Question

B * 67%C4) Mon 1:00 PM a ⓇO E5.2 (LO 1, 2, 3, 4, 5, 6) K The following are some of the terms discussed in the chapter: Match concepts with descriptions. 1. Gross profit 2. Perpetual inventory system 3. Cost of goods sold 4. Purchase returns 5. Freight out 6. FOB shipping point 7. Periodic inventory system 8. Subsidiary ledger 9. Sales discounts 10. FOB destination 11. Sales allowance 12. Non-operating activities 13. Profit margin 14. Contra revenue account 15. Merchandise inventory 16. Purchase discounts Instructions Match each term with the best description below. Each term may be used more than once, or may not be used at all. An expense account that shows the cost of merchandise sold A group of accounts that share a common characteristie, such as all inventory

Answer 1

a. Cost of goods sold An expense account that shows the cost of merchandise sold.

b. Subsidiary ledger A group of accounts that share a common characteristic, such as all inventory accounts.

c. Contra revenue account An account, such as sales discounts, that is deducted from a revenue accounts on the income statement.

d. Purchase return The return of unsatisfactory purchased merchandise.

e. FOB destination Freight terms where the seller will pay for the cost of shipping the goods.

f. Periodic inventory system An inventory system where a physical inventory count is required to determine inventory on hand and establish cost of goods sold.

g. Sales allowance A reduction in price given to a customer for unsatisfactory inventory.

h. Gross profit Sales revenue less cost of goods sold.

i. Non operating activities Revenue, expenses, gains, and losses that are not part of the company's main operations.

j. FOB shipping point Freight terms where the buyer will pay for the cost of shipping the goods.

k. Perpetual inventory system An inventory system where the cost of goods sold is calculated and recorded with every sales transaction.

l. Merchandise inventory An assets that shows the cost of goods purchased for resale.

m. Profit margin Profit divided by net sales.

n. Sales discount A price reduction given by a seller for early payment on a credit sale.

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Answer 2