Merchandising and inventory

Question 1

Goods purchased for resale at a profit
-Ex. Caskets, urns, jerwlery

Answer 1

Merchandise/ inventory

Question 2

An expense account to record the buying of merchandise for resale

Answer 2

Purchases

Question 3

• Contra purchases account
  -Record the return of merchandise to the manufacturer or supplier
  -Usually defects in workmanship and/ or inferior product quality

Answer 3

Purchases returns and allowances

Question 4

-Contra purchase account
-Record discount taken on inventory purchases
-Encourage prompt payment of their invoice

Answer 4

Purchase discounts

Question 5

Purchases - any returns - any discounts

Answer 5

Net purchases

Question 6

A revenue account to record the earnings of revenue

Answer 6

Sales

Question 7

-Contra sales account
-Records credit given to a customer
-Usually shortages or damaged goods

Answer 7

Sales returns and allowances

Question 8

-A contra sales account
-Records discounts given to a customer
-Incentive for prompt payment

Answer 8

Sales discounts

Question 9

Sales - sales returns - sale discounts

Answer 9

Net sales

Question 10

If someone receives a discount of 6/15, n/30 what does all of that mean

Answer 10

6/15 means that they would receive a 6% discount if they pay within the first 15 days and n/30 means that the payment is due within 30 days

Question 11

When goods are shipped, the ownership is transferred when they are delivered

Answer 11

FOB destination

Question 12

When goods are shipped, ownership is transferred when they are shipped

Answer 12

FOB shipping

Question 13

What is the inventory equation for calculating COGS

Answer 13

COGS = beg year inventory + inventory purchases - end inventory

Question 14

-Does not maintain a continual track of inventory levels and COGS
-Focus: how much did we start with, how much purchased, how much ended with?
-Inventory costing done periodically when physical count is done

Answer 14

Periodic inventory

Question 15

-Continual track of inventory and calculations of COGS
-Efficient management
-Focus: let the computers work
-Continuous inventory costing at each sale

Answer 15

Perpetual inventory

Question 16

What are the three methods of inventory costing

Answer 16

1. FIFO (first in, first out)
   -Oldest products in an inventory are sold first
2. LIFO (last in, first out)
   -Most recent products in an inventory are sold first
3. Weighted average
   -Total dollar value of the inventory is averaged out equally among all units