accT CH 8

A company has three identical inventory items purchased at different times that cost $500, $525, and $550 in that order. Assuming the company uses the LIFO method and sells one item for $700, what is the gross profit on that sale?

$150 Reason: Correct. $700 - $550 = $150 $700 Reason: Incorrect. The full price received in the sale is not the gross profit. $175 Reason: Correct. This is the correct answer for the average-cost method, not LIFO. $200 Reason: Incorrect. This is the correct answer for FIFO, not LIFO.

A company that uses the FIFO inventory method made four purchases of similar items in the following order: $100, $110, $115, and $123. It then sold two items for $500 each. What is the gross profit on the sale of the two units?

$790 Reason: Correct. $100 + $110 = $210; ($500 × 2) - $210 = $790 $762 Reason: Incorrect. This is the gross profit using the LIFO method. $776 Reason: Incorrect. This is the gross profit using the average-cost method. $1,000 Reason: Incorrect. This is the total sales price, not the gross profit.

The purpose of establishing a petty cash fund is to: A. Achieve internal control over small cash disbursements not made by check. B. Keep track of expenditures paid out of cash receipts from customers prior to deposit. C. Ensure that the amount of cash in the bank does not become excessive. D. Keep enough cash on hand in the office to cover all normal operating expenses of the business for a period of time.

A. Achieve internal control over small cash disbursements not made by check.

When the LIFO costing methods is in use, the seller

Assume that the most recently acquired units are sold first.

The Cash account in the records of Hensley, Incorporated showed a balance of $4,000 at June 30. The bank statement, however, showed a balance of $6,000 at the same date. The only reconciling items consisted of a $650 deposit in transit, a bank service charge of $9, and a large number of outstanding checks. What is the total amount of the outstanding checks at June 30? Multiple Choice $2,682 $2,659. $2.650. $3,350.

Cash$4,000 Balance as per cash Less: Bank Charges ($9) Bank charges would have been deducted from bank balance however in books the same is yet to be deducted Less: Deposit in transit ($650) deposit in transit is not yet received in bank so we shall deduct it Add: Outstanding checks??outstanding checks is yet to be presented in bank so balance would be more in bank than books. Balance as per Bank$6,000 $4,000-$9-$650+Outstanding checks= $6,000 Outstanding checks= $6,000-4,000+9+650 =$2,659 Answer B)

In applying the LIFO inventory method, which of the following best describes how costs move from the statement of financial position (balance sheet) to the income statement?

Multiple choice question. The most recent costs move first.

In a periodic inventory system, recording a sale on account involves debiting which of the following accounts? Select one: a. Accounts Receivable, Cost of Goods Sold, and Inventory. b. Accounts Receivable and Inventory. c. Only Accounts Receivable. d. Accounts Receivable and Cost of Goods Sold.

Option 'c' only Accounts Receivable is the correct option.

Which of the following inventory valuation methods is only an estimate of actual costs? Multiple Choice Only the retail method. Only the gross profit method. Both retail and gross profit methods are only estimations. Neither the retail nor the gross profit methods are estimations.

The following inventory valuation methods is only an estimate of actual costs:- Both retail and gross profit methods are only estimations.

Which of the four inventory approaches transfers the most recent purchase cost to the cost of goods sold and the remaining items in inventory are valued at the oldest acquisition costs? Multiple Choice LIFO FIFO Average cost Specific identification

The four inventory approaches transfers the most recent purchase cost to the cost of goods sold and the remaining items in inventory are valued at the oldest acquisition costs:-LIFO (Last in first out).

The specific identification method is more appropriate than a cost flow assumption method: Multiple Choice For a large inventory of identical low-priced items. If each item in the inventory is unique. If purchase costs are rising. If purchase costs are falling.

The specific identification method is more appropriate than a cost flow assumption method:- If each item in the inventory is unique.

The Cash account in the records of Hensley, Incorporated showed a balance of $3,700 at June 30. The bank statement, however, showed a balance of $5,300 at the same date. The only reconciling items consisted of a $550 deposit in transit, a bank service charge of $7, and a large number of outstanding checks. What is the "adjusted cash balance" at June 30? Multiple Choice $3,150. $2,157. $3,693. $5,300.

Total amount of outstanding checks = Balance as per bank statement + Deposit in transit + Bank service charge - Balance as per cash account = $5,300 + $550 + $7 - $3,700 = $2,157 Final answer Total amount of outstanding checks = $2,157 Therefore, correct option is b) $2,157

Mason Company purchased items of inventory as follows: Dec. 2 50 units @ $20 Dec. 12 12 units @ $21 Mason sold 15 units on December 20. Determine the cost of goods sold for the month under the LIFO inventory method. What are the Cost of Goods Sold?

Under LIFO the units purchased last are transferred first. thus COGS = 12 units from dec 12 + 3 units from dec 2. COGS = 12@21+3@20=$312

A write-down of inventory reduces the carrying amount of inventory and the Blank 1 Blank 2 of the current period.

nET INCOME

Efficient management of cash includes which of the following concepts? prepare a control listing of cash receipts at the time and place the money is rec pay suppliers in cash out of cash sales receipts before depositing them in the b pay each bill as soon as the invoice is received deposit all cash receipts and make all cash disbursements at the end of each w MacBook Air

prepare a control listing of cash receipt at the time and place the money is received .

QUESTION 9 A good system of internal control will include all of the following except: preparing a pro forma financial statement on a monthly basis separating the handling of cash from the maintenance of accounting records reconciling bank statements with accounting records making all major payments by check

preparing a pro forma financial statement on a monthly basis