financial accounting

ACT 200 Spring 2020

TAP 4 – 15 % - CH. 5 – V3

Name ____________________________________ ID______________________

Exercise 1 (50 points) Presented below is the information for Chocofabrics for the month January 31, 2020

Cost of goods sold 630000 Insurance expense 330000

Depreciation expense 31000 Sales discounts 15000

Rent expense 25500 Sales returns and allowances 26500

Salaries and wages expense 33000 Sales revenue 1800000

Instructions: Prepare an income statement for the month ended January 31, 2020.

Exercise 2 (15 points) 1) On November 2, 2020, Griffey Company has cash sales of €7,000 from merchandise having

a cost of €5,000. The entries to record the day's cash sales will include: (5 points) a. a €5,000 credit to Cost of Goods Sold. b. a €7,000 credit to Cash. c. a €5,000 credit to Inventory. d a €7,000 debit to Accounts Receivable.

2) The journal entry to record a credit sale is (5 points)

a. Cash Sales Revenue b. Cash Service Revenue c. Accounts Receivable Service Revenue d. Accounts Receivable Sales Revenue

3) When goods are returned that relate to a prior cash sale, (5 points) a. the Sales Returns and Allowances account should not be used. b. the Cash account will be credited. c. Sales Returns and Allowances will be credited. d. Accounts Receivable will be credited.

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Exercise 3 (15 points)

1) The Sales Returns and Allowances account and the Sales Discounts account are both

classified as expense accounts.

2) Sales revenues are earned during the period cash is collected from the buyer.

3) Net sales is sales revenue less sales returns and allowances and sales discounts.

Exercise 4 (20 points) Describe Sales return and allowances, why it happens? Bonus question (10 points) Financial information is presented below:

Operating Expenses € 80,000 Net Sales 310,000 Cost of Goods Sold 170,000

Calculate the Gross profit.