Accounting 2 Final Exam (Special)

The correct answer is "balance sheet" or "statement of financial position." Both terms refer to a financial statement that provides a snapshot of a company's financial position at a specific point in time. It presents the company's assets, liabilities, and shareholders' equity, giving an overview of what the company owns and owes. The balance sheet helps stakeholders assess the company's financial health and its ability to meet its financial obligations.

The given correct answer suggests that the transportation cost is included in the cost of sales. This means that the expense of transporting goods or products is considered as part of the overall cost incurred to make those sales. It implies that the transportation cost is directly associated with the sales process and is accounted for in the financial calculations.

Owner's Equity represents the residual interest in the assets of the entity after deducting liabilities. It is the owner's claim on the assets of the business. This includes the initial investment made by the owner, any additional capital contributions, and retained earnings. In simple terms, it is the net worth of the owner in the business.

The terms "gross margin" and "gross profit" are often used interchangeably in business. They both refer to the difference between net sales and the cost of sales. This represents the amount of money left over after subtracting the direct costs associated with producing or delivering a product or service. Gross margin or gross profit is an important financial metric that helps measure a company's profitability and efficiency in generating revenue. It indicates the percentage of each dollar of revenue that is available to cover operating expenses and contribute to net income.

Gross profit is the excess of net sales over the cost of sales. It represents the amount of money left after deducting the direct costs associated with producing or purchasing the goods or services sold. Gross profit is an important financial metric that indicates the profitability of a company's core operations before considering other expenses such as operating expenses or taxes. It helps assess the efficiency of a company's pricing strategy, production process, and inventory management. Overall, gross profit is a key indicator of a company's ability to generate revenue and cover its direct costs.

A physical count of inventory is usually taken at the end of the fiscal year to ensure accurate financial reporting and to reconcile the inventory records with the actual stock on hand. This timing allows for a comprehensive assessment of the inventory levels and valuation, which is important for financial statements and tax purposes. Additionally, taking the count at the end of the fiscal year allows for any necessary adjustments or write-offs to be made before starting a new fiscal year.

The given correct answer "freight in, transportation in" suggests that the transportation cost is included in the cost of sales. This means that when calculating the cost of sales, the company takes into account the expenses incurred for transporting the goods. These transportation costs are considered as part of the overall cost of sales, which is the total cost incurred to produce and deliver the goods to customers. Including transportation costs in the cost of sales allows for a more accurate calculation of the true cost of the goods sold.

The major expense of a merchandising business is the cost of goods sold. This refers to the cost incurred by the business to acquire or produce the goods that are sold to customers. It includes the cost of raw materials, direct labor, and overhead expenses directly related to the production of goods. By deducting the cost of goods sold from the total sales revenue, the business can determine its gross profit. The terms "cost of sales," "cost of sale," and "cost of good sold" are all alternative ways of referring to this expense.

These terms all refer to companies that provide services in exchange for a fee. A service concern is a business entity that focuses on providing services rather than selling products. Service companies are also businesses that offer services to clients or customers. The term "service" itself is a general term that encompasses any type of work or assistance provided in exchange for payment.

These four options all refer to businesses that earn profit by buying and selling goods. "Merchandising business" and "merchandising concern" are synonymous terms that specifically describe a business that focuses on buying and selling merchandise. "Merchandising" is a more general term that can also refer to the process of promoting and selling products. "Retail" is another term for businesses that sell products directly to consumers.

When a company sells the inventory, it is no longer considered as part of the merchandising inventory. Instead, it becomes part of the cost of goods sold. This is because the cost of goods sold represents the direct costs associated with producing or acquiring the goods that have been sold. Therefore, once the inventory is sold, its cost is transferred from the merchandising inventory account to the cost of goods sold account.

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In a merchandising company that uses a perpetual inventory system, the cost of sales is contained in one account in the income statement columns. This means that all the costs associated with selling the merchandise, such as the cost of acquiring the goods, transportation costs, and any other related expenses, are recorded in a single account in the income statement. This allows for easy tracking and analysis of the cost of sales, helping the company to determine its profitability and make informed business decisions.

Operating income is the amount of profit generated from a company's core operations after deducting operating expenses from gross profit. It represents the profitability of a company's day-to-day operations and is a key measure of its financial performance. By subtracting operating expenses, such as wages, rent, utilities, and other costs directly related to running the business, from gross profit, operating income provides a clearer picture of how well a company is managing its core operations to generate profit.

After all adjusting entries are posted, the balances of all asset, liability, income, and expense accounts correspond exactly to the amounts in the financial statements. This is because adjusting entries are made to ensure that the financial statements reflect the true and accurate financial position of the company. Therefore, the balances in the financial statements will include the effects of these adjustments and will be the most accurate representation of the company's financial position. The other options mentioned, such as the worksheet trial balance, post-closing trial balance, and unadjusted trial balance, do not necessarily include the effects of adjusting entries and may not reflect the accurate financial position.

A merchandising company relies on its inventory to generate revenue through sales. Inventory, ending is an account that tracks the value of unsold goods at the end of an accounting period. Since the company plans to continue selling these goods in the future, it would not close the Inventory, ending account. Instead, it would carry forward the balance to the next accounting period to accurately reflect the value of its remaining inventory.

Sales discounts are typically given to customers as an incentive for early payment of their invoices. When a customer takes advantage of a sales discount, the company needs to record the reduction in revenue. This is done by crediting the sales discounts account, which effectively closes the account and reduces the amount of revenue recognized. Therefore, the correct answer is sales discounts.

When an account is closed by debiting the account, it means that the balance in the account is reduced or eliminated by recording a debit entry. In this case, the correct answer "Purchases Returns and Allowances" is an account that is closed by debiting. This account is used to record the returns or allowances granted to customers for merchandise that they have previously purchased. By debiting this account, the amount of returns and allowances is subtracted from the total purchases, reducing the overall balance in the account.

The correct answer is "ending inventory, merchandise inventory-end". This is because ending inventory refers to the value of goods that a company still has on hand at the end of an accounting period. It is considered a current asset because it represents inventory that is available for sale in the near future. Merchandise inventory-end is another term used to describe the same concept of ending inventory. Both terms indicate that this amount is deducted from the cost of sales, as it represents inventory that has not yet been sold and should not be included in the calculation of cost of goods sold.

When the gross margin equals the operating expenses, it means that the revenue generated from the sale of goods or services is exactly equal to the expenses incurred in operating the business. This implies that there is no profit left after deducting the cost of goods sold and operating expenses from the net sales. In other words, all the revenue generated is used up to cover the expenses, resulting in a zero operating income.

The cost of goods available for sale represents the total value of inventory that a company has available to sell during a specific period. It is calculated by adding the beginning inventory (the value of inventory at the start of the period) to the net cost of purchases (the total cost of inventory acquired during the period). This sum reflects the total value of inventory that the company could potentially sell, providing insights into the company's inventory management and sales potential.