Financial Accounting: The Impact on Decision Makers
10th Edition
ISBN: 9781305654174
Author: Gary A. Porter, Curtis L. Norton
Publisher: Cengage Learning
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Chapter 2, Problem 2.2AP
To determine
Concept Introduction:
To State: Whethergiven costs transfer to income statement or not.
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The dollar amount paid by a retailer to acquire a product from a wholesaler is known
as the retailer's
expenses
cost
MSRP
markup
The cost of goods purchased line on the income statement of a retailer is the equivalent to which line on a manufacturer’s income statement?
a.
Cost of goods sold
b.
Cost of goods available for sale
c.
Cost of goods manufactured
d.
Cost of raw materials purchased
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In comparing the accounts of a merchandising company with those of a service company, what additional accounts would the merchandising company likely use, assuming it employs a perpetual inventory system?
Chapter 2 Solutions
Financial Accounting: The Impact on Decision Makers
Ch. 2 - Read each definition below and write the number of...Ch. 2 - Prob. 2.1ECh. 2 - The Operating Cycle Two Wheeler Cycle Shop buys...Ch. 2 - Classification of Financial Statement Items Regal...Ch. 2 - Current Ratio Baldwin Corp. reported the following...Ch. 2 - Classification of Assets and Liabilities Indicate...Ch. 2 - Selling Expenses and General and Administrative...Ch. 2 - Prob. 2.7ECh. 2 - Income Statement Ratio The income statement of...Ch. 2 - Statement of Retained Earnings Landon Corporation...
Ch. 2 - Components of the Statement of Cash Flows Identify...Ch. 2 - Prob. 2.11ECh. 2 - Prob. 2.12MCECh. 2 - Prob. 2.13MCECh. 2 - Prob. 2.14MCECh. 2 - Materiality Joseph Knapp, a newly hired accountant...Ch. 2 - Costs and Expenses The following costs are...Ch. 2 - Prob. 2.3PCh. 2 - Prob. 2.4PCh. 2 - Working Capital and Current Ratio The balance...Ch. 2 - Single-Step Income Statement The following income...Ch. 2 - Multiple-Step Income Statement and Profit Margin...Ch. 2 - Statement of Cash Flows Colorado Corporation was...Ch. 2 - Basic Elements of Financial Reports Comparative...Ch. 2 - Prob. 2.10MCPCh. 2 - Prob. 2.11MCPCh. 2 - Prob. 2.12MCPCh. 2 - Prob. 2.1APCh. 2 - Prob. 2.2APCh. 2 - Prob. 2.3APCh. 2 - Prob. 2.4APCh. 2 - Working Capital and Current Ratio The balance...Ch. 2 - Single-Step Income Statement The following income...Ch. 2 - Prob. 2.7APCh. 2 - Prob. 2.8APCh. 2 - Prob. 2.9APCh. 2 - Comparability and Consistency in Income Statements...Ch. 2 - Prob. 2.12AMCPCh. 2 - Prob. 2.1DCCh. 2 - Prob. 2.2DCCh. 2 - Analysis of Cash Flow for a Small Business...Ch. 2 - Prob. 2.4DCCh. 2 - The Expenditure Approval Process Roberto is the...Ch. 2 - Prob. 2.6DC
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- Why do companies adopt the LIFO method of inventory costing? Your discussion should include the effects on the income statement and balance sheet.arrow_forwardMerchandise Accounting Merchandise Inventory Raw materials Work in process Finished goods Gross profit Net sales Sales revenue Cost of goods available for sale Cost of goods sold Perpetual system Periodic system Transportation-In Purchases FOB destination point FOB shipping point Gross profit ratio An adjunct account used to record freight costs paid by the buyer. A system in which the Inventory account is increased at the time of each purchase and decreased at the time of each sale. Terms that require the seller to pay for the cost of shipping the merchandise to the buyer. Terms that require the buyer to pay for the shipping costs. A system in which the Inventory account is updated only at the end of the period. Beginning inventory plus cost of goods purchased. An account used in a periodic inventory system to record acquisitions of merchandise. Sales revenue less sales returns and allowances and sales discounts. Cost of goods available for sale minus ending inventory. Gross profit divided by net sales. Net sales less cost of goods sold. The cost of unfinished products in a manufacturing company. The account wholesalers and retailers use to report inventory held for sale. The inventory of a manufacturer before the addition of any direct labor or manufacturing overhead. A manufacturers inventory that is complete and ready for sale. A representation of the inflow of assets from the sale of a product.arrow_forwardInventory Costing: Average Cost Refer to the information for Filimonov Inc. and assume that the company uses a perpetual inventory system. Required: Calculate the cost of goods sold and the cost of ending inventory using the average cost method. ( Note: Use four decimal places for per-unit calculations and round all other numbers to the nearest dollar.)arrow_forward
- What accounts are used to recognize a retailers purchase from a manufacturer on credit? A. accounts receivable, merchandise inventory B. accounts payable, merchandise inventory C. accounts payable, cash D. sales, accounts receivablearrow_forwardWhich of the following represents the components of the income statement for a merchandising business? A. Sales Revenue - Cost of Goods Sold = gross profit B. Service Revenue - Operating Expenses = gross profit C. Sales Revenue - Cost of Goods Manufactured = gross profit D. Service Revenue - Cost of Goods Purchased = gross profitarrow_forward1. What kind of inventory system most applicable to sari-sari stores? A. Merchandise Inventory B. Merchandisers C. Perpetual Inventory system D. Periodic Inventory System 2. What accounting term is used for the cost of goods unsold at the end of the accounting period? C. Perpetual Inventory D. Periodic Inventory A. Cost of Goods Unsold B. Merchandise Inventory 3. Cost of Goods Sold (COGS) includes the following EXCEPT: A. Factory overhead expenses. B. The cost of storing products the business sells. C. Indirect labor costs for workers who produce the products D. The cost of products or raw materials, including freight or shipping charges. 4. The following are COGS formula to found in the cost of goods sold during an accounting period A. Gross Income= Gross Revenue-COGS B. Net Income+ Revenue-COGS- Expenses C. Beginning Inventory+ Purchases During the Period-Ending Inventory. D. Beginning Inventory – Purchase Return and Allowances - Ending Inventory. 5. Which of the following statement…arrow_forward
- The product cost for a merchandising retailer or wholesaler includes: i. all of the costs incurred to manufacture the productsii. shipping costs paid by the company selling goods to the retailer or wholesaleriii. shipping costs paid by the acquiring retailer or wholesaler for inventoryiv. purchase cost of inventoryarrow_forwardAccounting for Merchandising Businesses and Inventory and Assets Define the following: Cost of goods sold Credit memo Credit terms Debit memo FIFO FOB Gross profit Invoice LIFO Net sales Periodic inventory Perpetual inventory Sales Selling expense Subsidiary ledger Trade discount Weighted averagearrow_forwardCompanies that sell products and goods will have inventory and cost of goods sold accounts. The basic cost of goods sold equation is: Beginning Inventory + Purchases – Ending Inventory = Cost of Goods Sold The ending inventory of one period is the beginning inventory of the next period. Businesses that offer services do not normally sell products as their primary business activity but may sell them to supplement their services. What additional accounts would you expect to find in a manufacturing firm and how do they relate to the cost of goods sold?arrow_forward
- 1. What kind of inventory system most applicable to sari-sari stores? C. Perpetual Inventory system D. Periodic Inventory System A. Merchandise Inventory B. Merchandisers 2. What accounting term is used for the cost of goods unsold at the end of the accounting period? A. Cost of Goods Unsold B. Merchandise Inventory C. Perpetual Inventory D. Periodic Inventory 3. Cost of Goods Sold (COGS) includes the following EXCEPT: A. Factory overhead expenses. B. The cost of storing products the business sells. C. Indirect labor costs for workers who produce the products D. The cost of products or raw materials, including freight or shipping charges. 4. The following are COGS formula to found in the cost of goods sold during an accounting period A. Gross Income= Gross Revenue-COGS B. Net Income+ Revenue-COGS- Expenses C. Beginning Inventory+ Purchases During the Period-Ending Inventory. D. Beginning Inventory – Purchase Return and Allowances - Ending Inventory. 5. Which of the following statement…arrow_forwardincome statement for merchandisingbusiness using the function of expense formarrow_forwardIn comparing the accounts of a merchandising company with those of a service company, what additional accounts would the merchandising company likely use, assuming it employs a perpetual inventory system? Which financial statements would these accounts appear on?arrow_forward
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