Accounting chap 3 practice Q's Flashcards
In a perpetual inventory adjustment system what gets added to the inventory account
The purchase of inventory and transport in costs
How do you record a discount
subtract the discounted amount from inventory
subtract amount with discounted amount from cash
subtract undiscounted amount from notes payable
What’s the difference between a product cost and selling and admin cost
Product costs are related to the production of goods (COGS, Freight, labor, supplies)
admin costs: activities outside of production, needed for promoting and selling (Overhead, exec salaries, marketing)
How is the cost of good available for sale determined
Add the beginning year amount of inventory to the amount of inventory produced in the year
What portion of goods available for sale is shown on the balance sheet, and what portion is on the income statement?
Balance sheet: Shows inventory as a current asset
Income statement: Shows COGS or costs associated with ( shows expenses such as cost of materials, overhead and labor)
When are period vs product costs expensed
Period costs: overhead not directly related to product, EXPENSED IN PERIOD INCURRED
Product costs: directly related to production EXPENSED WHEN ITEM IS SOLD
If a company had net sales of 600k
goods available for sale for 450k
COGS for 375k
What is the gross margin? what amount of inventory is shown on the balance sheet
Gross margin: compares profitability to revenue
Gross margin: net sales-COGS
225k
inventory shown on balence sheet
end inv=beg inv-COGS
375k
Is transport in a product or period cost
A period cost not directly related to product because the buyer is paying for it
What does 2/10,n/30 means
2% discount if paid within 10 days, otherwise total is due in 30 days
What is transport out, and is it a product or period cost for the seller
Transport out is the cost of shipping incurred by the seller, and are period costs
what would you debit and credit: JPS returned some of the inventory purchased in Event 2. The list price of the returned merchandise was $1,000.
debit: accounts payable
Credit:inventory
what would you debit and credit: JPS received a cash discount on goods purchased in Event 2. The credit terms were 2/10, n/30.
Debit: accounts payable for full amount
Credit: cash for discounted price
What would you debit and credit: The shipping terms for the inventory purchased in Event 2 were FOB shipping point. JPS paid the freight company $300 cash for delivering the merchandise.
Debit: operating expense (freight out)
Credit: Cash
What do you debit and credit: JPS recognized $24,750 of revenue on the cash sale of merchandise that cost $11,500.
Debit: cash 24.75k
Credit: sales revenue 11.5k
—————————————————Debit: COG 11.5k
Credit: inventory 11.5k
what would u debit and credit: JPS recognized $11,500 of cost of goods sold.
Debit: COG sense its directly related to producing/purchasing
Credit: inventory
