ACCT 2121 PAL Session 10/9 Exam #2 Review

Merchandising Companies:

• Manufacture goods

• Buy and sell goods

• Distribute raw materials

The total cost of merchandise sold during the period is:

• Cost of goods sold

• Sales revenue

• Gross profit

Beginning inventory

+Cost of goods sold

=.....?

• Sales revenue

• Ending inventory

• Cost of goods available for sale

Which inventory system maintains detailed records of the cost of each inventory

purchase and sale?

• Perpetual inventory system

• Periodic inventory system

Which inventory system keeps a less detailed record of goods on hand?

• Perpetual

• Periodic

Under ______ freight terms, the buyer pays freight costs

• FOB Shipping point

• FOB Destination

Under _____ Freight terms, the seller pays freight costs

• FOB Shipping point

• FOB Destination

When the seller pays transportation costs, this affects

• Inventory account

• Operating expense (freight out or delivery expense)

• Retained Earnings

When the buyer pays transportation costs, it is considered a part of

• Inventory costs

• Operating expense (freight out or delivery expense)

• Retained earnings costs

BOBS Corporation sells inventory to Woodland company on March 1st. The freight terms are FOB Shipping point. On March 3rd, freight costs of $150 are paid to a public carrier. What would be the transaction for March 3rd?

• Cash decreases $150, inventory increases $150

• Cash decreases $150, delivery expense increases $150

• Accounts receivable increases $150, delivery expense decreases $150