Acct Ch. 5
When inventory items are purchased under a perpetual inventory system, the purchased item is recorded by debiting/crediting the
___ account
debiting; Merchandise Inventory
Profit margin is calculated by
dividing net earnings by net sales
T/F Purchases of assets that the company will use rather than resell, such as supplies and equipment, are recorded as increases to
specific asset accounts rather than as increases to the Merchandise Inventory account.
True. For example, Wal-Mart would increase the Supplies account to record the purchase of cash register receipt paper or materials
that it uses to make shelf signs.
When inventory is sold, its cost is transferred from the ___ account to the account ___
Merchandise Inventory (an asset); Cost of Goods Sold (an expense
In a periodic inventory system, the cost of goods sold is determined only at the ___ of the accounting period
end; Beginning inventory
+ cost of goods sold = cost of goods available for sale - end inventory = COST OF GOODS SOLD
Purchases are normally recorded by the buyer when the goods
are received from the seller
Cash purchases are recorded by an increase (debit)/decrease (credit) in ___ and an increase (debit)/decrease (credit) in ___
increase (debit) in Merchandise Inventory and a decrease (credit) in Cash
Cash purchases should be supported by a ___ and credit purchases should be supported by a ___
cash register receipt; purchase invoice
FOB (free on board) shipping point means the buyer/seller is responsible for the goods only until they reach their shipping point. The
buyer/seller will pay for the shipping
seller; buyer
FOB destination means the seller/buyer will pay for the shipping costs of the goods
seller
When FOB shipping point is used, the buyer/seller pays the freight charges and then increases (debited) its ___ account for the
additional cost
When inventory items are purchased under a perpetual inventory system, the purchased item is recorded by debiting/crediting the
___ account
debiting; Merchandise Inventory
Profit margin is calculated by
dividing net earnings by net sales
T/F Purchases of assets that the company will use rather than resell, such as supplies and equipment, are recorded as increases to
specific asset accounts rather than as increases to the Merchandise Inventory account.
True. For example, Wal-Mart would increase the Supplies account to record the purchase of cash register receipt paper or materials
that it uses to make shelf signs.
When inventory is sold, its cost is transferred from the ___ account to the account ___
Merchandise Inventory (an asset); Cost of Goods Sold (an expense
In a periodic inventory system, the cost of goods sold is determined only at the ___ of the accounting period
end; Beginning inventory
+ cost of goods sold = cost of goods available for sale - end inventory = COST OF GOODS SOLD
Purchases are normally recorded by the buyer when the goods
are received from the seller
Cash purchases are recorded by an increase (debit)/decrease (credit) in ___ and an increase (debit)/decrease (credit) in ___
increase (debit) in Merchandise Inventory and a decrease (credit) in Cash
Cash purchases should be supported by a ___ and credit purchases should be supported by a ___
cash register receipt; purchase invoice
FOB (free on board) shipping point means the buyer/seller is responsible for the goods only until they reach their shipping point. The
buyer/seller will pay for the shipping
seller; buyer
FOB destination means the seller/buyer will pay for the shipping costs of the goods
seller
When FOB shipping point is used, the buyer/seller pays the freight charges and then increases (debited) its ___ account for the
additional cost
