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​Mayflower, Inc. provided the following for​ 2017: Cost of Goods Sold​ (Cost of​ sales) ​$1,100,000 Beginning Merchandise Inventory ​325,000 Ending Merchandise Inventory ​600,000 Calculate the average merchandise inventory held by​ Thomas, Inc. during the year. A. ​$462,500 .B. ​$925,000 C. ​$600,000 D. ​$325,000

462,500

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? A. Cost of Goods Sold 500 Merchandise Inventory 500 B. Merchandise Inventory 500 Cost of Goods Sold 500 C. Cost of Goods Sold 500 Sales Revenue 500 D. Accounts Receivable 500 Sales Revenue 500

A.

A company sold merchandise with a cost of​ $238 for​ $440 on account. The seller uses the perpetual inventory system. The entry to record the cost of merchandise sold would include​ ________. A. a debit to Cash and a credit to Sales Revenue for​ $440 B. a debit to Cost of Goods Sold and a credit to Merchandise Inventory for​ $238 C. a debit to Sales Revenue and a credit to Cash for​ $440 D. a debit to Merchandise Inventory for​ $238 and a credit to Cost of Goods Sold for​ $238

B. a debit to Cost of Goods Sold and a credit to Merchandise Inventory for​ $238

A merchandiser uses a perpetual inventory system. The beginning​ Owner, Capital balance of the merchandiser was​ $95,000. During the​ year, Sales Revenue amounted to​ $80,000, Sales Returns and Allowances were​ $1,300, Sales Discounts were​ $2,700, Cost of Goods Sold was​ $40,000, and all other expenses totaled​ $13,000. The company paid​ $24,000 in withdrawals to the owner. The last step in the closing process would include​ ________. A. a debit to Income Summary for​ $57,000 B. a debit to the​ Owner, Capital account for​ $24,000 C. a credit to Income Summary for​ $80,000 D. a debit to the​ Owner, Capital account for​ $20,000

B. a debit to the​ Owner, Capital account for​ $24,000

When a company uses the perpetual inventory​ method, which of the following would be the entry to adjust inventory to​ lower-of-cost-or-market? A. debit Merchandise Inventory and credit Cost of Goods Sold B. debit Cost of Goods Sold and credit Merchandise Inventory This is the correct answer.C. debit Merchandise Inventory and credit Inventory Adjustment D. debit Loss on Inventory and credit Merchandise Inventory

B. debit Cost of Goods Sold and credit Merchandise Inventory

A company purchased 80 units for​ $20 each on January 31. It purchased 190 units for​ $25 each on February 28. It sold 190 units for​ $80 each from March 1 through December 31. If the company uses the​ first-in, first-out inventory costing​ method, what is the amount of Cost of Goods Sold on the income statement for the year ending December​ 31? (Assume that the company uses a perpetual inventory​ system.) A. ​$1,600 B. ​$4,350 .C. ​$4,750 D. ​$6,350

B. 4,350

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? A. conservatism B. disclosure principle C. consistency principle D. materiality concept

C. consistency principle

available for sale represents the total cost of merchandise inventory that is available for sale during the time period.

Cost of goods

The ending merchandise inventory for the current accounting period is overstated by​ $3,500. What will be the effect of this​ error? A. The ending merchandise inventory for the next accounting period will be overstated by​ $3,500. B. The cost of goods sold for the current accounting period will be overstated by​ $3,500. C. The cost of goods sold for the next accounting period will be understated by​ $3,500. D. The net income for the current accounting period will be overstated by​ $3,500.

D. The net income for the current accounting period will be overstated by​ $3,500.

Which of the following assets must be reported at the​ lower-of-cost-or-market value? A. Notes Receivable B. Accounts Receivable C. Prepaid Insurance D. Merchandise Inventory

D. Merchandise invetory

Under a perpetual inventory​ system, merchandise returned by a customer to the seller is recorded as a​ ________ in the books of seller. A. sales allowance B. sales discount C. purchase return D. sales return

D. Sales Return

The consistency principle states that businesses should report the same amount of ending merchandise inventory from period to period. True or False

False

the sum of Purchases less Purchase Returns and Allowances and Purchase Discounts.

Net Purchases

is the amount a company has earned on sales of merchandise after returns, allowances, and discounts have been taken out

Net Sales Revenue

Gross profit minus operating expenses equals

Operating income

A company is uncertain whether a complex transaction should be recorded as an asset or an expense. Under the conservatism​ principle, it should choose to treat it as an asset. True False

True

On a​ multi-step income​ statement, merchandisers report operating expenses in two categorieslong dash—selling expenses and administrative expenses. True or False

True

Better​ Buy, Inc. has 7 units in inventory on December 31. The units were purchased in November for​ $160 each. The price lists from the suppliers indicate that the same items would now cost the company a total of​ $1,155. What would be the amount reported as Ending Merchandise Inventory on the balance​ sheet? A. ​$2,275 B. ​$1,120 C. ​$325 D. ​$1,155

c. 1120

states that a company should report the least favorable figures in the financial statements when two or more possible options are presented.

conservatism principle

that a business should use the same accounting methods and procedures from period to period.

consistency principle

principle states that a company should report enough information for outsiders to make knowledgeable decisions about the company. Information should be relevant and have faithful representation.

disclosure principle

A purchase discount is the amount offered to the purchaser for delaying the payment to the seller. True or False

false

Freight in is recorded in the Merchandise Inventory account if the purchaser uses the perpetual inventory system. True or False

false

In a period of rising​ costs, the​ last-in, first-out​ (LIFO) method results in lower cost of goods sold and higher net income than the​ first-in, first-out​ (FIFO) method. True False

false

Under the​ last-in, first-out​ (LIFO) method, the cost of goods sold is based on the oldest purchases. True False

false

is used when the company knows exactly which item was sold and exactly what the item cost.

first-in, first-out method (FIFO)

Administrative expenses

include expenses not related to marketing the company's goods and services.

states that a company must perform strictly proper accounting only for significant items.

materiality concept

perpetual inventory system

offers continuous computerized record of merchandise inventory

requires a physical count of inventory to determine inventory on hand.

periodic inventory system

single-step income statement

presents revenues and expenses with no subtotals

multi-step income statement

presents revenues and expenses with subtotals to highlight significant relationships.

is used when the company knows exactly which item was sold and exactly what the item cost.

specific identification method

If a physical count of inventory indicates that the Merchandise Inventory account is​ overstated, an adjusting entry is required to record the difference. True or False

true

Maintaining good controls over merchandise inventory ensures that inventory purchases are properly authorized and accounted for by the accounting system. True or False

true

On the income​ statement, a merchandising company reports the cost of merchandise inventory that has been sold to customers. True or False

true

The specific identification method of inventory costing is recommended when a business deals in unique and​ high-priced inventory items. True or False

true

When using the LIFO inventory costing​ method, ending merchandise inventory will be the​ lowest, as compared to FIFO and​ weighted-average inventory costing​ methods, when costs are increasing. True or False

true

computes a new weighted-average cost per unit after each purchase.

weighted-average method