Chapter 5 and 6 Quiz Accy 201

Pronghorn's Fashions sold merchandise for $181000 cash during the month of July. Returns that month totaled $3500. If the company's gross profit rate is 30%, Pronghorn's will report monthly net sales revenue and cost of goods sold of

$181000 - $3500 = $177500 &177500 x 60% = $124250 (sales - ret.) x (1 - 40%)= cost of goods sold

At December 31, 2017 Pharoah Company's inventory records indicated a balance of $629000. Upon further investigation it was determined that this amount included the following: ▪ $122000 in inventory purchases made by Pharoah shipped from the seller 12/27/17 terms FOB destination, but not due to be received until January 2nd ▪ $80000 in goods sold by Pharoah with terms FOB destination on December 27th. The goods are not expected to reach their destination until January 6th ▪ $7000 of goods received on consignment from Concord Company What is Pharoah correct ending inventory balance at December 31, 2017?

$629000 - $122000 - $7000 = $500000 (Inv. bal. − inv. pur. − consign. goods)

Blossom Company just began business and made the following four inventory purchases in June: June 1 130 units $910 June 10 180 units 1422 June 15 180 units 1530 June 28 130 units 1157 $5019 A physical count of merchandise inventory on June 30 reveals that there are 190 units on hand. Using the LIFO inventory method, the value of the ending inventory (rounded to whole dollar) on June 30 is

$910 + [($1422 ÷ 180) × (190 - 130)] = $1384

Sheridan Company developed the following information about its inventories in applying the lower of cost or market (LCM) basis in valuing inventories: Product Cost Market A $96000 $101000 B 67000 64000 C 134000 136000 If Sheridan Company applies the LCM basis, the value of the inventory reported on the balance sheet would be

$96000 + $64000 + $134000 = $294000

Financial information is presented below: Operating expenses $ 29000 Sales returns and allowances 8000 Sales discounts 4000 Sales revenue 166000 Cost of goods sold 92000 Gross profit would be

($166000 - $8000 - $4000) - $92000 = $62000 (Sal. rev. - sal. ret./all. - sal. dis.) - COGS)

Sunland Company had the following inventory transactions occur during 2017: Units Cost/unit Feb. 1, 2017 Purchase 104 $43 Mar. 14, 2017 Purchase 179 $45 May 1, 2017 Purchase 127 $47 The company sold 294 units at $60 each and has a tax rate of 30%. Assuming that a periodic inventory system is used, and operating expenses of $1728, what is the company's after-tax income using LIFO? (rounded to whole dollars)

(127 × $47) + [(294 - $127) × $45] = $13484; [(294 × $60) - $13484] = $4156; ($4156 - $1728) × 70% = $1700

Splish's Market used the perpetual method to record the following events involving a recent purchase of inventory: Received goods for $83800, terms 2/8, n/30. Returned $1500 of the shipment for credit. Paid $300 freight on the shipment. Paid the invoice within the discount period. As a result of these events, the company's inventory

(Purch. amount - ret.) x (1 - 0.02) + freight [($83800 - $1500) x 0.98] + $300= 80954 increased by $80954

A credit sale of $5700 is made on April 25, terms 2/11, net/30, on which a return of $200 is granted on April 28. What amount is received as payment in full on May 4?

(Sale amount - ret.) x (1-.02) ($5700-&200) x .98 = $5390

After gross profit is calculated, operating expenses are deducted to determine

net income

Pina Colada Corp. sells $1900 of merchandise on account to Sheffield Company with credit terms of 2/10, n/30. If Sheffield Company remits a check taking advantage of the discount offered, what is the amount of Sheffield Company's check?

$1900 x 98% = $1862 (Sal. amount x (1-2%)

Metlock, Inc. just began business and made the following four inventory purchases in June: June 1 270 units $1728 June 10 320 units 2144 June 15 200 units 1380 June 28 270 units 1944 $7196 A physical count of merchandise inventory on June 30 reveals that there are 350 units on hand. Using the FIFO inventory method, the amount allocated to ending inventory (rounded to whole dollar) for June is Entry field with incorrect answer

$1944 + [($1380 ÷ 200) × (350 - 270)] = $2496

Sheffield Corp. has the following inventory data: July 1 Beginning inventory 32 units at $20 $640 7 Purchases 111 units at $21 2331 22 Purchases 16 units at $23 368 $3339 A physical count of merchandise inventory on July 30 reveals that there are 51 units on hand. Using the LIFO inventory method, the amount allocated to cost of goods sold for July is

$368 + [(159 - 51 - 16) × $21] = $2300

Bramble Corp.'s accounting records show the following for the year ending on December 31, 2017. Purchase Discounts $ 11500 Freight-in 16400 Purchases 722020 Beginning Inventory 56000 Ending Inventory 58600 Purchase Returns and Allowances 12100 Using the periodic system, the cost of goods purchased is

$722020 - $11500 - $12100 + $16400 = $714820 (Purch. - purch. dis. - purch. ret./all. + fr. -in.)

Blossom Company has the following inventory data: July 1 Beginning inventory 35 units at $7.10 5 Purchases 142 units at $7.80 14 Sale 94 units 21 Purchases 71 units at $8.50 30 Sale 66 units Assuming that a perpetual inventory system is used, what is the cost of goods sold on a LIFO basis for July?

(94 × $7.80) + (66 × $8.50) = $1294.20

Metlock, Inc. returned $180 of goods originally purchased on credit from Grouper Industries. Using the periodic Inventory approach, Metlock would record this transaction as: Accounts Payable 180 Purchases Returns and Allowances 180 Inventory 180 Accounts Payable 180 Accounts Payable 180 Inventory 180 Purchase Returns and Allowances 180 Accounts Payable 180

Accounts Payable 180 Purchases Returns and Allowances 180

When sales of merchandise are made for cash, the transaction may be recorded by the following entry:

Debit Cash, credit Sales Revenue

In a period of declining prices, which of the following inventory methods generally results in the lowest balance sheet figure for inventory?

FIFO method

The purchaser's journal entry to record a return of merchandise purchased on account under a perpetual inventory system would credit

Inventory

If a purchaser using a perpetual inventory system pays the transportation costs, then the

Inventory account is increased

Which statement is incorrect? Computers and electronic scanners allow more companies to use a perpetual inventory system. Freight-in is debited to Inventory when a perpetual inventory system is used. Regardless of the inventory system that is used, companies should take a physical inventory count. Periodic inventory systems provide better control over inventories than perpetual inventory systems.

Periodic inventory systems provide better control over inventories than perpetual inventory systems.

Concord Corporation purchases $380 of merchandise on credit. Using the periodic inventory approach, Concord would record this transaction as: Purchases 380 Accounts Payable 380 Accounts Payable 380 Inventory 380 Inventory 380 Accounts Payable 380 Accounts Payable 380 Purchases 380

Purchases 380 Accounts Payable 380

A company just began business and made the following four inventory purchases in June: June 1 300 units $1890 June 10 350 units 2237 June 15 350 units 2289 June 28 300 units 2034 $8450 A physical count of merchandise inventory on June 30 reveals that there are 340 units on hand. Using the average-cost method, the amount allocated to the ending inventory (rounded to whole dollar) on June 30 is

[($8450 ÷ 1300) × 340] = $2210

At May 1, 2017, Pina Colada Corp. had beginning inventory consisting of 330 units with a unit cost of $8.0. During May, the company purchased inventory as follows: ▪ 660 units at $8.0 ▪ 990 units at $9.0 The company sold 1650 units during the month for $13.0 per unit. Pina Colada uses the average cost method. The average cost per unit for May is

[(330 + $8.0) + (660 × $8.0) + (990 × $9.0)] ÷ 1980 = $8.50

An overstatement of the beginning inventory results in

an understatement of net income

The entry to record a sale of $3500 with terms of 2/14, n/30 will include a

credit to Sales Revenue for $3500

Gross profit equals the difference between

sales revenue and cost of goods sold

Under a perpetual inventory system, acquisition of merchandise for resale is debited to

the Inventory account

An error in the physical count of goods on hand at the end of a period resulted in a $10400 overstatement of the ending inventory. The effect of this error in the current period is Cost of Goods Sold Net Income

understaded overstated