CoGS, Inventory, Sales + returns

What is the cost per t-shirt purchased by the business from TShirtsRUS?

• $10

• $20

• $30

• $40

Answer explanation

The cost per t-shirt purchased from TShirtsRUS is $10, which is the lowest price option provided. This indicates that the business buys each t-shirt at this rate.

Which account is used to record the money the business owes to T-shirts RUS for the purchase of the 100 T-shirts.

• Accounts Receivable - T-shirts RUS

• Inventory

• Accounts Payable- T-shirts RUS

• Sales

Answer explanation

The business has purchased the T-Shirts from T-Shirts RUS on credit/account, and will pay for them at a later date. Therefore, this is a liability as the business owes someone money.

How much is credited to the Accounts Payable when the business purchases 100 t-shirts?

• $1000

• $200

• $800

• $1200

Answer explanation

When purchasing 100 t-shirts at $10 each, the total cost is $1,000. This amount is credited to Accounts Payable, reflecting the liability incurred by the business for the purchase.

What is the selling price of one t-shirt to a customer?

• $10

• $20

• $30

• $40

Answer explanation

The selling price of one t-shirt is $30, which is the correct choice among the options provided. This price likely reflects the cost of production and desired profit margin.

What account is debited when a customer purchases a t-shirt for cash?

• Sales

• Inventory

• Cash at Bank

• Cost of Goods Sold

Answer explanation

When a customer purchases a t-shirt for cash, the Cash at Bank account is debited to reflect the increase in cash received from the sale.

Which account is credited when a customer returns a t-shirt and receives a refund?

• Inventory

• Accounts Receivable

• Cash at Bank

• Sales Returns

Answer explanation

When a customer returns a t-shirt, the business refunds the customer, which decreases the cash balance. Therefore, the Cash at Bank account is credited to reflect this outflow of cash.

What is the journal entry when the business pays for the t-shirts purchased on credit?

• Debit Accounts Payable, Credit Inventory

• Debit Accounts Payable, Credit Cash at Bank

• Debit Cash at Bank, Credit Accounts Payable

• Debit Inventory, Credit Accounts Payable

Answer explanation

When the business pays for t-shirts purchased on credit, it debits Accounts Payable to reduce the liability and credits Cash at Bank to reflect the cash outflow. Thus, the correct entry is Debit Accounts Payable, Credit Cash at Bank.

How is the cost of goods sold affected when a t-shirt is sold?

• Cost of Goods Sold is credited

• Cost of Goods Sold remains unchanged

• Cost of Goods Sold is both debited and credited

• Cost of Goods Sold is debited

Answer explanation

When a t-shirt is sold, the Cost of Goods Sold (COGS) account is debited to reflect the expense incurred for the item sold. This increases the total expenses on the income statement, and provides a gross profit.

What happens to the Sales account when a t-shirt is sold for cash?

• Sales is both debited and credited

• Sales remains unchanged

• Sales is credited

• Sales is debited

Which account is debited when a customer returns a t-shirt and receives store credit?

• Inventory

• Accounts Receivable

• Cash at Bank

• Sales Returns