Merchandising Terms
The term for a cash discount granted to buyers in return for early payment.
What is a sellers discount?
The credit terms 3/15, n/30 means a ____% discount if the amount is paid within ____ days, or the full balance due in 30 days.
What are 3% and 15 days?
On April 30, Roja Merchandisers sold $3,000 in inventory to Stone Company under credit terms 3/15, n/30. The goods cost Roja $2,500. This is the journal entry for the revenue.
What is:
Accounts Receivable $3,000
Sales $3,000
?
True of false:
Managers can control customer demand for inventory.
What is false?
Beginning Inventory plus net purchases equals this.
What is merchandise available for sale?
All costs associated with obtaining inventory and getting it ready for sale are recorded to this account.
What is Merchandise Inventory?
At the beginning of the period, Pebble Company had $14,000 of inventory. During the year, Pebble Company purchased $24,000 of merchandise and sold $10,000 of merchandise. A physical count of inventory at year-end shows $26,000 of inventory exists. This is the entry to record inventory shrinkage.
What is:
Cost of Goods Sold $2,000
Merchandise Inventory $2,000
?
On April 30, Roja Merchandisers sold $3,000 in inventory to Stone Company under credit terms 3/15, n/30. The goods cost Roja $2,500. This is the journal entry for the cost/expense.
What is:
Cost of Goods Sold $2,500
Merchandise Inventory $2,500
?
A landscaping company has the following products in its ending inventory. They calculate the lower of cost or market for inventory applied separately to each product and then record a journal entry to adjust their inventory for this amount. (note, the entry amount, not the new inventory amount).
Stone - 20 units
Cost per unit: $5; Market per unit $ 6
Landscaping Pins - 500 units
Cost per unit: $1.25; Market per unit: $1.00
Rose Bushes - 40 units
Cost per unit $8; Market per unit $8.50
What is $125?
Stone: Cost 20x$5=$100; Market 20x$6=$120
Landscaping Pins: Cost 500x$1.25=$625; Market 500x$1.00=$500
Rose Bushes: Cost 40x$8=$320; Market 40x$8.50=$340
Total Cost:
$100+$625+$320=$1,045
LCM:
$100+$500+$320=$920
J/E is the difference: $1,045-$920=$125
For a service company, Revenues - Expenses equal this.
What is net income?
True of False:
GAAP requires inventory to be reported at retail value.
What is false?
Sally Company purchased $16,000 of merchandise from their supplier with credit terms of 3/10, n/30, invoice dated December 9, and FOB shipping point. This is the journal entry for the purchase on December 9.
What is
Merchandise Inventory $16,000
Accounts Payable $16,000
?
On May 4, Stone Company returns $750 worth of products because they did not fit their needs. Roja Merchandisers restores the products, which cost $625, to its inventory. This is the revenue side of the return.
What is:
Sales Returns and Allowances $750
Accounts Receivable $750
?
Based on Smith Company's activity below, this is the cost of goods sold and the ending inventory based on the FIFO inventory costing method.
1/1 Beginning Inventory: 100 units @ $5.00
1/16 Purchased 20 units at a cost of $5.50
1/20 Purchased 25 units at a cost of $6.00
1/23 Sold 125 units for $8.00 each
What is:
COGS $640
Ending Inventory $120
?
Maria Company's sales were $550,000, sales discounts were $25,000, sales returns and allowances were $10,000, and cost of goods sold was $290,000. This is their gross profit.
What is $225,000?
Net Sales: Sales - Sales Discounts - Sales Returns and Allowances
$550,000 - $25,000 - $10,000 = $515,000
Gross Profit: Net Sales - COGS
$515,000 - $290,000 = $225,000
Goods in transit are included in the buyer's inventory when they are on the delivery truck when the terms are FOB _________ _____________.
What is Shipping Point?
Sally Company purchased $16,000 of merchandise from their supplier with credit terms of 3/10, n/30, invoice dated December 9, and FOB shipping point. On December 13, they returned $3,000 of merchandise. This is the journal entry for Sally's merchandise return on December 13.
What is
Accounts Payable $3,000
Merchandise Inventory $3,000
?
On May 5, Stone Company discovers that some of the products are scratched, but they are still of use and, therefore, keeps the products. Roja Merchandisers gives a price reduction (allowance) for $250 to compensate for the damage. This is the journal entry for the allowance.
What is:
Sales Returns and Allowances $250
Accounts Receivable $250
?
Based on Smith Company's activity below, this is the cost of goods sold and the ending inventory based on the LIFO inventory costing method.
1/1 Beginning Inventory: 100 units @ $5.00
1/16 Purchased 20 units at a cost of $5.50
1/20 Purchased 25 units at a cost of $6.00
1/23 Sold 125 units for $8.00 each
What is:
COGS $660
Ending Inventory $100
?
Maria Merchandisers had a beginning inventory of 500 units costing $1,125. They purchased 100 additional units for $225 and sold 350 units for $1,750 This is the goods available for sale.
What is $1,350?
This is a discount between sellers/traders that reduces the selling price below the list price.
What is a trade discount?
Sally Company purchased $16,000 of merchandise from their supplier with credit terms of 3/10, n/30, invoice dated December 9, and FOB shipping point. On December 13, they returned $3,000 of merchandise. This is the journal entry when Sally sends a check on December 16, net of the discount and the returned merchandise.
What is
Accounts Payable $13,000
Merchandise Inventory $390
Cash $12,610
?
On April 30, Roja Merchandisers sold $3,000 in inventory to Stone Company under credit terms 3/15, n/30. The goods cost Roja $2,500. Stone Company returned $750 worth of products and received a $250 allowance for scratched projects. This is the journal entry when Roja Merchandisers receives payment on May 6.
What is:
Cash $1,940
Sales Discounts $60
Accounts Receivable $2,000
?
A/R ($3,000 - $750 - $250 = $2,000)
Discount ($2,000 x 3% = $60)
Cash ($2,000 - $60 = $1,940)
Based on Smith Company's activity below, this is the cost of goods sold and the ending inventory based on the Weighted Average inventory costing method.
1/1 Beginning Inventory: 100 units @ $5.00
1/16 Purchased 20 units at a cost of $5.50
1/20 Purchased 25 units at a cost of $6.00
1/23 Sold 125 units for $8.00 each
What is:
COGS $655
Ending Inventory $105
?
Calculations:
$760 total cost/145 units available=$5.24 per unit
$5.24 per unit x 125 units = $655
XYZ Company had the following data for the year:
This is their inventory turnover.
What is 6.25?
Calculations:
Cost of Goods Sold/Average Inventory
$250,000/$40,000=6.25
Average Inventory=(Beginning Inventory/Ending Inventory)/2
($50,000+$30,000)/2 = $80,000/2 = $40,000