Inventory Account
When we sell the asset, we will record an expense called _______.
Cost of Goods Sold
What is Gross Margin (or Gross Profit)?
Sales - COGS
Subtotal shown before operating expenses
What are Nonoperating Items (definition)?
Other income/expense items that are not part of our core business operations
At January 1, Year 2 accounts receivable was $29,500. Revenue earned on account was $119,000. Cash collected on accounts receivable during Year 2 was $50,700. What was the ending balance in accounts receivable on December 31, Year 2?
$29,500 BAR + $119,000 revAcc − $50,700 CC
=$97,800 ending Accounts Receivable
Every sale of inventory will involve what two events?
1.
2.
1. Record the sale
2. Record the cost of the sale
What is Operating Income?
Income from our core operations.
Besides Gains and Losses, what are the other two events that fall under Nonoperating Items?
+ Interest Revenue
- Interest Expense
What is the formula of Pre-paid Rent?
Beginning Balance
+ Rent paid in advance
- Rent used (time passed)
= Ending Balance
What is the Inventory Account formula?
Beginning balance
+ inventory purchased
Cost of goods available for sale
- Cost of Goods Sold
Ending balance
What is a gain (definition)?
Increase net income
Not expected to recur from year-to-year
Example: Selling land for more than we paid for it
Middleton Company uses the perpetual inventory system. The company purchased an item of inventory for $50 and sold the item to a customer for $120. How will the sale affect the company's Inventory account?
Inventory decreases by $50
What is the formula of Unearned Revenue?
Beginning Balance
+ Cash received in advance from customer
- revenue earned
= Ending Balance
Determine the amount of the difference between book balance and the actual amount of inventory.
- Paid $25,000 cash to purchase inventory.
- Sold inventory costing $15,500 for $30,000 cash.
- Physically counted inventory showing $9,000
Inventory Account:
Beginning+ inventory bought - inventory sold = BB
BB - actual count = difference in book and actual
Thus answer is $500
What is a loss (definition)?
Decrease net income
Not expected to recur from year-to-year
Example: Selling land for less than we paid for it
How would these events be shown on a HM?
Purchased $1,150 of office supplies on account.
1. Supplies +1,150 & AP +1,150
2. Supplies (1,000) & RE (1,000) --(IS)
EB = Supplies 150
What would the following event look like on the HM?
A. Sold inventory costing $5,060 for $7,050 cash.
A1. Cash +7,050 & RE + 7,050 & Rev+NI +7,050 & Cash flow +7,050 OA
A2. Inventory -5,060 & RE -5,060 & Exp+NI -5,060
What is the layout of a multi-step income statement?
Sales
Less: Cost of Goods Sold
= Gross Margin (or Gross Profit)
Less: Operating Expenses
= Operating Income
Nonoperating items
+/- Other income/expense
= Net income
Financed initial operations by borrowing $50,000 from a local bank. Interest payments on the loan are not due until the loan fully matures.
Adjusted the accounting records on December 31, Year 1, to recognize accrued interest expense on the bank note. The note, issued on July 1, Year 1, had a one-year term and a 6 percent annual
50,000 x .06 x 6/12
1,500