ACCT 2100 - Exam 1 Bonus Review

Which of the following is considered a period cost? Transportation cost on goods received from suppliers. Advertising expense for the current month. Cost of merchandise purchased. None of these answer choices are considered a period cost.

(Administrative costs expensed in the period in which the economic sacrifice is made.) Advertising expense for the current month.

The Wilson Company purchased $35,000 of merchandise from the Poole Wholesale Company. Wilson also paid $2,800 for freight costs to have the goods shipped to its location. Which of the following statements regarding the necessary entries for the transactions is true? Wilson uses the perpetual inventory system.

1. COGS + Freight costs 2. Total increase to inventory is #1 Total increases to the inventory account would be $37,800.

On January 1, 2011, Baird Company had beginning balances as follows: Assets = $1,400 Liabilities = $450 Common Stock = $545 During 2011, Baird paid dividends to its stockholders of $500. Given that ending retained earnings was $630, what was Baird's net income for the 2011 accounting period?

1. Calculate RE A = L + CS + RE A - L - CS = RE 1400 - 450 - 545 = 405 2. Calculate Beg. RE End. RE - current RE = Beg. RE 630 - 405 = 225

Stosch Company's balance sheet reported assets of $117,000, liabilities of $30,000 and common stock of $27,000 as of December 31, Year 1. If Retained Earnings on the balance sheet as of December 31, Year 2, amount to $78,000 and Stosch paid a $29,000 dividend during Year 2, then the amount of net income for Year 2 was which of the following?

1. Calculate RE for Y1 A(Y1) - (L(Y1) + CS(Y1)) = RE(Y1) 117,000 - (30,000 + 27,000) = 60,000 2. Calculate increase in RE RE(Y2) - RE(Y1) = INCREASE 78,000 - 60,000 = 18,000 3. Add dividend to increase 29,000 + 18,000 = 47,000 Net income for Y2 was $47,000

Retained Earnings at the beginning and ending of the accounting period was $550 and $1,200, respectively. If revenues were $2,100 and dividends paid to stockholders were $450, expenses for the period must have been:

1. Calculate net income Beg. RE + NI - Div = End. RE End RE + Div. - Beg. RE = NI 1200 - 550 + 450 = 1100 2. Calculate expense (liablilities) NI = Rev. - Exp. Rev. - NI = Exp. 2100 - 1100 = 1000 Liabilities = $1,000

The year-end financial statements of Calloway Company contained the following elements and corresponding amounts: Assets = $35,000; Liabilities = ?; Common Stock = $6,500; Revenue = $14,000; Dividends = $1,500; Beginning Retained Earnings = $4,500; Ending Retained Earnings = $8,500.

1. Calculate net income Beg. RE + NI - Div = End. RE End RE + Div. - Beg. RE = NI 8500 + 1500 - 4500 = 5500 2. Calculate expense (liablilities) NI = Rev. - Exp. Rev. - NI = Exp. 14000 - 5500 = 8500 Liabilities = $8,500

Sanchez Company engaged in the following transactions during Year 1: 1) Started the business by issuing $13,100 of common stock for cash. 2) The company paid cash to purchase $7,900 of inventory. 3) The company sold inventory that cost $5,300 for $10,900 cash. 4) Operating expenses incurred and paid during the year, $4,800. Sanchez Company engaged in the following transactions during Year 2: 1) The company paid cash to purchase $11,400 of inventory. 2) The company sold inventory that cost $9,500 for $17,500 cash. 3) Operating expenses incurred and paid during the year, $5,800. Note: Sanchez uses the perpetual inventory system. Sanchez's gross margin for the Year 2 is:

1. Gross margin = Sales Revenue - Cost of Goods Sold 2. Sales Revenue = 17500 3. COGS = 9500 (ignore 11400, not related to revenue made in event 2) 4. 17500 - 9500 = 8000 Gross margin = 8000

Assume the perpetual inventory method is used. 1) Green Company purchased merchandise inventory that cost $16,200 under terms of 2/10, n/30 and FOB shipping point. 2) The company paid freight cost of $620 to have the merchandise delivered. 3) Payment was made to the supplier within 10 days. 4) All of the merchandise was sold to customers for $23,900 cash and delivered under terms FOB shipping point with freight cost amounting to $420. The gross margin from these transactions of Green Company is

1. Gross margin = Sales revenue - COGS 2. Sales rev = 23900 3. COGS Calculate inventory cost 16200 * 0.02 = 324 16200 - 324 = 15876 Add freight 15876 + 620 = 16496 COST OF SHIPPING OUT IS NOT INCLUDED 4. 23900 - 16496= 7404 Gross margin = 7404

Ballard Company uses the perpetual inventory system. The company purchased $9,900 of merchandise from Andes Company under the terms 2/10, net/30. Ballard paid for the merchandise within 10 days and also paid $440 freight to obtain the goods under terms FOB shipping point. All of the merchandise purchased was sold for $18,800 cash. The amount of gross margin for this merchandise is:

1. Gross margin = Sales revenue - COGS 2. Sales revenue = 18800 3. COGS Calculate discounted goods 9900 * 0.02 = 198 9900 - 198 = 9702 Add freight 9702 + 440 = 10142 4. 18800 - 10142 = 8658 FREIGHT IS INCLUDED IN COGS

Jackson Company had a net increase in cash from operating activities of $8,500 and a net decrease in cash from financing activities of $1,750. If the beginning and ending cash balances for the company were $3,500 and $12,000, then net cash change from investing activities was:

1. Start with beginning cash balance 2. Add net increase 3,500 + 8,500 = 12,000 3. Subtract net decrease 12,000 - 1,750 = 10,250 4. Calculate missing net cash Ending balance - current balance 12,000 - 10,250 = 1,750 Net cash change from investing activities was and inflow or increase of $1,750

Packard Company engaged in the following transactions during Year 1, its first year of operations. (Assume all transactions are cash transactions.) 1) Acquired $1,400 cash from the issue of common stock. 2) Borrowed $870 from a bank. 3) Earned $1,050 of revenues cash. 4) Paid expenses of $340. 5) Paid a $140 dividend. During Year 2, Packard engaged in the following transactions. (Assume all transactions are cash transactions.) 1) Issued an additional $775 of common stock. 2) Repaid $535 of its debt to the bank. 3) Earned revenues of $1,200 cash. 4) Incurred expenses of $540. 5) Paid dividends of $190. Packard Company's net cash flow from financing activities for Year 2 is:

1. Year 2's FA - Event 1 - Event 2 - Event 5 2. Calculate net cash flow 775 - 535 - 190 = 50 Net cash flow from financing activities is $50 inflow.

The year-end financial statements of Calloway Company contained the following elements and corresponding amounts: Assets = $29,000; Liabilities = ?; Common Stock = $5,900; Revenue = $12,800; Dividends = $1,200; Beginning Retained Earnings = $4,200; Ending Retained Earnings = $7,900. The amount of liabilities reported on the end-of-period balance sheet was:

A = L +CS + RE (ending) 29000 = x + 5900 + 7900 x = 15200 Liabilities = $15,200

Llewelyn Company paid the amount due on a purchase of merchandise on account. Llewelyn uses the perpetual inventory system. Which of the following answers reflects the effect of the payment on the financial statements?

Assets: - Liab.: - Equity: NA Rev.: NA Exp: NA Net Inc. NA Cash Flow: -OA

Missing a variable?

Beginning retained earnings + Revenue - Expenses - Dividends = Ending retained earnings

Faust Company uses the perpetual inventory method. Faust sold goods that cost $5,000 for $8,000. If the sale was made on account, the net effect of the sale will:

Increase total assets by $3,000

Middleton Company uses the perpetual inventory method. The company purchased an item of inventory for $150 and sold the item to a customer for $270. What effect will the sale have on the company's inventory account?

The account will decrease by $150.

Santa Fe Company was started on January 1, Year 1, when it acquired $9,600 cash by issuing common stock. During Year 1, the company earned cash revenues of $5,900, paid cash expenses of $3,550, and paid a cash dividend of $1,100. Based on this information, A. The Year 1 statement of cash flows would show a net cash flow from financing activities of $9,600. B. The Year 1 statement of cash flows would show net cash inflow from financing activities of $8,500. C. The Year 1 income statement would show net income of $1,250. D. The balance sheet at December 31, Year 1 would show total equity of $15,500.

Three options: net FA, net income, or equity. 1. Calculate net FA - common stock - dividend 9600 - 1100 = 8500 Choice B is correct

Galaxy Company sold merchandise costing $3,600 for $6,200 cash. The merchandise was later returned by the customer for a refund. If the perpetual inventory method is used, what effect will the sales return have on the accounting equation?

Total assets and total equity decrease by $2,600.

The cost of goods sold account is classified as:

an expense.