Chapter 5: Q5-27RQ (page 295)
What account is debited when recording the payment of freight when using the periodic inventory system?
Freight-in account is debited when recording freight payments while using the periodicinventory system.
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Match the accounting terminology to the definitions.
1. Cost of Goods Sold | a. An inventory system that requires businesses to obtain a physical count of inventory to determine quantities on hand. |
2. Perpetual inventory system | b. Expenses, other than the Cost of Goods Sold, that are incurred in the entity’s major ongoing operations. |
3. Vendor | c. Excess of Net Sales Revenue over Cost of Goods Sold. |
4. Periodic inventory system | d. The cost of merchandise inventory that the business has sold to customers. |
5. Operating expenses | e. The individual or business from whom a company purchases goods. |
6. Gross profit | f. An inventory system that keeps a running computerized record of merchandise inventory. |
What does the gross profit percentage measure, and how is it calculated?
Describe the multi-step income statement.
Journalize the following transactions that occurred in January 2018 for Sylvia’s Amusements. No explanations are needed. Identify each accounts payable and accounts receivable with the vendor or customer name. Sylvia estimates sales returns at the end of each month.
Jan. 4 Purchased merchandise inventory on account from Vanderbilt Company, \(7,000. Terms 1/10, n/EOM, FOB shipping point.
6 Paid freight bill of \)100 on January 4 purchase.
8 Returned half the inventory purchased on January 4 from Vanderbilt Company.
10 Sold merchandise inventory for cash, \(1,600. Cost of goods, \)640. FOB destination.
11 Sold merchandise inventory to Graceland Corporation, \(10,800, on account, terms of 1/10, n/EOM. Cost of goods, \)5,400. FOB shipping point.
12 Paid freight bill of \(60 on January 10 sale.
13 Sold merchandise inventory to Cabbell Company, \)9,500, on account, terms of n/45. Cost of goods, \(5,225. FOB shipping point.
14 Paid the amount owed on account from January 4, less return and discount.
17 Received defective inventory as a sales return from the January 13 sale, \)600. Cost of goods, \(300.
18 Purchased inventory of \)4,600 on account from Roberts Corporation. Payment terms were 3/10, n/30, FOB destination.
20 Received cash from Graceland Corporation, less discount.
26 Paid amount owed on account from January 18, less discount.
28 Received cash from Cabbell Company, less return.
29 Purchased inventory from Sandra Corporation for cash, \(11,600, FOB shipping point. Freight in paid to shipping company, \)240.
Crazy Cookies earned net sales revenue of \(66,000,000 in 2018. The cost of goods sold was \)39,600,000, and net income reached $7,000,000, the company’s highest ever. Compute the company’s gross profit percentage for 2018.
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