Chapter 5

Question 1

Mechandiser

Answer 1

business that sells merch, or goods to customers

Question 2

Wholesaler

Answer 2

buys goods from a manufacturer and sells them to retailers

Question 3

Retailer

Answer 3

buys merchandise from manufacturers or wholesalers and sells the goods to customers

Question 4

Vendor

Answer 4

when a company purchases inventory from an individual or business

Question 5

Cost of Goods Sold

Answer 5

the cost of merchandise sold to customers

Question 6

Gross Profit

Answer 6

net sales revenue - cogs

Question 7

Operating Expenses

Answer 7

expenses other than cogs

Question 8

Periodic inventory system

Answer 8

requires a physical count if inventory to determine inventory on hand

Question 9

Perpetual inventory system

Answer 9

keeps a running computerized record of merchandise inventory

Question 10

Invoice

Answer 10

sellers request for payment from the purchaser (bills)

Question 11

Purchase returns

Answer 11

sellers allow purchasers to return merchandise that is defective or unsuitable

Question 12

Purchase allowances

Answer 12

amounts granted to purchasers as an incentive to keep goods that are “not as ordered”

Question 13

Purchase Discount

Answer 13

discount that a business offers to purchasers as an incentive to pay earlier

Question 14

Credit terms

Answer 14

payment terms of purchase 3/15, n/30 means 3% discount if paid within 15 days and if not full amount is due in 30

Question 15

FOB Shipping point

Answer 15

buyer takes ownership to the goods after it leaves the sellers place and the buyer pays the freight

Question 16

FOB Destination

Answer 16

buyer takes ownership at the delivery destination therefore the seller pays for freight

Question 17

Freight in

Answer 17

cost to ship goods to the purchasers warehouse

Question 18

Freight out

Answer 18

cost to ship goods out of the seller’s warehouse and to the customer

Question 19

Sales Revenue

Answer 19

amount a business earns from selling merchandise

Question 20

Sales Discounts

Answer 20

reduction in the amount of revenue earned on sales for early payment

Question 21

Sales Returns and Allowances

Answer 21

contra asset that shows a decrease in the seller’s receivable from a customer’s return of merchandise

Question 22

Sales Returns

Answer 22

reduce the future cash collected from the customer or require a refund to be made to the customer

Question 23

Sales Allowances

Answer 23

seller reduces the amount owned by a customer, but the customer does not return merchandise inventory

Question 24

Inventory Shrinkage

Answer 24

loss of inventory due to theft, damage or errors