5.2: Concept Self-Check
- Page ID
- 20093
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Use the following questions as a self-check while working through Chapter 5.
- What is gross profit and how is it calculated?
- How is a merchandiser different from a service company?
- What is a perpetual inventory system?
- How is the purchase of merchandise inventory on credit recorded in a perpetual system?
- How is a purchase return recorded in a perpetual system?
- What does the credit term of "1/15, n30" mean?
- How is a purchase discount recorded in a perpetual system?
- How is the sale of merchandise inventory on credit recorded in a perpetual system?
- How is a sales return that is restored to inventory recorded versus a sales return that is not restored to inventory (assuming a perpetual inventory system)?
- What is a sales discount and how is it recorded in a perpetual inventory system?
- Why does merchandise inventory need to be adjusted at the end of the accounting period and how is this done in a perpetual inventory system?
- What types of transactions affect merchandise inventory in a perpetual inventory system?
- How are the closing entries for a merchandiser using a perpetual inventory system different than for a service company?
- When reporting expenses on an income statement, how is the function of an expense reported versus the nature of an expense?
- On a classified multiple-step income statement, what is reported under the heading 'Other revenues and expenses' and why?
- What is the periodic inventory system?
- How is cost of goods sold calculated under the periodic inventory system?
NOTE: The purpose of these questions is to prepare you for the concepts introduced in the chapter. Your goal should be to answer each of these questions as you read through the chapter. If, when you complete the chapter, you are unable to answer one or more the Concept Self-Check questions, go back through the content to find the answer(s). Solutions are not provided to these questions.