Financial Accounting Test 3

Tidwell Company's goods in transit at December 31 include sales made (1) FOB destination (2) FOB shipping point and purchases made (3) FOB destination (4) FOB shipping point. Which items should be included in Tidwell's inventory at December 31? a. (2) and (4) b. (1) and (4) c. (2) and (3) d. (1) and (3)

(2) and (3)

At the beginning of the year, Blue Spruce had an inventory of $375000. During the year, the company purchased goods costing $1110000. If Blue Spruce reported ending inventory of $340000 and sales of $1840000, their cost of goods sold and gross profit rate would be a. $1145000 and 37.77%. b. $770000 and 62.23% c. $1070000 and 38%. d. $1145000 and 62%.

a. $1145000 and 37.77%.

Ayayai Corp. has the following inventory data: July 1 Beginning inventory 66 units at $19 $12547 Purchases 231 units at $2046 2022Purchases33 units at $22726 $6600 A physical count of merchandise inventory on July 30 reveals that there are 110 units on hand. Using the FIFO inventory method, the amount allocated to cost of goods sold for July is a. $2266. b. $6590. c. $4334. d. $2134.

a. $2266.

At May 1, 2022, Splish Brothers Inc. had beginning inventory consisting of 360 units with a unit cost of $8. During May, the company purchased inventory as follows: ▪ 720 units at $8 ▪ 1080 units at $10 The company sold 1800 units during the month for $14 per unit. Splish Brothers Inc. uses the average cost method. The value of Splish Brothers Inc.'s inventory at May 31, 2022 is (Round average cost per unit to 2 decimal places, e.g. 12.52.) a. $3600. b. $2880. c. $3240. d. $19440.

a. $3600.

Pharoah has the following inventory data: July 1 Beginning inventory 37 units at $745 Purchases 223 units at $69 14 Sale 149 units 21 Purchases 112 units at $72 30 Sale 104 units Assuming that a perpetual inventory system is used, what is ending inventory (rounded) under the average cost method for July? a. $8432 b. $8476 c. $7744 d. $8500

a. $8432

Financial information is presented below: Operating expenses$ 28000 Sales revenue 214000 Cost of goods sold 139000 The profit margin would be a. 0.22. b. 0.78. c. 0.65. d. 0.35.

a. 0.22

When sales of merchandise are made for cash, the transaction may be recorded by the following entry: a. Debit Cash, credit Sales Revenue b. Debit Sales Revenue, credit Cash Discounts c. Debit Sales Revenue, credit Sales Returns and Allowances d. Debit Sales Revenue, credit Cash

a. Debit Cash, credit Sales Revenue

In a period of increasing prices, which inventory flow assumption will result in the lowest amount of income tax expense? a. LIFO b. FIFO c. Average cost method d. Income tax expense for the period will be the same under all assumptions

a. LIFO

Coronado's Market recorded the following events involving a recent purchase of inventory: Received goods for $114000, terms 2/12, n/30.Returned $3500 of the shipment for credit.Paid $600 freight on the shipment.Paid the invoice within the discount period. As a result of these events, the company's inventory a. increased by $108890. b. increased by $111100. c. increased by $108290. d. increased by $108878.

a. increased by $108890.

If beginning inventory is understated by $11600, the effect of this error in the current period is Cost of Goods Sold Net Income a. understated overstated b. overstated overstated c. understated understated d. overstated understated

a. understated overstated

Tamarisk has the following inventory data: July 1 Beginning inventory 42 units at $21 $882 7 Purchases 146 units at $22 3212 22 Purchases 21 units at $23 483 $4577 A physical count of merchandise inventory on July 30 reveals that there are 52 units on hand. Using the LIFO inventory method, the amount allocated to ending inventory for July is a. $1165. b. $1102. c. $1092. d. $1196.

b. $1102.

Sheridan Company had the following inventory transactions occur during 2022: Units Cost/unit Feb. 1, 2022 Purchase 91 $38 Mar. 14, 2022 Purchase 156 $39 May 1, 2022 Purchase 111 $41 The company sold 257 units at $53 each and has a tax rate of 30%. Assuming that a periodic inventory system is used, and operating expenses of $1512, what is the company's after-tax income using LIFO? a. $1864.00 b. $1304.80 c. $2157.00 d. $1509.90

b. $1304.80

Martinez's Fashions sold merchandise for $181000 cash during the month of July. Returns that month totaled $3200. If the company's gross profit rate is 30%, Martinez's will report monthly net sales revenue and cost of goods sold of a. $181000 and $124460. b. $177800 and $124460. c. $177800 and $53340. d. $181000 and $126700.

b. $177800 and $124460.

Financial information is presented below: Operating expenses$ 44000 Sales revenue220000 Cost of goods sold153000 The gross profit rate would be a. 0.70. b. 0.30. c. 0.20. d. 0.10.

b. 0.30.

At December 31, 2022, Kingbird, Inc. inventory records indicated a balance of $873000. Upon further investigation it was determined that this amount included the following: ▪ $175000 in inventory purchases made by Kingbird shipped from the seller 12/27/22 terms FOB destination, but not due to be received until January 2nd ▪ $109000 in goods sold by Kingbird with terms FOB destination on December 27. The goods are not expected to reach their destination until January 6. ▪ $7500 of goods received on consignment from Lisa Company What is Kingbird's correct ending inventory balance at December 31, 2022? a. $865500 b. $690500 c. $581500 d. $698000

b. 690500

Pharoah Corporation purchases $1300 of merchandise on account from Enterprise Company, terms 5/10, n/30. Pharoah and Enterprise both use periodic inventory systems. Enterprise's entry record this transaction is: a. Accounts Payable 1300 Purchases 1300 b. Accounts Receivable 1300 Sales Revenue 1300 c. Inventory 1300 Accounts Payable 1300 d. Accounts Receivable 1300 Purchases 1300

b. Accounts Receivable 1300 Sales Revenue 1300

Which inventory method generally results in costs allocated to ending inventory that will approximate their current cost? a. Whichever method that produces the highest ending inventory figure b. FIFO c. Average cost method d. LIFO

b. FIFO

Under the perpetual inventory system, which of the following accounts would not be used? a. Inventory b. Purchases c. Sales Revenue d. Cost of Goods Sold

b. Purchases

A merchandiser will earn an operating income of exactly $0 when a. gross profit equals operating expenses. b. net sales equals cost of goods sold. c. operating expenses equal net sales. d. cost of goods sold equals gross margin.

b. net sales equals cost of goods sold.

A company just began business and made the following four inventory purchases in June: June 1 123units $738 June 10 164units 1312 June 15 164 units 1640 June 28 123 units 1476 $5166 A physical count of merchandise inventory on June 30 reveals that there are 164 units on hand. Using the average-cost method, the amount allocated to the ending inventory on June 30 is a. $984. b. $1312. c. $1476. d. $1968.

c. $1476.

Windsor has the following inventory data: July 1 Beginning inventory 26 units at $52 5 Purchases 155 units at $48 14 Sale 103 units 21 Purchases 77 units at $50 30 Sale 72 units Assuming that a perpetual inventory system is used, what is the ending inventory on a LIFO basis for July? a. $4134 b. $4086 c. $4098 d. $4386

c. $4098

Swifty has the following inventory data: July 1 Beginning inventory 23 units at $46 5 Purchases 137 units at $43 14 Sale 91 units 21 Purchases 68 units at $44 30 Sale 64 units Assuming that a perpetual inventory system is used, what is the cost of goods sold on a LIFO basis for July? a. $6820 b. $6741 c. $6729 d. $6681

c. $6729

In a period of declining prices, which of the following inventory methods generally results in the lowest balance sheet figure for inventory? a. Need more information to answer b. Average cost method c. FIFO method d. LIFO method

c. FIFO method

When using a perpetual inventory system, why are discounts credited to Inventory? a. The discounts are debited to discount expense and thus the credit has to be made to merchandise inventory. b. The discounts reduce the cost of the inventory. c. The discounts are a reduction of business expenses. d. None of these answers choices are correct.

c. The discounts are a reduction of business expenses.

A company using a perpetual inventory system that returns goods previously purchased on credit would a. debit Accounts Payable and credit Purchases. b. debit Cash and credit Accounts Payable. c. debit Accounts Payable and credit Inventory. d. debit Sales and credit Accounts Payable.

c. debit Accounts Payable and credit Inventory.

A credit sale of $1800 is made on July 15, terms 2/10, net/30, on which a return of $150 is granted on July 18. What amount is received as payment in full on July 24? a. $1800 b. $1725 c. $1764 d. $1617

d. $1617

Pharoah Company just began business and made the following four inventory purchases in June: June 1 192 units $1152 June 102 56 units 1792 June 15 256 units 2048 June 28 192 units 1728 $6720 A physical count of merchandise inventory on June 30 reveals that there are 256 units on hand. Using the FIFO inventory method, the amount allocated to ending inventory for June is a. $1536. b. $1600. c. $2304. d. $2240.

d. $2240.

Whispering Winds Corp. has the following inventory data: July 1 Beginning inventory 37 units at $18 $666 7 Purchases 129 units at $19 2451 22 Purchases 18 units at $20 360 $3477 A physical count of merchandise inventory on July 30 reveals that there are 46 units on hand. Using the LIFO inventory method, the amount allocated to cost of goods sold for July is a. $2493. b. $2557. c. $2585. d. $2640.

d. $2640.

Concord Corporation had the following inventory transactions occur during 2022: Units Cost/unit Feb. 1, 2022 Purchase 86 $36 Mar. 14, 2022 Purchase 149 $38 May 1, 2022 Purchase 106 $39 The company sold 245 units at $50 each and has a tax rate of 30%. Assuming that a periodic inventory system is used, what is the company's gross profit using LIFO? a. $3102 b. $9148 c. $9416 d. $2834

d. $2834

Pina Colada Corp. accounting records show the following at the year ending on December 31, 2022. Purchase Discounts $13400 Freight-in 15800 Purchases 705020 Beginning Inventory 56000 Ending Inventory 64600 Purchase Returns and Allowances 10700 Using the periodic system, the cost of goods sold is a. $704920. b. $707120. c. $726120. d. $688120.

d. $688120.

Under the perpetual system, cash freight costs incurred by the buyer for the transporting of goods is recorded in which account? a. Freight-In b. Freight-Out c. Freight Expense d. Inventory

d. Inventory

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

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

An overstatement of ending inventory in one period results in a. an overstatement of the ending inventory of the next period. b. no effect on net income of the next period. c. an overstatement of net income of the next period. d. an understatement of net income of the next period.

d. an understatement of net income of the next period.

In a perpetual inventory system, cost of goods sold is recorded a. on a daily basis. b. each time a sale occurs. c. on an annual basis. d. on a monthly basis.

d. on a monthly basis.

The LIFO inventory method assumes that the cost of the latest units purchased is a. the first to be allocated to ending inventory. b. the last to be allocated to cost of goods sold. c. not allocated to cost of goods sold or ending inventory. d. the first to be allocated to cost of goods sold.

d. the first to be allocated to cost of goods sold.