Exam 4: Inventories

Your friend owns a small business supplying restaurants with fresh, organically grown produce. She prepares her own financial statements and has asked you to review the income statement she prepared for the financial year ended 30 June 2019: As an experienced accountant, you review the statement and determine the following facts: 1. Sales include $5,000 of deposits from customers for future sales orders. 2. Other revenues contain two items: interest expense $2,000 and interest revenue $2,650. 3. Selling expenses consist of sales salaries $38,000; advertising $5,000; depreciation on storage equipment $3,750; and sales commissions expense $3,250. 4. Administrative expenses consist of office salaries $9,500; electricity expense $4,000; rent expense $8,000; and insurance expense $3,500. Insurance expense includes $600 of prepaid insurance. 5. Financial expenses consist of $500 bank charges. Required: Prepare a corrected fully classified income statement. You do not need to calculate income taxes.

Expenses that are associated with sales are classified as:

When a retailer makes a sale to a customer, the amount of GST that needs to be remitted to the Australian Taxation Office from the sale is determined by taking the total sale amount including GST and:

The gross profit is generally considered to be more informative than the gross profit amount when expressing the relationship between gross profit and net sales. Provide the gross profit ratio, and briefly explain why it is considered more informative than the amount.

Match the items below by choosing the appropriate code letter . -A reduction given by the seller for prompt payment of a credit sale.

The journal entry to record a credit sale is:

-The amount of net sales on the income statement would be:

Match the items below by choosing the appropriate code letter . -Sales less sales returns and allowances and cash discounts.

Match the items below by choosing the appropriate code letter . -An account that is offset against a revenue account on the income statement.

Match the items below by choosing the appropriate code letter . -Gross profit divided by net sales.

Hammer Hardware sold goods to James Brown on credit at a price of $2,750.00 including GST. What is the correct accounting entry to record this transaction in Hammer Hardware's books?

The Sales returns and allowances account is classified as an:

Consumers are not required to pay goods and services tax on the following item:

Which of the following does not affect the gross profit?

Match the items below by choosing the appropriate code letter . -A report used to provide GST information to the Australian Taxation Office.

Match the items below by choosing the appropriate code letter . -Cost to deliver goods to customers reported as a selling expense.

Match the items below by choosing the appropriate code letter . -A credit received by registered suppliers for all the GST paid on goods purchased.

Complete the following statements: -A manufacturer acts as a GST collecting agent for the _____________________.

Under a perpetual inventory system, which of the following accounts would be used to record purchases?

Match the items below by choosing the appropriate code letter . -Requires a physical count of goods on hand to compute cost of sales.