ACC 201 Study Guide - Midterm Guide: Inventory Turnover, Public Company Accounting Oversight Board, Weighted Arithmetic Mean

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30 Sep 2016

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Net sales= sales revenue sales discounts sales returns and allowances. Cost of goods sold= (beginning inventory + purchases) ending inventory. Gross profit= net sales cost of goods sold. Net income (loss)= gross profit operating expenses. Inventory turnover ratio= cost of goods sold/average inventory. Merchandising companies have a longer operating cycle than service enterprises. Manufactured inventory that has begun the production process but is not yet completed is work in process. Legal title determines whether or not goods should be included in a physical count of inventory. Perpetual system- maintain records of cost of each inventory purchase & sale, continuous. Periodic system- no detailed records, cost of goods sold determined at the end of the accounting period. Recording purchases of merchandise- there is a purchase invoice for each credit purchase. Freight costs fob stands for free on board. Fob shipping point- ownership of goods passes to the buyer when the carrier accepts the goods from the seller.

Related Questions

***This is a classmates discussion that they posted my onlyassignment is to comment on it 150 words minium***

1. The company's inventory at the 2016 year end had a value of$4,864,000.

2. The amount of cost of goods for the fiscal year of 2016 had avalue of $30,150,000,000 including depreciation (D) andamortization (A). The value was $29,490,000,000 excluding D andA.

3. Best Buy uses a multi-step income statement. The incomestatement begins with sales/revenue, cost of goods sold, and grossincome. There is another section that lists the selling, general,and administrative expense for the company. This includes incometax along with interest expenses. The net income is stated afterthese entries.

4. Gross profit percentage is found by subtracting the cost ofgoods sold by the total revenue. So for Best Buy this would be$39,400,000,000-$30,150,000,000 which equal a gross profit of$9,250,000,000. The final step to get the gross profit percentageis to divide gross profit by the total revenue and multiply by 100.Plugging Best Buy's data into the equation, I got$9,250,000,000/$39,400,000,000 which equals 0.235. Multiply by 100to get a percentage makes Best Buy's gross profit percentage23.5%.

5. The gross profit percentage in 2015 for Best Buy was 23.0%.The gross profit percentage increased by 0.5% from 2015 to 2016.That concludes that the gross profit percentage for Best Buy heldfairly steady from 2015 to 2016.

6. Best Buy's gross profit percentage is considerably lower thanother companies in the industry. For example, Apple's gross profitpercentage for 2016 was 38.6%. That is 15% higher than BestBuy's.

7. I calculated the company's inventory turnover ratio bydividing the value of cost of goods sold by the value of inventory;$30,150,000,000/$4,860,000,000 which came out to a ratio of 6.2. Tocalculate the days sales in inventory I took the the inventoryturnover ratio and divided 365 by the number; 365/6.2 which equals58.9 days. These ratios mean that Best Buy sells is averageinventory 6 times per year or about every 2 months during a year.Best Buy also has about a 59 day supply of inventory available atall times. These numbers indicate that Best Buy does not encountermany problems when selling their inventory.

Selected year-end financial statements of McCordCorporation follow. (All sales were on credit; selected balancesheet amounts at December 31, 2010, were inventory, $50,900; totalassets, $219,400; common stock, $80,000; and retained earnings,$52,348.)

McCORD CORPORATION Income Statement For Year Ended December 31, 2011
Sales	$	451,600
Cost of goods sold		296,950

Gross profit		154,650
Operating expenses		98,700
Interest expense		4,300

Income before taxes		51,650
Income taxes		20,807

Net income	$	30,843

McCORD CORPORATION Balance Sheet December 31, 2011
Assets			Liabilities and Equity
Cash	$	20,000	Accounts payable	$	24,500
Short-term investments		9,400	Accrued wages payable		3,600
Accounts receivable, net		29,400	Income taxes payable		3,400
Notes receivable (trade)*		6,000	Long-term note payable, secured
Merchandise inventory		32,150	by mortgage on plant assets		69,400
Prepaid expenses		2,850	Common stock		80,000
Plant assets, net		149,300	Retained earnings		68,200

Total assets	$	249,100	Total liabilities and equity	$	249,100

*These are short-term notes receivable arising from customer (trade)sales.

Required:

Compute thefollowing. (Use 365 days ayear. Do not round intermediate calculations and round your finalanswers to 1 decimal place. Omit the "%" sign in yourresponse):


(1)	Current ratio	to
(2)	Acid-test ratio	to
(3)	Days' sales uncollected	days
(4)	Inventory turnover	times
(5)	Days' sales in inventory	days
(6)	Debt-to-equity ratio	to
(7)	Times interest earned	times
(8)	Profit margin ratio	%
(9)	Total asset turnover	times
(10)	Return ontotal assets	%
(11)	Return on common stockholders' equity	%

pucemouse541

1. Inventory is classified on the balance sheet as a

a.current liability

b.long-term asset

c.current asset

d.long-term liability

2. What is the term applied to the excess of sales over the cost of goods sold?

a.net income

b.gross profit

c.operations

d.gross sales

3. The inventory system employing accounting records that continuously disclose the amount of inventory is called

a.periodic

b.retail

c.perpetual

d.physical

4. Calculate the gross profit for Jefferson Company based on the following:

Sales $764,000

Selling Expenses $42,500

Cost of Goods Sold $538,000

a.$183,500

b.$721,500

c.$495,500

d.$226,000

5. Calculate income from operations for Jonas Company based on the following data:

Sales $764,000

Selling Expenses $52,500

Cost of Goods Sold $538,000

a.$226,000

b.$711,500

c.$485,500

d.$173,500

6. The primary difference between the periodic and perpetual inventory systems is that a

a.periodic system keeps a record showing the inventory on hand at all times

b.periodic system determines the inventory on hand only at the end of the accounting period

c.periodic system records the cost of the sale on the date the sale is made

d.periodic system provides an easy means to determine inventory shrinkage

7. In credit terms of 3/15, n/45, the "3" represents the

a.percent of the cash discount

b.full amount of the invoice

c.number of days when the entire amount is due

d.number of days in the discount period

8. Which of the following accounts has a normal credit balance?

a.Inventory

b.Accounts Receivable

c.Sales

d.Delivery Expense

9. Using a perpetual inventory system, the entry to record the purchase of $30,000 of merchandise on account would include a

a.debit to Inventory

b.debit to Accounts Payable

c.credit to Sales

d.credit to Inventory

10. Which of the following accounts usually has a debit balance?

a.Sales

b.Inventory

c.Accounts Payable

d.Sales Tax Payable

11. If title to merchandise purchases passes to the buyer when the goods are shipped from the seller, the terms are

a.n/30

b.consigned

c.FOB shipping point

d.FOB destination

12. When goods are shipped FOB destination and the seller pays the freight charges, the buyer

a.does not take a discount

b.journalizes a reduction for the cost of the merchandise

c.makes no journal entry for the freight

d.journalizes a reimbursement to the seller

13. When the perpetual inventory system is used, the inventory sold is debited to

a.Supplies Expense

b.Cost of Goods Sold

c.Sales

d.Inventory

14. Generally, the revenue account for a merchandising business is entitled

a.Gross Sales

b.Sales

c.Gross Profit

d.Fees Earned

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ACC 201 Study Guide - Midterm Guide: Inventory Turnover, Public Company Accounting Oversight Board, Weighted Arithmetic Mean

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