm separately determined inventory under FIFO and LIFO and compared the results
In each of the spaces below, place the correct sign [less than (<), greater than (>), or equal (=)} for each comparison, assuming periods of rising prices. 1 FIFO inventory _____ LIFO inventory
2 FIFO cost of goods sold _____ LIFO of goods sold
3 FIFO net income _______ LIFO net income
4 FIFO income tax ______ LIFO income tax
Things to remember:
Merchandise sold = COGS + Gross profit
Purchase - Purchase discounts + Purchase returns and allowances = Net sales Net sales + Freight in = Cost of merchandised purchased
Merchandise inventory (beginning) + Cost of merchandise purchased = Merchandise available for sale
Merchandise available for sale - Merchandise inventory (ending) = Cost of merchandise sold
Revenue - Expenses = Net income
Revenue = Net sales + Rent revenue
Expenses = Cost of Merchandise Sold + any other expenses
Revenue - Expenses = Net income
o Purchase - Purchase discounts + Purchase returns and allowances = Net sales
o Net Sales - Cost of Merchandise sold = Gross Profit
o Gross Profit - Expenses (all but Interest) = Income from operations o Income from operations - Other expenses (Interest) = Net income FOB Shipping point = buyer pays
FOB Destination = seller pays
Percentage of doubtful accounts = doubtful accounts / receivables Face x rate x time = interest revenue
Direct method: The Accounts Receivable account is adjusted "directly" for bad debts as they occur
∙ Net sales x bad debt expense % = Adjustment
Allowance method: Bad debts are estimated each period and a contra receivables accounts called "Allowance for Bad Debts" is used
∙ Estimated doubtful accounts + Allowance account before adjustment = Adjustment
FIFO: first items we got, assume to be the first out
LIFO: last items we got, assume to be the first out
Average: Average of costs
1. A=2,$600,000; B=58%; C=No, if it is a negative it would be a net loss 2. $39,700
3. (Purchases discounts) (Freight in) (Merchandise available for sale) (Merchandise inventory ending)
4. ($11,780,000) $(5,780,000)
7. ($40,000) $(175,000)
8. ($15,000) ($15,100) ($300) ($14,800)
9. ($11,385) (Merchandise Inventory)
10. (a = $29,460) (b = $29,400) B is less expensive
11. (a= $6,4344.01) (b= $1,742) (c=$17,000) (d=$8,632) (e=$4,165) 12. C
17. (Feb 19, $450) (May 21, $150) (Aug 27,$360) (Dec 28, $600) (Dec 1, $140)
20. ($169,500) ($140,000) ($113,000) ($140,000)
21. Materials inventory, Work-in-progress inventory, Finished goods inventory
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