Multi-Step Income Statement
What is the formula to find Net Sales?
Sales Revenue - Returns & Allowances
What are the two sides to the bank reconciliation?
Balance per bank & Balance per company
Which inventory method that assumes all inventory first purchased are the ones first sold?
FIFO
What is the formula used to calculate inventory turnover ratio?
COGS / Average Inventory
What does 2/10 n/30 mean?
2% Discount if paid in 10 days
Net due in 30 days
What is the formula to find gross profit?
Net Sales - COGS
What side are service fees on and what do they do (increase, decrease)?
Balance per company, decrease
Which inventory method gives you a higher cost of goods sold, resulting in lower net income?
LIFO
What is the formula used to calculate receivables turnover ratio?
Net Sales / Average Accounts Receivable
Use the chart on the whiteboard to find the lower of cost and net realizable value for furniture and electronics
Furniture: 200x$85 = 17,000
Electronics: 50x$300 = 15,000
What is the formula to find operating income
Gross Profit - Operating expenses (advertising, salaries, utilities) (everything but income tax exp & interest exp)
What side are deposits outstanding on and what do they do (increase, decrease)?
Balance per bank, increase
A company buys 100 units at $10 each and later 100 units at $12 each. It sells 120 units.
Using FIFO, what is the cost of goods sold?
(100x$10) + (20x$12) = $1,240
Garner Company had net credit sales of $240,000 during the year. Accounts Receivable at the beginning of the year were $20,000, and at the end of the year were $40,000. What is the receivable turnover ratio?
240,000 / ((20,000+40,000)/2) = 8 times
How do you record the sale of inventory?
Debit: Cash
Credit: Inventory
Find gross profit with these numbers:
Cash - $20,000
Sales Revenue - $100,000
Advertising Expense - $25,000
Sales Returns & Allowances - $8,000
Cost of Goods Sold - $45,000
$100,000 - $8,000 - $92,000
$92,000 - $45,000 = $47,000
What side are checks outstanding on and what do they do (increase, decrease)?
Balance per bank, decrease
A company buys 200 units at $15 each and later 100 units at $18 each. It sells 250 units.
Using LIFO, what is the ending inventory?
50x$15 = $750
Miller Company reported Cost of Goods Sold of $360,000 for the year. Its beginning inventory was $40,000, and its ending inventory was $50,000. What is the inventory turnover ratio?
360,000 - ((40,000+50,000)/2) = 8 times
On October 5, a customer bought $5,000 of inventory on account from Carson Company terms 2/10, n/30. The customer paid the balance on October 12. What is the journal entry on October 12?
Cash 4,900
Sales Discounts 100
Accounts Receivable 5,000