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Principles of Accounting, Volume 1: Financial Accounting

Questions

Principles of Accounting, Volume 1: Financial AccountingQuestions

Questions

1.

LO 6.1What are some benefits to a retailer for offering a discount to a customer?

2.

LO 6.1What do credit terms of 4/10, n/30 mean in regard to a purchase?

3.

LO 6.1What is the difference between a sales return and a sales allowance?

4.

LO 6.1If a retailer made a purchase in the amount of $350 with credit terms of 2/15, n/60. What would the retailer pay in cash if they received the discount?

5.

LO 6.2What are two advantages and disadvantages of the perpetual inventory system?

6.

LO 6.2What are two advantages and disadvantages of the periodic inventory system?

7.

LO 6.2Sunrise Flowers sells flowers to a customer on credit for $130 on October 18, with a cost of sale to Sunrise of $50. What entry to recognize this sale is required if Sunrise Flowers uses a periodic inventory system?

8.

LO 6.2Sunrise Flowers sells flowers to a customer on credit for $130 on October 18, with a cost of sale to Sunrise of $50. What entry to recognize this sale is required if Sunrise Flowers uses a perpetual inventory system?

9.

LO 6.3Name two situations where cash would be remitted to a retailer from a manufacturer after purchase.

10.

LO 6.3If a retailer purchased inventory in the amount of $750, terms 2/10, n/60, returned $30 of the inventory for a full refund, and received an allowance for $95, how much would the discount be if the retailer remitted payment within the discount window?

11.

LO 6.3A retailer discovers that 50% of the total inventory items delivered from the manufacturer are damaged. The original purchase for all inventory was $1,100. The retailer decides to return 20% of the damaged inventory for a full refund and keep the remaining 80% of damaged inventory. What is the value of the merchandise returned?

12.

LO 6.4Name two situations where cash would be remitted to a customer from a retailer after purchase.

13.

LO 6.4If a customer purchased merchandise in the amount of $340, terms 3/10, n/30, returned $70 of the inventory for a full refund, and received an allowance for $65, how much discount would be applied if the customer remitted payment within the discount window?

14.

LO 6.4A customer discovers 60% of the total merchandise delivered from a retailer is damaged. The original purchase for all merchandise was $3,600. The customer decides to return 35% of the damaged merchandise for a full refund and keep the remaining 65%. What is the value of the merchandise returned?

15.

LO 6.5What are the main differences between FOB Destination and FOB Shipping Point?

16.

LO 6.5A buyer purchases $250 worth of goods on credit from a seller. Shipping charges are $50. The terms of the purchase are 2/10, n/30, FOB Destination. What, if any, journal entry or entries will the buyer record for these transactions?

17.

LO 6.5A seller sells $800 worth of goods on credit to a customer, with a cost to the seller of $300. Shipping charges are $100. The terms of the sale are 2/10, n/30, FOB Destination. What, if any, journal entry or entries will the seller record for these transactions?

18.

LO 6.5Which statement and where on the statement is freight-out recorded? Why is it recorded there?

19.

LO 6.6The following is select account information for Sunrise Motors. Sales: $256,400; Sales Returns and Allowances: $34,890; COGS: $120,470; Sales Discounts: $44,760. Given this information, what is the Gross Profit Margin Ratio for Sunrise Motors? (Round to the nearest whole percentage.)

20.

LO 6.6What is the difference between a multi-step and simple income statement?

21.

LO 6.6How can an investor or lender use the Gross Profit Margin Ratio to make financial contribution decisions?

22.

LO 6.6The following is select account information for August Sundries. Sales: $850,360; Sales Returns and Allowances: $148,550; COGS: $300,840; Operating Expenses: $45,770; Sales Discounts: $231,820. If August Sundries uses a multi-step income statement format, what is their gross margin?

23.

LO 6.7If a retailer purchased inventory in the amount of $680, terms 3/10, n/60, returned $120 of the inventory for a full refund, and received an allowance for $70, how much would the discount be if the retailer remitted payment within the discount window?

24.

LO 6.7A customer discovers 50% of the total merchandise delivered from the retailer is damaged. The original purchase for all merchandise was $5,950. The customer decides to return 40% of the damaged merchandise for a full refund and keep the remaining 60%. What is the value of the merchandise returned?

25.

LO 6.7What is the difference in reporting requirements for customer-returned merchandise in sellable condition under a perpetual inventory system versus a periodic inventory system?

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