Sara's . Chapter seven test sample questions. Therefore, he would be able to enjoy a 2% discount on his credit purchase ($10,000 x 2% = $200). 29. . $26,010 c. $24,990 d. $16,000 C The primary difference between the periodic and perpetual inventory systems is that a The company properly records the inventory sale with the debit of the cash account and the credit of the sales revenue account of 1,500. If the retailer records the $7,000 of purchases as an asset, the Inventory account balance increases from $800 to $7,800. As the accounting period progresses and the business receives invoices from suppliers for inventory items shipped to the company, record them either in a single purchases account or in whichever inventory asset account is most applicable. Also during the year, customers returned $613,000 in sales for credit, with $338,000 of those being of merchandise sold prior to 2021, and the rest being . . $26,010 c. $24,990 d. $16,000. We calculate cost of goods sold as follows: Beg. Therefore, Gem Merchandise . 25. March 11, purchased merchandise inventory, on account, $18,500; March 15, Sold merchandise . X-Mart uses the perpetual inventory system. 92 terms. This answer has been confirmed as correct and helpful. Cost of Sale #1: $25. Click Save & Close. If a company has 100 items recorded on the books for $10 each, but it figures the items are really worth only $6 each, an adjusting entry needs to be made. The company sold the whole lot to a supermarket chain for $ 13 comma 000$13,000 on account. Cost of Mug Sales $24.00 . Any entry relating to the sale of merchandise for cash is recorded in the cash receipts journal.. 6 Sold merchandise inventory for cash, $950 (cost, $750). See the following example: Example On 1 January 2016, Sam & Co. sells merchandise for $10,000 on account to John Traders. Calculate COGS. 2. That way you see a net number for sales minus cost of goods sold in the income section of the profit and loss report: Mug Sales $50.00. PRE- Planning - audit Preview text CHAPTER 8 Exercise 1 True or False. Be sure to accrue purchases at the end of the accounting period if goods have been received but not the . At the end of the year the Purchases account(s) are closed and the Inventory account is adjusted to the cost of the merchandise actually on hand at the end of the current year. 6-1 Example Exercise 6-1 10 Gallatin Repair Service was offered $160,000 for the land by a national retail chain. .5/10, n/60 — ½% if paid within 10 days, net due in 60 days. Merchandise is sold on credit for $580 plus 5 percent sales tax. Under the periodic inventory system, the Purchases account is used to record; A. Accounts Receivable. Explanation: Since the account has not been paid yet, the amount must be realized as a balance due in Accounts Receivable. Let's assume that Gem Merchandise Co. makes a sale to a customer that has a sales value of $1,050 and a cost of goods sold at $800. Invoice no. We can make the journal entry for sold merchandise on account by debiting the sale amount into the accounts receivable and crediting the same amount into the sales revenue. The market interest rate on the . A Sold Merchandise for Cash subject to a sales tax. Collect information ahead of time, such as your beginning inventory balance, purchased inventory costs, overhead costs (e.g., delivery fees), and ending inventory count. Work-in-process Inventory. 72 terms. Cost of Merchandise Sold is often the largest expense on a merchandising company income statement. Credit sales interact with a balance sheet through the customer receivables account, which is a short-term asset. Collect information ahead of time, such as your beginning inventory balance, purchased inventory costs, overhead costs (e.g., delivery fees), and ending inventory count. Accounting- Chapter 7: Accounting Information Syst…. (L.O. Results of Journal Entry. a debit to Capital. To Merchandise Inventory A/c $375 (Being goods are sold at cost) On February 9. Cash (400 - 8) 392. During 2021, Halifax sold merchandise on account for $12,500,000. Cost of goods, $860. Accounts for Merchandise Sales. F. A sale of $750 on account, subject to a sales tax of 6%, would be recorded as an account receivable of $750. 27. Assume instead that a customer returns $300 of goods sold on account. Immediately we can see a gross profit for the sale made: $40 - $25 = $15. Purchase Transactions 8. Dollar Co. sold merchandise to Pound Co. on account, $25,500, terms 2/15, net 45. Credit memo b. . Accepting cash will be recorded with none of the above. Recording Sales to Internal . The length of time the customer is allowed to repay the bill is the: O A. credit period. This was recorded with a debit to Sales Discounts for $1, a debit to Cash for $99, and a credit to Accounts Receivable for $100, but no mention was made of the subsidiary ledger account. Gross profit: $75. B. Credit Accounts Receivable $1,400. A. For statements of cash flows, cash sales must be figured out to create the statement. The cost . What is the amount of the gross profit? When merchandise are sold on account, the two accounts involved in the transaction are the accounts receivable account and sales account. 7 Received $22,300 cash from Halstad Co. on account. The cost of the merchandise sold was $32,000. Using effective-interest amortization, prepare journal entries to record (a) the bond issuance on January 1, 2021, and (b) the payment of interest on December 31, 2021. Physical possession is necessary for inventory to be included in the business' assets. --> Increase in Expense : Example . How to calculate the cost of goods sold. which of the following accounts will be used to record the sales entry for this transaction? Cost of Goods Sold. Sale and accounts receivable are recorded as one entry while the other caters to reducing inventory and increasing the cost of goods that are sold. 2. Transfer the inventory cost of goods sold to the operating account using a cost of goods sold transaction. When the consignor sends goods to the consignee, there is no need to create an accounting entry related to the physical movement of goods. Under the perpetual inventory system, when a sale is made, both the sale and cost of merchandise sold are recorded. Payment for these goods had not yet been received. 2. collected from a change customer. Journalize the entries by Silverman Enterprises to record the merchandise returned by Brewster Co. on February 23. 1. Feb. 1 Sold merchandise inventory on account, terms n/30, to Cole Co., Feb. 1 Sold merchandise inventory on account, terms n/30, to Cole Co., $1,050. Question: Sold merchandise on account would be recorded with: O A. a debit to an asset account. Merchandise that has been sold but not yet recorded in the accounts should not be included in the physical inventory at year-end. 5 $ 43,200 of the goods sold on account on April 1 were returned for a full credit. Pound Co. paid the invoice within the discount period. A company must also record the cost of sale entry, where Merchandise Inventory decreases and COGS increases. 401. MASTERCARD OR VISA The transaction requires a debit to CASH since the money is deposited in the vendor's account overnight. On May 1, it sold $1,400 of merchandise on credit. During periods of inflation, the specific identification cost flow assumption will yield a higher cost of goods sold than LIFO. Let's see an example of this in action: Opening inventory value: $100. Calculate COGS by adding the cost of inventory at the beginning of the year to purchases made throughout the year. What amount should be recorded for each sale? 12) Determine the amount of cash collected at the time of making a cash sale of $7,450 worth of merchandise subject to 13% HST. Accounting questions and answers Sold merchandise on account would be recorded using: a debit to an asset account. F. Use your Miscellaneous Income account in the From Account column on the deposit screen. If the company ABC uses the perpetual inventory system, we can make the journal entry on October 1, for the $10,000 merchandise purchased by debiting the $10,000 into the merchandise inventory account and crediting the same amount into the accounts payable for the credit purchased it has made. . Theending inventoryis deductedfrom the Total Goods Available for Sales to yield the Cost of Goods(Merchandise) Sold. The cost of merchandise sold duringthe period may also be calledCost of Goods Soldor theCost of Sales. The accounts receivable account is debited and the sales account is credited. None of these are correct. In this case, an inventory loss journal entry of $400 would be debited to the Cost of Goods Sold account and $400 would be credited to the Inventory account. Click Account drop down arrow and choose New. Inventory $24,000 + Net Purchases $166,000 - Ending inventory count $31,000 = $159,000 cost of goods sold Gather information from your books before recording your COGS journal entries. John paid his invoice four days (January 5) after purchasing the goods on credit. a. B) a debit to a liability account. Return of merchandise sold for cash is entered in the cash payments journal or cash book. In this journal entry, the sold merchandise on account results in the increase of sales revenue and the increase of accounts receivable. The final number will be the yearly cost of goods sold for your business. 9. July 10 Sold $1,500 of merchandise inventory for cash, FOB Shipping Point, with a cost of goods sold of $1,000. Gather information. For the sale of any merchandise, there have to be two recorded journal entries. Typically, calculating COGS helps you . Here are a few you may recognize while recording inventory transactions in your books: Inventory (of course) Accounts Payable. a. To record sales allowance refund to customer less discount. 10 Payment was received for the net amount due from the sale of April 1. b. Notice there is no contra account for Cost . Only cash purchases of merchandise inventory B. As a result, the income statement will report the cost of goods sold at $6,900 ($7,000 minus the $100 credit). What is the sales amount to be recorded in the above transactions? Purchases of any asset on account or note payable C. . The company uses the specificminus−identification method of inventory costing. The consignor continues to own the goods until they are sold, so the goods appear as inventory in the accounting records of the consignor, not the consignee. The value being returned to inventory is the cost that Whistling Flute paid for the inventory, which is $400. However, ABC Ltd. uses the perpetual inventory system, so it needs to record the cost of goods sold at the same time of sale. Demonstrate the required journal entry to record the sale and the cost of the sale by selecting all that apply: A. $25,500 b. However, companies may also sell these for cash. Gather information. When goods are sold, properly record the transactions and ensure that the correct items are billed and shipped to customers. a debit to a liability account. ABC Co. uses the following journal entries to record this amount. Sold merchandise on account to S. Mooney, $6,000, terms n/eom. Merchandising Business Fall 2014-1 Prof. M. Mari Page 5 Note: that sales are credited for the sales price and merchandise inventory is credited for the COST. The Sale must also be realized on the books to account for the merchandise sold. ABC Co. estimates the cost of the sold merchandise to be 80% of its sale value. The cost of goods sold account is debited at the time of the sale, exactly for the cost associated with the merchandise. What is the sales amount to be recorded in the above transactions? 10 Sold merchandise for cash, $54,000. To determine the cost of goods sold in any accounting period, management needs inventory information. This will be recorded with A) a credit to an expense account. The original cost of the merchandise to X-Mart was $500. 31. . Problem 3: Bri Co. sold merchandise to An Co. on account, P95,760, terms 2/15, n/30 FOB Destination. During the current year, merchandise is sold for $250,000 cash and for $975,000 on account. a debit to an owner's equity account. elisabeth_bode. 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