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Study Resources (Accounting)

Objective 6-2 1) FIFO will report the lowest cost of goods sold on the income statement when prices are falling. 2) FIFO results in a more accurate portrayal of ending inventory on the balance sheet than does moving-weighted-average. 3) Moving-weighted-average matches cost of goods sold to sales on the income statement better than.
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Objective 6-1 1) All balance sheets have inventory listed as an asset. 2) The two main types of inventory systems are the perpetual system and the periodic system. 3) Gross margin is the excess of net sales revenue over cost of goods sold. 4) The inventory costing method used must match the physical flow.
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11) When inventory prices are rising, the FIFO method will generally yield a gross margin that is: A) less than the weighted average method. B) equal to the gross margin of the weighted-average method. C) higher than the weighted-average method. D) FIFO does not generally cause a gross margin that is different from that.
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11) Two separate errors affected Rollings Company in 2013. The beginning inventory was overstated by $12,000 and the ending inventory was overstated by $18,000. Net income in 2014 will be: A) overstated by $30,000. B) understated by $18,000. C) overstated by $18,000. D) overstated by $6,000. 12) If ending inventory for the current accounting period.
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11) Referring to Table 5-1, what is the net income? A) $60,000 B) $65,000 C) $55,000 D) $180,000 Table 5-2   Sales revenue $382,000 Net sales revenue $360,000 Gross margin  255,000 Operating expenses 132,000 Interest expense 30,000 Interest revenue 60,000 12) Referring to Table 5-2, if sales discounts amount to $15,000, the balance in Sales Returns and Allowances must be: A) $7,000. B) $29,000. C) $22,000. D) $8,000. 13) Referring to.
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Objective 5-B1 1) Describe the difference between a perpetual inventory system and a periodic inventory system. Objective 5-C1 1) Goods and services taxes add an extra cost to the value of inventory. 2) Benny's Shoes and Feet Stuff operates in a province where HST is applicable at a rate of 12%. Last week he.
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  Table 6-5 Assume the following data for Kruger Sales for November 2013: Beginning inventory Nov. 15 units at $90 each Sale Nov. 33 units at $120 each Nov. 6 purchase11 units at $95 each Sale Nov. 84 units at $120 each Sale Nov. 93 units at $120 each On November 30, a physical count reveals 6 units.
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11) Given the following data: Ending inventory at cost $24,000 Ending inventory at net realizable value 23,600 Cost of goods sold (before consideration of the      lower-of-cost-and-net-realizable-value rule) 37,000 Which of the following depicts the proper account balance after the application of the lower-of-cost-and-net realizable value rule? A) Cost of goods sold will be $37,400. B) Cost of.
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Objective 6-3 1) Under either the periodic or the perpetual system, ending inventory will be the same when FIFO inventory costing method is used. 2) The disclosure principle of accounting requires that a business reveal to the user of the financial statement the method to value inventory that has been used. 3) The.
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  Table 6-5 Assume the following data for Kruger Sales for November 2013: Beginning inventory Nov. 15 units at $90 each Sale Nov. 33 units at $120 each Nov. 6 purchase11 units at $95 each Sale Nov. 84 units at $120 each Sale Nov. 93 units at $120 each On November 30, a physical count reveals 6 units.
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  Table 6-6 Sam's Wholesale Bikes January 1 inventory balance 15 units at $350 per unit January 4 purchase 50 units at $375 per unit January 15 sale 40 units at $550 per unit February 8 purchase 80 units at $405 per unit February 15 sale 70 units at $550 per unit 31) Refer to Table 6-6. What is the cost of.
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11) Following is a random list of some of the accounts and their December 31, 2014, balances for Milita Merchandising. Milita Merchandising uses a periodic inventory system and all account balances are normal. Purchases $330,000 Sales revenue470,000 Interest revenue 23,000 Salary expense45,000 Freight in    17,000 Purchase discounts 31,000 Sales returns and allowances 40,000 Interest expense    18,000 Delivery expense 24,000 Sales.
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  Table 5-10 The December 31, 2014 adjusted trial balance for Camptown Company is shown below. Debit Credit Cash $12,600 Accounts receivable 2,400 Prepaid rent 800 Inventory 28,000 Accounts payable $4,200 Salary payable 1,000 Notes payable 800 Capital 13,800 Drawing 1,000 Sales revenue 96,000 Sales returns and allowances 1,600 Sales discounts 400 Cost of goods sold 25,000 Salary expense 21,000 Rent expense 22,500 Supplies expense 500 Total $115,800  $115,800 28) Using the information.
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23) Following is a random list of accounts with normal balances for the Lexis Merchandising as of December 31, 2013. All adjusting entries have been made. Closing entries have not been made. K. Lexis, Capital$159,000 Land80,000 Sales discounts18,000 Supplies expense9,000 Interest revenue14,000 Mortgage payable80,000 Cash22,000 Accounts receivable34,000 Unearned service revenue11,000 Salary expense23,000 Accounts payable36,000 Accumulated amort.-building17,000 Equipment46,000 Prepaid insurance8,000 Interest expense6,000 K. Lexis, Withdrawals15,000 Sales revenue285,000 Interest receivable5,000 Inventory28,000 Accumulated.
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Objective 5-5 1) The gross margin percentage is determined by dividing the gross margin by the net sales revenue. 2) The faster the sale of inventory and the collection of cash, the higher the profits will be for a business. 3) There is no such thing as too high an inventory turnover ratio. 4).
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56) Jan-Con Company provides the following information for the month of August.  Date   Units $/Unit Total Aug   1 Opening inventory 40 $ 30 $ 1,200 Aug   3 Purchase 60 $ 35 $ 2,100 Aug 10 Sale 100 $ 60 $ 6,000 Aug 22 Purchase 90 $ 40 $ 3,600 Aug 24 Sale 70 $ 70 $ 4,900 Required: (a)What is the value of the ending inventory assuming the company uses a periodic inventory system and the weighted-average method? (b)What is the.
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46) Refer to Table 6-5. Calculate gross margin for Kruger Sales assuming the perpetual FIFO cost method is being used. 47) Sam Levine Merchandising had the following transactions during May: May   1Beginning inventory was 20 units valued at $25 per unit. May   5Purchased 80 units of merchandise on account for $2,160, terms n/15,.
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11) Under the FIFO method, ending inventory is valued based on the most recent purchases. 12) Under the perpetual system, ending inventory and cost of goods sold will be the same when FIFO inventory costing method is used. 13) In a perpetual inventory system, recording a sale also includes a corresponding journal.
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11) Beginning inventory plus net purchases and plus freight in equals: A) net purchases. B) cost of goods available for sale. C) cost of goods sold. D) gross purchases. 12) Cost of goods sold plus ending inventory equals: A) net purchases. B) cost of goods available for sale. C) gross margin. D) gross profit. Table 5-4   The following data is for.
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Objective 5-6 1) The preparation of the income statement for a merchandising company that is following international financial reporting standards (IFRS) is not significantly different from the approach used by companies following accounting standards for private enterprises (ASPE). 2) What are two key criteria that merchandisers who report under international financial reporting.
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8) If a purchaser returns goods purchased on account to the supplier under a periodic inventory system, the purchaser would debit: A) Inventory and credit Accounts Payable. B) Accounts Payable and credit Inventory. C) Inventory and credit Accounts Receivable. D) Accounts Payable and credit Purchase Returns. 9) When a discount is taken for prompt payment.
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49) Sam's Corner Store has the following purchase and sales information for one of their inventory items: Date   Units $/Unit Total Feb   1 Opening inventory 10 $8 $80 Feb   9 Purchase 25 $9 $225 Feb 15 Sale 15 $15 $225 Feb 17 Purchase 20 $11 $220 Feb 25 Sale 10 $16 $160 Required: For (a) and (b) assume the company uses the periodic inventory system. (a)Calculate the gross profit if the company uses first-in, first-out (FIFO) (b)Calculate the value of the ending inventory.
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Objective 6-5 1) Understating beginning inventory in 2012 will overstate net income for 2013. 2) Understating ending inventory in 2012 will overstate net income for 2013. 3) Overstating ending inventory in 2012 will overstate net income for 2013. 4) Overstating ending inventory in 2012 will understate net income for 2013. 5) Owners and managers of.
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9) Following is a random list of some of the accounts and their December 31, 2014, balances for Carmen & Company. Carmen & Company uses a periodic inventory system and all account balances are normal. Purchases  $320,000 Sales revenue  460,000 Interest revenue   23,000 Salary expense45,000 Freight in      17,000 Purchase discounts 31,000 Sales returns and allowances35,000 Interest expense 18,000 Delivery.
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34) Sam Levine Merchandising had the following transactions during May: May   1Beginning inventory was 20 units valued at $25 per unit. May   5Purchased 80 units of merchandise on account for $2,160, terms n/15, FOB shipping point. May   9Paid transportation cost on the May 5 purchase, $240. May 10Returned two units of defective merchandise purchased.
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  Table 6-6 Sam's Wholesale Bikes January 1 inventory balance 15 units at $350 per unit January 4 purchase 50 units at $375 per unit January 15 sale 40 units at $550 per unit February 8 purchase 80 units at $405 per unit February 15 sale 70 units at $550 per unit 31) Refer to Table 6-6.  What is the cost of.
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41) A principle requiring the financial statements to report enough information for outsiders to make knowledgeable decisions about the business 42) A concept by which the least favourable figures are presented in the financial statements 43) A characteristic requiring the use of the same accounting methods and procedures from period to period 44).
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28) Avery Supplies uses a periodic inventory system. Avery purchased $10,000 of inventory on account. The terms were 3/10, n/30. The purchase was made on February 1. On February 2, Avery returned $400 of damaged goods to the supplier and was granted an allowance.  How should Avery properly record the.
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41) The following data pertain to Cross Company (assume a perpetual inventory system) for the month ended January 31, 2013: DateDescriptionUnitsUnit Cost                    Unit Selling Price Jan.1Beg. Inventory10 $50 5 Purchase2552 10Sale(6)$80 16Sale(10)82 20Purchase 1255 25Sale (20)85 Required: 1. Compute the cost of goods sold and ending inventory under FIFO. 2. Compute Gross Margin under FIFO 42) The Snowboarding Company.
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22) Given the following worksheet with the trial balance already entered, and the related adjustment information, complete the worksheet. All Star Merchandising Accounting Work Sheet For the Year Ended December 31, 2014 AccountTrialAdjustmentsInc.Balance BalanceStatementSheet   Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Cash 15 Accounts Rec. 9 Inventory 30 Prepaid Rent 4 Furniture 18 Accumulated Amortization- Furniture 7 Accounts Payable 19 Salary Payable 0 Unearned Service Revenue 9 A.J. Star, Capital 40 A.J. Star, Withdrawals 7 Sales Revenue 65 Sales Discounts 4 Sales Returns and Allowances 2 Cost of Goods Sold 30 Salary Expense 14 Rent Expense 0 Utilities Expense 7 Amortization Expense- Furniture 140 140 Net.
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Objective 6-7 1) The treatment of inventories under accounting standards for private enterprises (ASPE) is significantly different than for companies reporting under international financial reporting standards (IFRS). 2) For companies reporting under international financial reporting standards (IFRS), it is possible to value inventory higher than its original cost. 3) There are more acceptable.
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  Match the following. A) gross margin method B) retail method C) gross margin percentage 11) One of two methods used to estimate ending inventory 12) A method of estimating ending inventory based on the total cost and total selling price of opening inventory and net purchases 13) The relationship of gross margin to net sales. 14) Late.
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47) The following data are available for the month of April for Gore Company: April 1 inventory120 units at $8.15 each April 10 purchase200 units at $8.20 each April 20 purchase410 units at $8.40 each April 25 purchase310 units at $8.50 each Gore sold 630 units during April. Compute the value of ending inventory under FIFO..
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Objective 5-A3 1) The adjusting entry to record inventory shrinkage would include a debit to the cost of goods sold account in a periodic inventory system. 2) In a periodic inventory system, the closing entries include a debit to the Inventory account in an amount that equals the ending inventory, and a.
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54) Refer to Table 6-5. Calculate gross profit for Kruger Sales assuming the periodic FIFO cost method is being used. 55) Sam Levine Merchandising had the following transactions during May: May   1Beginning inventory was 20 units valued at $25 per unit. May   5Purchased 80 units of merchandise on account for $2,160, terms n/15,.
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25) Please refer to the following trial balance. Debit Credit Cash $5,000 Accounts receivable 14,000 Inventory 20,000 Supplies 5,000 Land 100,000 Accounts payable $3,000 Notes payable 25,000 Capital 90,000 Drawing 1,000 Sales revenues 160,000 Sales returns and allowances 2,000 Sales discounts 3,000 Cost of goods sold 80,000 Salary expense 5,000 Utility expense 23,000 Rent expense 18,000 Interest expense 2,000 Totals $278,000 $278,000 Please prepare a multi-step income statement: Answer:  26) Describe single-step.
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  Table 5-6 The following are transactions for Latest Fashions for the month of June. June 2              Purchased $2,000 of inventory under terms 1/10, n/60 and FOB shipping point                             from Trendy Manufacturing. The merchandise had cost Trendy $1,800 June 7              Returned defective merchandise to Trendy Manufacturing with invoice price of $400. June.
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Objective 5-A2 1) In a periodic inventory system, cost of goods sold is determined by subtracting the ending inventory from the cost of goods available for sale. 2) In a periodic inventory system, beginning inventory plus net purchases minus freight in equals cost of goods sold. 3) In a periodic inventory system, the.
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21) Fill in the missing amounts for each case in the table presented below: A B C D Beginning inventory $6,000 $7,200 $9,100 Net purchase 9,000 32,700 32,000 Freight in 500 950 1,200 Cost of goods avail. for sale 50,000 17,250 45,600 Ending inventory 5,375 14,850 Cost of goods sold 32,600 14,800         22) The following items were taken from the records of Slow Boat Company, which uses a periodic inventory system:  Salary payable $1,100 Sales revenue480,000 Freight in20,000 Beginning inventory35,000 Purchases.
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Objective 5-A4 1) The caption "Net sales" in a multi-step income statement is different if a business uses the periodic instead of the perpetual inventory system. 2) Net purchases caption on the multi-step income statement is calculated by subtracting purchase discounts and purchase returns and allowances from purchases. 3) Inventory and cost.
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  Table 5-5   The following items were taken from the December 31, 2013 records of Speedy Boat Company, which uses a periodic inventory system:  Salary payable $1,100 Sales revenue  480,000 Interest revenue 3,000 Freight in    20,000 Beginning inventory 35,000 Sales discounts   18,000 Purchases of inventory 240,000 Purchase returns and allowances 35,000 Purchase discounts    10,000 Sales returns and allowances 35,000 Ending inventory       80,000 Operating expenses  85,000 Interest expense 7,000 Owner withdrawals 12,000 12) Based on.
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17) The following data are available for three products of the Classic Company: Beginning inventory$ 5,000 $20,000$15,000 Purchases45,000 65,00062,000 Goods available for sale50,00085,00077,000 Ending inventory18,00013,0009,000 Cost of goods sold32,00072,00068,000 You discover the following errors: a) Ending inventory for product A was overstated by $6,000. b) Ending inventory for product B was understated by $5,000. c) Beginning inventory for product.
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48) Jan-Con Company provides the following information for the month of August.  Date   Units $/Unit Total Aug   1 Opening inventory 40 $ 30 $ 1,200 Aug   3 Purchase 60 $ 35 $ 2,100 Aug 10 Sale 100 $ 60 $ 6,000 Aug 22 Purchase 90 $ 40 $ 3,600 Aug 24 Sale 70 $ 70 $ 4,900 Required: (a)What is the value of the ending inventory assuming the company uses a periodic inventory system and the weighted-average method? (b) What is.
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Objective 6-4 1) The lower-of-cost-and-net-realizable-value rule is a good example of conservatism in accounting. 2) When applying the lower-of-cost-and-net-realizable-value rule to ending inventory valuation, net realizable value generally refers to the company's expected selling price for its inventory net of any selling costs. 3) When the sales value of the inventory subsequently increases.
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