ACCT 1201 Chapter Notes - Chapter 6: Financial Statement, Direct Deposit, Bank Statement

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periwinkledinosaur391

20 Jan 2016

School

Northeastern University

Department

Accounting

Course

ACCT 1201

Professor

All

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Document Summary

Net sales revenue: the top line on the income statement. Need to manage bed debts which affect expenses on the income statement, cash, and accounts receivable on the balance sheet. Receivable turnover ratio is the measure of the efficiency of credit granting and collection activities: net credit sales/average accounts recievable. Revenue realization principle: revenue must be recorded when earned, delivery of services must have occurred, persuasive evidence of an arrangement for customer payment, price is fixed, and collection is reasonable assured. When goods are shipping (fob) free on board shipping point, the title changes hands at shipment and buyer pays for shipping. When shipped fob destination, the title changes hands on delivery, and seller normally pays for shipping. Revenues from goods shipped fob shipping point are normally recognized at. Revenues from goods shipped fob destination are normally recognized at shipment delivery. The appropriate amount of revenue to record is the cash equivalent sales price.

Related Questions

Travis Company has just completed a physical inventory count at year-end, December 31 of the current year. Only the items on the shelves, in storage, and in the receiving area were counted and costed on a FIFO basis. The inventory amounted to $66,500. During the audit, the independent CPA developed the following additional information: Goods costing $910 were being used by a customer on a trial basis and were excluded from the inventory count at December 31 of the current year. Goods in transit on December 31 of the current year, from a supplier, with terms FOB destination (explained in the âRequiredâ section), cost $1,400. Because these goods had not yet arrived, they were excluded from the physical inventory count. On December 31 of the current year, goods in transit to customers, with terms FOB shipping point, amounted to $1,800 (expected delivery date January 10 of next year). Because the goods had been shipped, they were excluded from the physical inventory count. On December 28 of the current year, a customer purchased goods for cash amounting to $3,050 and left them âfor pickup on January 3 of next year.â Travis Company had paid $1,720 for the goods and, because they were on hand, included the latter amount in the physical inventory count. On the date of the inventory count, the company received notice from a supplier that goods ordered earlier at a cost of $4,000 had been delivered to the transportation company on December 27 of the current year; the terms were FOB shipping point. Because the shipment had not arrived by December 31 of the current year, it was excluded from the physical inventory count. On December 31 current year, the company shipped $1,700 worth of goods to a customer, FOB destination. The goods are expected to arrive at their destination no earlier than January 8 of next year. Because the goods were not on hand, they were not included in the physical inventory count. One of the items sold by the company has such a low volume that management planned to drop it last year. To induce Travis Company to continue carrying the item, the manufacturer-supplier provided the item on a âconsignment basis.â This means that the manufacturer-supplier retains ownership of the item, and Travis Company (the consignee) has no responsibility to pay for the items until they are sold to a customer. Each month, Travis Company sends a report to the manufacturer on the number sold and remits cash for the cost. At the end of December of the current year, Travis Company had seven of these items on hand; therefore, they were included in the physical inventory count at $780 each. Required: Assume that Travisâs accounting policy requires including in inventory all goods for which it has title. Note that the point where title (ownership) changes hands is determined by the shipping terms in the sales contract. When goods are shipped âFOB shipping point,â title changes hands at shipment and the buyer normally pays for shipping. When they are shipped âFOB destination,â title changes hands on delivery, and the seller normally pays for shipping. Begin with the $66,500 inventory amount and compute the correct amount for the ending inventory. (Deductible amounts should be entered with a minus sign. If no adjustment is necessary, enter a 0 in the cell.)

blushwater-buffalo929

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

lemonpug879

1. Capsule Corp. purchased merchandise from Store Palace on May1^st; terms of purchase were FOB shipping point, 3/5,n/60. The goods were shipped on May 3^rd but were lost intransit before they arrived at Capsule Corp.; the shipment was notinsured. Which of the following is accurate?

a. Capsule Corp. can hold Store Palace liable for the missingshipment

b. Capsule Corp. does not have to pay store palace for themissing goods

c. Capsule Corp. paid for shipping costs

d. If Store Palace selected the common freight carrier, StorePalace must reimburse Capsule Corp

e. None of the above

2. Stark Industries purchases goods for resale and later returnssome of these goods to the seller (a purchase item). Thisreturn:

a. decreases price per unit; decreases number of units availablefor sale

b. decreases price per unit; has no effect on number of unitsavailable for sale

c. has no effect on price per unit; decreases number of unitsavailable for sale

d. has no effect on price per unit; has no effect on number ofunits available for sale

e. none of the above

3. Gorilla Grodd Company sells goods to customers; a customerasks and is granted an allowance for a price match guarantee; thecustomer has already paid and requests a cash allowance. Which ofthe following statements is true regarding the effect for GorillaGrodd Company?

a. assets increase; equity increases, net revenues decrease

b. assets decrease; equity decreases, net expenses increase

c. assets decrease; equity decreases, net revenues decrease

d. assets decrease; equity decreases; net expenses increase

e. assets do not change; equity decreases; net revenuesdecrease

4. The Regeay Business currently has 300,000 of receivablesoutstanding, but needs to immediate cash in order to take advantageof a business opportunity. The company sells its receivables to alocal collection agency for 250,000. This process is known as:

a. factoring

b. secured borrowing

c. credit swap

d. forward option

e. unsecured borrowing

cyanant515

ACCT 1201 Chapter Notes - Chapter 6: Financial Statement, Direct Deposit, Bank Statement

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