Chapter 4

Question 1

Merchandising Inventory

Answer 1

Goods that a company buys to resell

Question 2

Merchandiser

Answer 2

one who buys and sells merchandise

Question 3

Wholesaler

Answer 3

Buys from manufacturer and sells to retailers

Question 4

Retailer

Answer 4

buys from manufacturer or wholesaler and sells to consumer

Question 5

Merchandising Inc Stmt

Answer 5

sales

<cost>
Gross profit
<selling>
<general>
net income
</general></selling></cost>

Question 6

Sales

Answer 6

revenue stream

Question 7

Cost of goods sold (CGS)

Answer 7

expense- the cost of stuff you had to buy before you could sell it

Question 8

Gross profit

Answer 8

what you are making on selling the goods before other expenses

Question 9

Merchandise inventory

Answer 9

current asset, product a company owns and expects to sell, valued at a cost of goods+ shipping+getting them ready

Question 10

Merch inventory turns into what when sold

Answer 10

CGS (expense)

Question 11

Operating Cycle

Answer 11

purchase of merch on shelf as inventory for sale
sales on credit billed as A/R receipt of cash

Question 12

What cycle do we want to shorten and why

Answer 12

the operating cycle to make more profit by efficieny

Question 13

Calculation of CGS

Answer 13

Beg inventory
+purchases
+goods avail for sale

<end>
=CGS
</end>

Question 14

Control Accounts

Answer 14

Summary of subsidiary (A/R, A/P, inventory)

Question 15

subsidiary ledger

Answer 15

detail of each individual account

Question 16

what are the two methods of keeping track of inventory

Answer 16

periodic and perpetual

Question 17

periodic

Answer 17

count at the end of the period

Question 18

perpetual

Answer 18

keep up as you sell

Question 19

physical inventory

Answer 19

count taken of inventory at least once per year under both methods (counts for shrinkage)

Question 20

shrinkage

Answer 20

theft, damage, obsolescence

Question 21

gross method

Answer 21

keeps up with the details

Question 22

net method

Answer 22

smushes together F/S presentation, requires estimates for discounts and returns

Question 23

trade discount

Answer 23

reduction form catalog list price

Question 24

purchase discount

Answer 24

buyer

Question 25

sales discount

Answer 25

seller

Question 26

credit terms

Answer 26

2/10 net 30 2% discount if paid within 10 days

Question 27

credit period

Answer 27

time before full payment due

Question 28

discount period

Answer 28

time to get discount by paying fast

Question 29

freight in

Answer 29

buyer- cost to get merchandise delivered, added to cost of inventory

Question 30

freight out

Answer 30

seller- cost to get merch to buyer, selling expense

Question 31

FOB shipping point

Answer 31

Title passes at shipping buyer pays freight

Question 32

FOB destination

Answer 32

title passes at destination seller pays freight

Question 33

Cost of purchases

Answer 33

invoice cost +freight in =net cost of purchases

Question 34

purchase merchandise (entry periodic)

Answer 34

debit: purchases credit: A/P

Question 35

purchase merchandise (entry perpetual)

Answer 35

debit: merchandise inventory credit: A/P

Question 36

Purchase discount/paying the bill (entry periodic)

Answer 36

debit: A/P credit: purch disc, cash

Question 37

Purchase Discount/ Paying the bill (entry perpetual)

Answer 37

Debit: A/P Credit: Merch Inv, cash

Question 38

Purchase Return (entry periodic)

Answer 38

Debit: A/P Credit: Purchase Return

Question 39

Purchase Return (entry perpetual)

Answer 39

Debit: A/P Credit: Merch Inv

Question 40

Freight in (Entry Periodic)

Answer 40

Debit: Freight in Debit: Cash

Question 41

Freight In (Entry Perpetual)

Answer 41

Debit: Merch Inv Credit: Cash

Question 42

Sale (Entry Periodic)

Answer 42

Debit: A/R Credit: Sales

Question 43

Sale (Entry Perpetual)

Answer 43

Debit: A/R Credit: Sales Debit: CGS Credit: Merch Inv

Question 44

Sales Disc/ Bill Paid (Entry Periodic)

Answer 44

Debit: Cash, Sales Disc Credit: A/R

Question 45

Sales Disc/ Bills paid (Entry Perpetual)

Answer 45

Debit: Cash, Sales Disc Credit: A/R

Question 46

Sales Return (entry periodic)

Answer 46

Debit: sales return Credit: A/R

Question 47

Sales Return (Entry Perpetual)

Answer 47

Debit: Sales Return Credit: A/R Debit: Merch Inv Credit: CGS

Question 48

End of Inv of one period becomes...

Answer 48

Beg Inv of next period

Question 49

Adjusting Entry For Shrinkage (Under Perpetual)

Answer 49

Debit: CGS Credit: Merch Inv

Question 50

Revenue Recognition Rules

Answer 50

Record sales at amount expected to be received

Question 51

Periodic Closing

Answer 51

Remove beg inv, add end inv

Question 52

Perpetual Closing

Answer 52

pick up additional accounts

Question 53

Financial Statement Presentation

Answer 53

Gross sales =Net sales

Question 54

Single Step Income statement

Answer 54

Not as informative or common as the multistep