Revenue
A company delivers $2,000 of merchandise to a customer on account. At what point should the company recognize revenue?
What is when control of the merchandise transfers to the customer, generally upon delivery.
A business sells $5,000 of goods on account. Which asset account increases?
What is Accounts Receivable.
Inventory held for resale is classified as this type of asset on the balance sheet.
What is Current Asset?
This is the formula for gross profit?
What is Net Sales Revenue − Cost of Goods Sold?
A delivery truck used in business operations belongs to this major asset category.
What is Property, Plant, and Equipment (PP&E)?
A customer pays $600 in advance for services that will be performed next month. How much revenue does the company recognize when cash is received?
What is $0. The $600 is initially recorded as Unearned Revenue.
A customer pays a $900 invoice previously recorded as a credit sale. What happens to total assets?
What is total assets do not change. (Cash increases by $900, while accounts receivable decreases by $900).
These are two common inventory cost flow assumptions used to determine inventory costs.
What are LIFO, FIFO, Weighted-Average Cost, and Specific Identification?
Beginning inventory is $15,000, purchases are $40,000, and ending inventory is $12,000. Calculate COGS, assuming no other inventory cost adjustments.
What is $43,000? (15000+40000-12000)
A company purchases a truck with a 5 year useful life. This expense recognizes the allocation of its cost over that life.
What is depreciation expense?
A $12,000 contract provides services evenly over 12 months. How much revenue should be recognized after three months?
What is $3,000 ($12,000 × 3/12).
A company estimates $3,000 of customer balances will not be collected. This adjusting journal entry is required.
What is Debit Bad Debt Expense $3,000; credit Allowance for Doubtful Accounts $3,000.
A store purchases 10 units at $10 and 10 units at $14. It sells 12 units. Under periodic FIFO, what is ending inventory?
What is $112 (8 units × $14).
A store sells $2,000 of goods on account. The merchandise cost $1,200. Under a perpetual inventory system, how many journal entries are required and what are they?
What is Two: debit Accounts Receivable $2,000 and credit Sales Revenue $2,000; debit COGS $1,200 and credit Inventory $1,200.
Equipment costs $50,000, has a $5,000 residual value, and a five-year useful life. This is the annual straight-line depreciation.
What is $9,000 per year? (50,000 - $5,000)/5 years
A company sells equipment and a two-year service plan for $2,400. Their standalone prices are $2,000 and $1,000. How much revenue is allocated to the equipment?
What is $1,600 ($2,400 × $2,000 / $3,000).
A $700 receivable is deemed uncollectible and written off using the allowance method. This is the journal entry.
What is Debit Allowance for Doubtful Accounts $700; credit Accounts Receivable $700.
When purchase prices are rising, this inventory valuation method reports higher ending inventory and gross profit. FIFO or LIFO
What is FIFO?
Beginning inventory is 10 units at $5. The company purchases 10 more at $7 and sells 12 units. Under periodic LIFO, what is COGS?
What is $80? (10 × $7 + 2 × $5).
A machine was purchased for $40,000 and has accumulated depreciation of $22,000. It is sold for $15,000 cash. This is the gain or loss on the sale.
What is $3,000 loss.
(40,000-22,000) = 18,000 Book Value.
15,000 - 18,000 = -3,000
A company has gross sales of $80,000, sales returns of $4,000, and sales discounts of $1,500. Calculate net sales revenue.
What is $74,500 ($80,000 − $4,000 − $1,500).
Year-end Accounts Receivable is $100,000. The allowance has a $1,000 credit balance before adjustment. The estimated uncollectible amount is 4% of receivables. This is the adjusting journal entry required.
What is Debit $3,000 to Bad Debt Expense, Credit $3,000 to Allowance for Doubtful Account.
A company begins with 100 units at $8, purchases 100 at $10, and sells 120. Under periodic weighted-average cost, calculate ending inventory.
What is $720? [(100*8)+(100*10)]/200 = $9/item. 80 left in inventory (200-120) X $9 = $720.
A company has $100,000 in net sales. FIFO COGS is $58,000, and LIFO COGS is $65,000. This is the gross profit under both methods and an explanation on why the difference.
What is Gross profit: FIFO: $42,000. LIFO: $35,000?
FIFO reports more gross profit because, when inventory costs are rising, FIFO assigns the older, lower costs to COGS, resulting in lower COGS and higher gross profit. LIFO assigns the newer, higher costs to COGS, resulting in higher COGS and lower gross profit.
A machine costs $60,000, has a six-year useful life, and $6,000 residual value. Using double-declining-balance depreciation, this is first-year depreciation.
What is $20,000? (2/6 X 60,000)