1. Unit 6 Bowling Review
Accounting

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

3. 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

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

5. Answer #2
Inventory xxxxx Accounts Payable xxxxx

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

7. 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.

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

9. Answer #4
Accounts Receivable XXXX Sales XXXX

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

11. Answer #5
Cost of Goods Sold XXXX Inventory XXXX

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

13. Answer #6
AR 500 Sales 500 COGS 300 Inventory 300

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

15. Answer #7
Net Income/Total Revenue

16. Question #8
What is example of a current asset?

17. #8 Answer
Cash
Accounts Receivable
Inventory

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

19. #9 Answer
Accounts Payable Notes Payable Unearned Revenue Wages Payable Tax Payable Interest Payable

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

21. #10 Answer
Controlling: AP & AR
Subsidiary: John Smith, AR

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

23. #11 Answer
Gross profit method

24. 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?

25. #12 Answer
$70,000

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

27. #13 Answer
#2. Inventory

28. 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)

29. #14 Answer
AR/Pascal $4,000 Sales $4,000 COGS $2,000 Inventory $2,000

30. 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

31. #15 Answer
#2. Current Assets – Current Liabilities

32. 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

33. #16 Answer
#3. An increase in an asset account and an increase in capital

34. 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?

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

36. Question #18
What account is a contra revenue account?

37. #18 Answer
Sales Returns & Allowances
Sales Discount

38. 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

39. #19 Answer
#3. Credit Inventory $6,000

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

41. #20 Answer
Net Cost Method