Principles of Accounting Unit V Assessment

Misty, Inc. had 24,000 units of ending inventory that were recorded at the cost of $8.00 per unit using the FIFO method. The current replacement cost is $4.50 per unit. Which of the following amounts would be reported as Ending Merchandise Inventory on the balance sheet using the lower-of-cost-or-market rule?

$108,000 Explanation: Ending Merchandise Inventory =24,000 x $4.50 = $108,000

A company using the perpetual inventory system purchased inventory worth $21,000 on account with terms of 3/10, n/30. Defective inventory of $1,000 was returned two days later, and the accounts were appropriately adjusted. If the invoice is paid within 10 days, the amount of the purchase discount that would be available to the company is ________.

$600

A company purchased 400 units for $20 each on January 31. It purchased 520 units for $26 each on February 28. It sold a total of 560 units for $40 each from March 1 through December 31. What is the amount of ending inventory on December 31 if the company uses the first-in, first-out (FIFO) inventory costing method? (Assume that the company uses a perpetual inventory system.)

$9,360

A company that uses the perpetual inventory system purchases inventory for $61,000 on account, with terms of 3/10, n/30. Which of the following is the journal entry to record the payment made within 10 days?

A debit to Accounts Payable for $61,000, a credit to Merchandise Inventory for $1,830, and a credit to Cash for $59,170

What does "2/10" mean, with respect to "credit terms of 2/10, n/30"?

A discount of 2 percent will be allowed if the invoice is paid within 10 days of the invoice date.

A company that uses the perpetual inventory system sold goods to a customer on account for $4,000. The cost of the goods sold was $2,000. Which of the following journal entries correctly records this transaction?

Accounts Receivable 4,000 Sales Revenue 4,000 Costs of Goods Sold ​2,000 Merchandise Inventory 2,000

Which of the following is subtracted from net sales revenue to arrive at gross profit on a multi-step income statement?

Cost of goods sold

Which of the following is not recorded in a modern perpetual inventory system?

Customer account numbers and balances owed from the sale of merchandise inventory

A company that uses the perpetual inventory system sold goods for $2,500 to a customer on account. The company had purchased the inventory for $500. Which of the following journal entries correctly records the cost of goods sold?

Debit Cost of Goods Sold - $500Credit Merchandise Inventory - $500

Which of the following statements is FALSE? a. In a perpetual inventory system, the "cash register" at the store is a computer terminal that records sales and updates inventory records. b. Even in a perpetual inventory system, a business must count inventory at least one a year. c. Restaurants and small retail stores often use the periodic inventory system. d. In a periodic inventory system, merchandise inventory and purchasing systems are integrated with the records for Accounts Receivable and Sales Revenue.

In a periodic inventory system, merchandise inventory and purchasing systems are integrated with the records for Accounts Receivable and Sales Revenue.

Which of the following is the correct formula to calculate inventory turnover?

Inventory turnover = Cost of goods sold / Average merchandise inventory

Which of the following is true of freight in?

It is the transportation cost on purchases.

Which of the following inventory costing methods uses the costs of the oldest purchases to calculate the value of the ending inventory?

Last-in, first-out

The ending merchandise inventory for the current year is overstated by $25,000. What effect will this error have on the following year's net income?

The net income will be understated by $25,000.

Which of the following is the correct formula to calculate weighted-average unit cost for merchandise inventory?

Weighted-average unit cost = Cost of goods available for sale / Number of units available

If goods are sold on terms free on board (FOB) shipping point, the __________.

buyer normally pays the transportation costs

Which of the following principles states that a business's financial statements must report enough information for outsiders to make knowledgeable decisions about the company?

disclosure principle

Under the weighted-average method for inventory costing, the cost per unit is determined by __________.

dividing the cost of goods available for sale by the number of units available

A company decides to ignore a very small error in its inventory balance. This is an example of the application of the __________.

materiality concept

The term "freight out" refers to __________.

transportation costs on sales