Unit 6 Bowling Review Accounting

Question #1 What are the three basic transactions in the operating cycle of a merchandising company? Hint: refer to page 4 of your packet

Answer #1 Cash Inventory Cash Inventory Accounts Receivable 1. Purchase of merchandise 3. Collection of the receivables 2. Sale of merchandise on account Cash Inventory Accounts Receivable Cash 3. Collection of the receivables Accounts Receivable Inventory 2. Sale of merchandise on account

Question #2 What is the transaction for recording a purchase in the perpetual inventory method?

Answer #2 Inventory xxxxx Accounts Payable xxxxx

Question #3 What do the credit terms 2/10, n/30 mean?

Answer #3 If you pay the invoice in 10 days, you get a 2% discount. If you do not pay within the discount period, it must be paid within 30 days.

Question #4 What is the transaction to record the sales price of inventory sold to a customer?

Answer #4 Accounts Receivable XXXX Sales XXXX

Question #5 What is the transaction to record the cost of inventory being sold to the customer?

Answer #5 Cost of Goods Sold XXXX Inventory XXXX

Question #6 Doug sold 10 laser lights for $50 per unit on account to ABC Radios. What account(s) are debited and credited?

Answer #6 AR 500 Sales 500 COGS 300 Inventory 300

Question #7 How do you find the net income percentage?

Answer #7 Net Income/Total Revenue

Question #8 What is example of a current asset?

#8 Answer Cash Accounts Receivable Inventory

Question #9 What is an example of a current liability?

#9 Answer Accounts Payable Notes Payable Unearned Revenue Wages Payable Tax Payable Interest Payable

Question #10 Provide an example of a controlling account AND a subsidiary account.

#10 Answer Controlling: AP & AR Subsidiary: John Smith, AR

Question #11 Under this method purchases are recorded at their full amount

#11 Answer Gross profit method

Question #12 If Colin Inc. has Revenue from sales totaling $100,000, Accounts Receivable of $20,000 and Gross Profit of $30,000 what is their cost of goods sold?

#12 Answer $70,000

Question #13 When you purchase merchandise you will sell on account you will debit? Cost of goods sold Inventory Accounts payable Accounts receivable

#13 Answer #2. Inventory

Question #14 On July 6, Joe sold $4,000 of merchandise to Pascal on credit, 2/10, n/30. The merchandise originally cost Joe $2,000. How would you journalize this transaction? (using the gross method)

#14 Answer AR/Pascal $4,000 Sales $4,000 COGS $2,000 Inventory $2,000

Question #15 Working Capital is calculated by doing the following: Liabilities – Assets Current Assets – Current Liabilities Current Assets – Current Owners Equity Current Liabilities – Current Assets

#15 Answer #2. Current Assets – Current Liabilities

Question #16 Each Sales Transaction causes… an increase in a capital account an increase in capital and a decrease in an asset an increase in an asset account and an increase in capital an increase in an asset account

#16 Answer #3. An increase in an asset account and an increase in capital

Question #17 Harley reported revenue of $180,000, Net income of $44,000 and had an average stockholder equity of $125,000. What was her Return on Equity?

#17 Answer 35% Net Income/Average Stockholder’s Equity 44,000/125,000 = 35%

Question #18 What account is a contra revenue account?

#18 Answer Sales Returns & Allowances Sales Discount

Question #19 At the end of the year George Co. Inventory account had a balance of $50,000. However after a physical inventory it is determined actual inventory is $44,000. What needs to take place? Credit sales $6,000 Debit AR $6,000 Credit Inventory $6,000 All of the above

#19 Answer #3. Credit Inventory $6,000

Question #20 Under this method purchases are recorded at a discounted amount.

#20 Answer Net Cost Method