Exam 6: Internal Control and Financial Reporting for Cash and Merchandising Operations

On April 6,Lopez Co.purchased $5,000 of inventory,terms 1/15,n/30.Lopez Co.uses a perpetual inventory system.The company paid for the purchase on April 26.The entry to record the payment on April 26 includes which of the following?

Which inventory system records a change in the Inventory account every time goods are bought,sold or returned?

When a periodic inventory system is in use,an entry is made at year-end to transfer beginning inventory and net purchases to cost of goods sold.

If a company that uses a perpetual inventory system sold inventory which cost $1,000 for a selling price of $3,000,the accounting equation would show a net:

Boron Company has sales of $60,000,beginning inventory of $7,000,purchases of $35,000,and ending inventory of $5,000.The cost of goods sold is:

Sales revenue equals $367,810,sales returns & allowances are $10,000,and sales discounts total $14,180.The cost of goods sold is $216,490,operating expenses are $28,500,and the company incurs $31,640 of income tax expense.Which of the following statements is correct?

Central Company sold goods for $5,000 to Western Company on March 12 on credit.Terms of the sale were 2/10,n/30.At the time of the sale,Central recorded the transaction by debiting Accounts Receivable for $5,000 and crediting Sales Revenue for $5,000.Western paid the balance due,less the discount,on March 21.Central's journal entry on March 21 would include a debit to:

Your company purchases $50,000 of inventory from a wholesaler who allows you 45 days to pay.In addition,the wholesaler offers a 3% discount if payment is made within 12 days.These payment terms would be expressed as:

Ace Electronics,which uses a perpetual inventory system,recorded a debit to Sales Returns & Allowances and a credit to Accounts Receivable,along with a debit to Inventory and a credit to Cost of Goods Sold.What business event must have taken place?

In a perpetual system,when inventory is sold on account:

The Ocho Co.had a beginning inventory of $25,000 and an ending inventory of $40,000.Its Cost of Goods Sold for the year was $485,000.What was the amount of purchases that it made for the year?

Purple Corp.purchased $10,000 of merchandise on June 3,subject to the terms,2/10,n/30.On June 9,it pays for all the merchandise purchased on June 3.When the entry relating to this transaction is recorded,that entry will reduce:

Gross profit equals:

Garcia Company is trying to decide whether to purchase identical inventory from one of the following suppliers. Assume the company will pay within the discount period. Required: What is the actual cost of the inventory if purchased from each supplier?

Surfshack Corp.buys surfboards,wetsuits,and surf wax from Rip to Shreds,Inc.for sale to consumers.What type of company is Surfshack Corp?

A company performs a service,sells inventory that it purchases from others,or manufacturers a product; it cannot serve more than one of these functions.

Most companies report sales revenue,sales returns and allowances,and sales discounts,as well as net sales on their externally reported income statements.

Bijoux Company has sales of $40,000,beginning inventory of $5,000,purchases of $25,000,and ending inventory of $7,000.The cost of goods sold is:

On July 1,Darin Company sold inventory costing $4,500 to Dee Company for $6,000,terms 2/10,n/30.Both companies use a perpetual inventory system.What journal entry will be recorded by Dee Company on July 1?

Dunedin Inc.began the month with inventory of $10,000 and then purchased inventory at a cost of $105,000.The perpetual inventory system indicates that inventory costing $94,000 was sold during the month for $141,000.An inventory count shows that inventory costing $20,100 is actually on hand at month-end. Required: What amount of shrinkage occurred during the month?