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

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Question 81

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Flynn Company uses a perpetual inventory system and had the following transactions during November: -November 6 - Purchased $5,800 of inventory on account, terms 2/10, n/30. -November 8 - Returned $800 of defective units and received full credit. -November 15 - Paid the amount due. -Use the information above to answer the following question.What journal entry will be recorded by Flynn Company on November 15?

A) Debit Accounts Payable and credit Cash for $4,900
B) Debit Accounts Payable for $5,000, credit Purchase Discount for $100, and credit Cash for $4,900
C) Debit Accounts Payable for $5,000, credit Inventory for $100, and credit Cash for $4,900
D) Debit Accounts Payable for $4,900, credit Inventory for $100, and credit Cash for $4,800

E) None of the above
F) All of the above

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Question 82

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Which inventory system (periodic or perpetual)inventory system provides the best inventory control?

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A major drawback of a periodic system is...

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Question 83

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If a company's ending inventory count was $50,000,cost of goods sold was $27,000,and purchases were $56,000,its beginning inventory must have been:

Inventory reports the:

Companies using a perpetual inventory system:

Flynn Company uses a perpetual inventory system and reported $500,000 of inventory at the beginning of the month based on a physical count of inventory.During the month,the company bought $45,000 of inventory and sold inventory that had cost $30,000.At the end of the month,the physical count of inventory shows $510,000 on hand.How much shrinkage occurred during the month?

The periodic inventory system uses the Inventory account to keep track of the amount of inventory that is purchased.

Neutron uses a periodic inventory system.On June 10,the company purchased inventory on credit from Proton for $9,000,terms 2/10,n/30. Required: Prepare the journal entry to record the June 10 transactions on the books of Neutron

Tesoro Corp.uses a perpetual inventory system.The following activities occurred during May: -May 2 - Tesoro purchased $45,000 worth of inventory,on credit terms 3/10 n/30. -May 2 - Because the terms of the purchase were FOB shipping point,Tesoro pays $1,200 to the trucker. -May 5 - Tesoro returned $5,000 worth of that inventory to the supplier. -May 10 - Tesoro paid for the inventory,taking advantage of all available discounts. Required: Prepare the journal entries to record these transactions on the books of Tesoro Corp.

An account used in the periodic inventory system that is not used in the perpetual inventory system is: 

Which of the following statements regarding periodic and perpetual inventory systems is correct?

A sale is recorded when goods leave the seller's shipping department when the merchandise is shipped:

Inventory is reported as a(n) ______ on the:

When goods are sold to a customer with credit terms of 2/15,n/30,the customer will receive a:

If a merchandiser offers a sales discount of 2/10,net/30 on a sale of $1,000,the amount due in 30 days is the net amount of $980.

Which line item would be found on a service firm's income statement and not on a merchandiser's?

The following is a listing of some of the balance sheet accounts and all of the income statement accounts for Aldine Inc.as they appear on the company's adjusted trial balance. -Use the information above to answer the following question.Net sales would be:

The journal entry to record taking a discount when paying for goods previously purchased on account includes a:

Choose the appropriate letter to match the term and the definition.There are more definitions than terms. Term 1.____ FOB Destination 2.____ FOB Shipping Point 3.____ Merchandising Company 4.____ Periodic Inventory System 5.____ Perpetual Inventory System 6.____ Service Company Definition A.Sells services rather than physical goods. B.Assets acquired for resale to customers. C.Inventory records are updated every time inventory is bought,sold,or returned. D.A term of sale indicating that goods are owned by the seller until they are delivered to the buyer. E.Sells goods that have been obtained from a supplier. F.The sum of beginning inventory and purchases for the period. G.Inventory records are updated at the end of the accounting period.To determine how much merchandise has been sold,periodic systems require that inventory be physically counted at the end of the period. H.A term of sale indicating that goods are owned by the buyer the moment they leave the seller's premises. I.A sales price reduction given to customers for prompt payment of their account balance. J.Presents important subtotals,such as gross profit,to help distinguish core operating results from other,less significant items that affect net income.

If merchandise costing $500 is sold on account for $620,how is this transaction recorded when using a perpetual inventory system?