ACCT 211 LIBERTY UNIVERSITY CHAPTER 1
TO 3 STUDY GUIDE QUESTIONS AND
SOLUTIONS 2026 CORRECT ANSWERS
GRADED A+
⩥ Service Company Net Income. Answer: Rev-Exp=Net Inc
⩥ Merchandising companies sell _________ to earn revenue.. Answer:
products (sporting goods, clothing, and auto parts stores)
⩥ Merchandising Companies Net Income. Answer: Net Sales-
COGS=Gross Prof - Exp=Net Inc
⩥ Operating Cycle for a Merchandizer. Answer: Begins w/ purch of
merch & ends w/ collection of cash form sale of merch
⩥ Inventory Systems: Graphic. Answer: (Net purch + Beg inv) --> =
(Merch available for sale) --> (COGS + End inv)
⩥ Perpetual Systems. Answer: Updates accounting records for each
purchase and each sale of inventory
,⩥ Periodic Systems. Answer: Updates accounting records for purchases
and sales of inventory only at the end of a period
⩥ Credit Terms. Answer: Sellers can grant a cash discount to encourage
buyers to pay early
⩥ x/y, n/z. Answer: x = discount percent
y = number of days discount is available
n = otherwise net (all) is due in z days
z = credit period
⩥ Purchase Allowance. Answer: Price reduction to buyer of defective or
unacceptable merch
⩥ Purchase Return. Answer: Merch returned by purchaser to supplier
⩥ FOB Shipping Point. Answer: Ownership transfers at shipping point
Goods in transit owned by buyer
Transportation costs paid by buyer
Merch Inv #
Cash #
⩥ FOB Destination. Answer: Ownership transfers at destination
, Goods in transit owned by seller
Transportation costs paid by seller
Delivery Exp #
Cash #
⩥ Itemized Costs of Purchases. Answer: Invoice cost of merch purch
Less: Purch discount received
Purch returns and allowances
Add: Cost of transportation-in
= Total net cost of merch purch
⩥ Gross Profit. Answer: Net Sales - COGS = Gross profit
⩥ Net Sales. Answer: Gross sales - Sales discounts - Returns &
allowances
⩥ Sales of Merchandise. Answer: Each sales transaction for a seller of
merch involves 2 parts: Revenue recorded (asset increased) from a
customer
COGS incurred (asset decreased) to a customer
⩥ Sales Returns and Allowances. Answer: Usually involve dissatisfied
customers and possibility of lost future sales
TO 3 STUDY GUIDE QUESTIONS AND
SOLUTIONS 2026 CORRECT ANSWERS
GRADED A+
⩥ Service Company Net Income. Answer: Rev-Exp=Net Inc
⩥ Merchandising companies sell _________ to earn revenue.. Answer:
products (sporting goods, clothing, and auto parts stores)
⩥ Merchandising Companies Net Income. Answer: Net Sales-
COGS=Gross Prof - Exp=Net Inc
⩥ Operating Cycle for a Merchandizer. Answer: Begins w/ purch of
merch & ends w/ collection of cash form sale of merch
⩥ Inventory Systems: Graphic. Answer: (Net purch + Beg inv) --> =
(Merch available for sale) --> (COGS + End inv)
⩥ Perpetual Systems. Answer: Updates accounting records for each
purchase and each sale of inventory
,⩥ Periodic Systems. Answer: Updates accounting records for purchases
and sales of inventory only at the end of a period
⩥ Credit Terms. Answer: Sellers can grant a cash discount to encourage
buyers to pay early
⩥ x/y, n/z. Answer: x = discount percent
y = number of days discount is available
n = otherwise net (all) is due in z days
z = credit period
⩥ Purchase Allowance. Answer: Price reduction to buyer of defective or
unacceptable merch
⩥ Purchase Return. Answer: Merch returned by purchaser to supplier
⩥ FOB Shipping Point. Answer: Ownership transfers at shipping point
Goods in transit owned by buyer
Transportation costs paid by buyer
Merch Inv #
Cash #
⩥ FOB Destination. Answer: Ownership transfers at destination
, Goods in transit owned by seller
Transportation costs paid by seller
Delivery Exp #
Cash #
⩥ Itemized Costs of Purchases. Answer: Invoice cost of merch purch
Less: Purch discount received
Purch returns and allowances
Add: Cost of transportation-in
= Total net cost of merch purch
⩥ Gross Profit. Answer: Net Sales - COGS = Gross profit
⩥ Net Sales. Answer: Gross sales - Sales discounts - Returns &
allowances
⩥ Sales of Merchandise. Answer: Each sales transaction for a seller of
merch involves 2 parts: Revenue recorded (asset increased) from a
customer
COGS incurred (asset decreased) to a customer
⩥ Sales Returns and Allowances. Answer: Usually involve dissatisfied
customers and possibility of lost future sales
