Closing Entries & Adjusting entries
Name one account that is closed directly to Retained Earnings?
Income summary or dividends
In which inventory system is the Inventory account updated continuously
perpetual
How do you calculate gross profit on a multi-step income statement?
Net Sales – Cost of Goods Sold
What does the term “2/10, n/30” mean?
A 2% discount is available if paid within 10 days; otherwise, the full amount is due in 30 days.
Supplies on hand total $500, but the Supplies account shows $2,000. What is the adjusting entry?
Debit Supplies Expense $1,500
Credit Supplies $1,500.
Which system requires a physical inventory count to determine COGS?
Periodic
What is the calculation for profit margin
Net income divided by Sales
FOB Shipping point - who pays shipping
BUYER
A company earned $2,000 of revenue that has not yet been billed to the client. What is the adjusting entry?
DR Accounts Receivable $2,000
CR Service Revenue $2,000.
What account is debited when the buyer purchases inventory under the perpetual system?
Inventory
A company has Net Sales of $100,000 and COGS of $60,000. What is the gross profit percentage?
40%
Normal Balance of the Sales Discounts account
Debit
Unearned Rent Revenue has a balance of $12,000. At year-end, $3,000 has been earned. What is the adjusting entry?
DR Unearned Rent Revenue $3,000
CR Rent Revenue $3,000.
A company records “Purchases,” “Purchase Returns,” and “Freight-In.” Which inventory system is it using
Periodic
If a company’s gross profit % is 60% and its net sales are $500,000, what is its COGS?
40% × 500,000 = $200,000.
FOB Destination means that ownership of goods remains with _____ until the destination?
Seller
A company’s Income Summary shows a credit balance of $8,000 after closing revenues and expenses. What closing entry comes next?
Debit Income Summary $8,000; Credit Retained Earnings $8,000.
Under a perpetual system, when goods are returned to the supplier, which account is credited on the buyers books?
Inventory
On a multi-step income statement, where would “Loss on Sale of Equipment” appear?
Other Expenses and Losses section, below operating income.
The buyer records a purchase discount of $40 under the perpetual system. What account is debited?