ACCOUNTING 203 EXAM 3 QUESTIONS WITH
COMPLETE SOLUTIONS
1/10, n/30 Correct Answers Terms of 1/10, n/30 mean there is
a 1% discount granted if payment is made by the 10th day
following the date of sale. If payment is not made in the first ten
days, the buyer has an additional 20
days, for a total of 30, to pay for the goods at the full price.
a loss account is used Correct Answers If the lost inventory is
due to some unusual circumstance, such as a fire
Either way, assets, retained
earnings, and net income are reduced.
Accounts Payable Correct Answers LIABILITY/ Amounts to
be paid in the future for goods or services already acquired
Accounts Receivable Correct Answers ASSETT / Amounts to
be received in the future due to the sale of goods or services
allowance Correct Answers implies that the purchaser kept
goods that did meet his or her original expectations, but that the
seller reduced the price that the buyer had originally agreed to
pay.
Cash discount terms Correct Answers (also referred to as sales
discounts or purchase discounts) such as 1/10, n/30 tell when the
buyer is supposed to pay for the goods, and indicates if there is a
discount for paying early.
, cost of goods sold Correct Answers determined by adding
inventory from the beginning of the period to the balance in the
purchases account
(this total is called goods available for sale) and subtracting the
inventory that exists at the end of the
accounting period. Ending inventory is determined by a physical
count
cost of goods sold expense Correct Answers income statement
ending inventory Correct Answers balance sheet
FIFO Correct Answers Highest ending inventory
lowest COGS
lowest cash flow
First-in-first-out (FIFO) Correct Answers Method to assign
cost to inventory that assumes items are sold in the order
acquired; earliest items purchased are the first sold.
FOB Correct Answers free on board. the term FOB tells when
legal title to goods is passed from the seller to the buyer, which
has implications beyond indicating who will pay for shipping
costs
FOB destination Correct Answers means the seller will pay
FOB shipping point Correct Answers means the buyer will pay
COMPLETE SOLUTIONS
1/10, n/30 Correct Answers Terms of 1/10, n/30 mean there is
a 1% discount granted if payment is made by the 10th day
following the date of sale. If payment is not made in the first ten
days, the buyer has an additional 20
days, for a total of 30, to pay for the goods at the full price.
a loss account is used Correct Answers If the lost inventory is
due to some unusual circumstance, such as a fire
Either way, assets, retained
earnings, and net income are reduced.
Accounts Payable Correct Answers LIABILITY/ Amounts to
be paid in the future for goods or services already acquired
Accounts Receivable Correct Answers ASSETT / Amounts to
be received in the future due to the sale of goods or services
allowance Correct Answers implies that the purchaser kept
goods that did meet his or her original expectations, but that the
seller reduced the price that the buyer had originally agreed to
pay.
Cash discount terms Correct Answers (also referred to as sales
discounts or purchase discounts) such as 1/10, n/30 tell when the
buyer is supposed to pay for the goods, and indicates if there is a
discount for paying early.
, cost of goods sold Correct Answers determined by adding
inventory from the beginning of the period to the balance in the
purchases account
(this total is called goods available for sale) and subtracting the
inventory that exists at the end of the
accounting period. Ending inventory is determined by a physical
count
cost of goods sold expense Correct Answers income statement
ending inventory Correct Answers balance sheet
FIFO Correct Answers Highest ending inventory
lowest COGS
lowest cash flow
First-in-first-out (FIFO) Correct Answers Method to assign
cost to inventory that assumes items are sold in the order
acquired; earliest items purchased are the first sold.
FOB Correct Answers free on board. the term FOB tells when
legal title to goods is passed from the seller to the buyer, which
has implications beyond indicating who will pay for shipping
costs
FOB destination Correct Answers means the seller will pay
FOB shipping point Correct Answers means the buyer will pay
