In a perpetual inventory system, which account would be debited when goods are purchased with the intent of being resold?

Gross profit will result if


    sales revenue is greater than cost of goods sold.

    operating expenses are less than net income.

    operating expenses are greater than cost of goods sold.

    sales revenue is greater than operating expenses.

Answer
sales revenue is greater than cost of goods sold.


Gross profit is


    sales revenue less cost of goods sold.

    net income less operating expenses.

    net income less cost of goods sold.

    sales revenue less operating expenses. 


Answer
sales revenue less cost of goods sold.


A company determines the cost of goods sold each time a sale occurs in
    a periodic inventory system only.

    a perpetual inventory system only.

    both a periodic and perpetual inventory system.

    neither a periodic nor perpetual inventory system. 

Answer
    a perpetual inventory system only.


Under a perpetual inventory system
    purchases on account are debited to Purchases.

    purchase returns are debited to Purchase Returns and Allowances.

    freight costs are debited to Freight-Out.

    purchases on account are debited to Inventory. 

Answer
purchases on account are debited to Inventory. 

FOB shipping point means that the
    common carrier pays the freight.
    seller pays the freight.

    goods are placed free on board to the buyer’s place of business.

    buyer pays the freight. 

Answer
  buyer pays the freight. 

In a perpetual inventory system, which account would be debited when goods are purchased with the intent of being resold?

    Cost of Goods Sold

    Inventory

    Purchases

    Accounts Payable

Answer
    Inventory

Company A purchases $1,200 of merchandise from Company B on July 1 with credit terms 2/10, n/30. Company A returns $200 of the merchandise on July 5. On July 11, Company B received full payment from Company A. The amount of the payment on July 11 is


    $980.

    $20.

    $1,176.

    $1,000. 

Answer
 $980.
First, payment is made within the 10-day discount period, thus the 2% cash discount is to be applied to the final payment. Cash discount = Gross invoice price ($1,200) – return and allowances ($200) x Cash Discount (2%) = $20. The amount of the payment = Gross invoice price ($1,200) – returns and allowances ($200) – cash discount ($20) = $980.




A credit sale of $750 is made on June 13, terms 2/10, net/30. A return of $50 is granted on June 16. The amount received as payment in full on June 23 is


    $686.

    $685.

    $700.

    $650.  

Answer
 $686.
This amount is accurate because the full amount is paid within 10 days of the purchase {($750 - $50) – [($750 - $50) X 2%]}.      

To record the sale of goods for cash in a perpetual inventory system


    two journal entries are necessary: one to record the receipt of cash and sales revenue, and one to record the cost of goods sold and reduction of inventory.

    two journal entries are necessary: one to record the receipt of cash and reduction of inventory, and one to record the cost of goods sold and sales revenue.

    only one journal entry is necessary to record the receipt of cash and the sales revenue.

    only one journal entry is necessary to record cost of goods sold and reduction of inventory. 

Answer 
two journal entries are necessary: one to record the receipt of cash and sales revenue, and one to record the cost of goods sold and reduction of inventory.

Which of the following is not part of the journal entries made when merchandise is sold on credit?


    Debit the Accounts Receivable account.

    Credit the Cost of Goods Sold account.

    Credit the Sales Revenue account.

    Credit the Inventory account.
 Answer
Credit the Cost of Goods Sold account.

The Cost of Goods Sold account is debited when inventory is sold on account.