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21. The LIFO method tends to create peaks and valleys in the business cycle.  22. The LIFO method agrees with the actual physical goods flow in most businesses.  23. Periodic and perpetual are examples of inventory costing systems.  24. In periods of falling prices, LIFO will result in a higher ending inventory valuation than FIFO.  25. In general, when.
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91. Positive operating income will result if gross margin exceeds A. operating expenses.B. purchases.C. cost of goods sold.D. cost of goods sold minus operating expenses. 92. Which of the following is not considered an operating expense? A. General office expenses.B. Cost of goods sold.C. Freight-out expense.D. Advertising expense. 93. Which of the following is not classified as a selling expense on the income statement? A. Sales salaries.
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111. Use this balance sheet and income statement for the first year of operations for Cane Construction to answer the following question. Use ending balances whenever average balances are required for computing ratios. Cane Construction Balance Sheet December 31, 20x5 Assets Liabilities Current assets $ 14,000 Current liabilities $  8,000 Investments 6,000 Long-term liabilities       2,000 Property, plant, and equipment 24,000 Total liabilities $  10,000 Intangible assets    16,000 Stockholders' Equity Common.
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82. An unrealistic picture of the inventory’s current value on the balance sheet is an argument against using A. Specific identification.B. FIFO.C. Average-cost.D. LIFO. 83. Use this inventory information for the month of July to answer the following question. July 1 Beginning inventory 10 units @ $120 5 Purchase 60 units @ $112 14 Sale 40 units 21 Purchase 30 units @ $116 31 Sale 28 units Assuming that a periodic inventory system is used,.
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81. Each of the following companies is a merchandising business except a A. candy store.B. car wash.C. wholesale parts company.D. furniture store. 82. The periodic inventory system has traditionally been used most commonly by companies that sell A. low-priced, high-volume merchandise.B. low-priced, low-volume merchandise.C. high-priced, low-volume merchandise.D. high-priced, high-volume merchandise. 83. The perpetual inventory system A. reduces the amount of clerical work.B. eliminates the need for a physical.
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187. The income statement account balances on December 31, 20x5, for Janice Company appear below. In addition, beginning merchandise inventory was $3,000 and ending merchandise inventory was $4,000. Prepare a 20x5 income statement for the company. Account Name Balance Sales $100,000 Sales Returns and Allowances 1,500 Purchases 50,000 Purchases Returns and Allowances 3,000 Freight-In 5,000 Selling Expenses 25,000 General and Administrative Expenses 10,000 188. Compute the dollar amount of.
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1. Direct materials and direct labor are components of manufacturing overhead.  2. A manufacturer's inventory consists of raw materials, work in process, and finished goods.  3. Inventory is an example of a long-term asset.  4. The term cost flow refers to the association of costs with their assumed flow in the operation of a business.  5. Goods in transit.
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135. Using the following amounts taken from the balance sheet and income statement of a business, compute the measures listed below. After each answer, write “L” if it is a measure of liquidity or “P” if it is a measure of profitability. Round to two decimal places. Current assets $  12,000 Average stockholders' equity $30,000 Average.
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159. The following lettered items represent a classification scheme for a multistep income statement. In the blank next to each account, write the letter indicating to which category it belongs. a. Revenues d. General and administrative expenses b. Cost of goods sold e. Other revenues and expenses c. Selling expenses f.  Not on income statement _____ 1. Depreciation.
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62. The most important accounting problem in dealing with merchandise inventory is the application of which of the following conventions or rules? A. MaterialityB. Full disclosureC. MatchingD. Conservatism 63. Manufacturing overhead would not include which of the following costs? A. Plant utilitiesB. Supervisory salariesC. Depreciation of plant assetsD. Raw materials 64. Which of the following is an inventory valuation method? A. First-in, first-outB. Average-costC. Lower-of-cost-or-marketD. Perpetual 65. When applying the lower-of-cost-or-market rule.
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1. Under the perpetual inventory system, when merchandise is sold, its cost is transferred from the Merchandise Inventory account to the Sales account.  2. Under the perpetual inventory system, the Cost of Goods Sold account is updated continually throughout the period.  3. Under the periodic inventory system, the amount for inventory on hand is accurate.
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101. An advantage of the single-step income statement over the multistep form is A. the amount of information it provides.B. its simplicity.C. its comprehensiveness.D. its use in computing ratios. 102. The other revenues and expenses section of a multistep income statement could include all the following except A. interest expense.B. interest income.C. dividend income.D. insurance expense. 103. Which of the following items is not shown.
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11. Market is the amount that a merchandising company would pay at the present time for the same goods that are in the inventory and from the usual suppliers in the usual quantities  12. The lower-of-cost-or-market rule implies that it is a violation of the conservatism concept to carry inventory at a cost.
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72. Which of the following is an inventory costing method? A. PerpetualB. Lower-of-cost-or-marketC. Specific identificationD. Periodic 73. Inventory costing methods place primary reliance on assumptions about the flow of A. costs.B. goods.C. resale prices.D. values. 74. Which of the following terms best describes the assumption made in applying the four inventory methods? A. Cost flowB. Goods flowC. Asset flowD. Physical flow 75. All of the following are inventory costing methods except A. first-in, first-out.B. average-cost.C. periodic.D. specific.
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177. Given the following information, prepare in good form the cost of goods sold section of an income statement for 20x5. Freight-In $  12,000 Merchandise Inventory, December 31, 20x4 45,000 Merchandise Inventory, December 31, 20x5 51,000 Purchases 114,000 Purchases Returns and Allowances 4,200 178. From the following data, calculate the amount of gross margin and gross purchases. Ending Merchandise Inventory $   256 Purchases Returns and Allowances 64 Beginning.
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131. Assuming that net cost of purchases was $39,000 during the year and that ending merchandise inventory was $1,000 less than the beginning merchandise inventory of $12,500, how much was cost of goods sold? A. $50,500B. $52,500C. $40,000D. $38,000 132. Which of the following is not considered in computing net cost of purchases? A. Freight-out expensesB. PurchasesC. Freight paid on purchased goodsD. Purchases.
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130.  1. Current assets divided by current liabilities.      Current assets.    2. The percentage of each sales dollar that results in net income.      Investments.    3. Measures how much income each dollar of assets generated.      Net worth.    4. Measures how efficiently assets are used to produce sales.      Earned capital.    5. A less-preferred term for “owner’s equity.”      Current ratio.    6. Cash and other assets that a company can reasonably expect.
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161. Wolf Equipment uses a perpetual inventory method.  Discuss how Wolf Equipment accounts for freight-in and freight-out. 162. Wolf Equipment uses a perpetual inventory method.  Discuss how Wolf Equipment accounts for purchase returns and allowances. 163. Distinguish between the cost of goods available for sale and the cost of goods sold. 164. Describe how to compute the.
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31. Specific identification is a very popular inventory method because it is very easy to apply.  32. The matching of revenue with inventory costs is best achieved with the FIFO method.  33. In periods of rising inventory prices, the LIFO method will result in a higher inventory valuation than will the average-cost method.  34. In periods of.
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51. Under the perpetual inventory system, the return of goods from a customer is recorded with a debit to Sales Returns and Allowances.  52. Under the perpetual inventory system, the Cost of Goods Sold and Merchandise Inventory accounts are updated with each sale.  53. Under the perpetual inventory system, the return of goods from a.
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167. Using the following data, prepare a multistep income statement for Romano’s Catering Co. for the month ended February 28, 20x5. Cost of Goods Sold $30,000 General and Administrative Expenses 8,000 Net Sales 50,000 Selling Expenses 7,000 168. Use the information from the following single-step income statement to prepare a multistep income statement in proper form. Midway Industries Income Statement For the Year Ended.
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126. Match the following financial statement ratios with their definition.1. Working capital _____2. Current ratio _______3. Profit margin ______4. Return on assets______5. Debt to equity ratio________6. Return on equity_______7. Asset turnover_________a. A measure of profitability that shows the proportion of a company's assets that is financed by creditors and the proportion.
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11. Taking a physical inventory refers to making a count of all merchandise on hand at a particular time.  12. Under the periodic inventory system, Cost of Goods Sold must be computed because it is not updated for sales and other transactions during the accounting period.  13. When the periodic inventory system is used, a.
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169. Use the information from the following multistep income statement to prepare a single-step income statement in proper form. Hernandez Enterprises Income Statement For the Month Ended July 31, 20x5 Net sales $30,000 Cost of goods sold     18,000 Gross margin $  12,000 Operating expenses Selling expenses $2,400 General and administrative expenses      1,600 Total operating expenses    4,000 Income from operations $ 8,000 Other revenues and expenses Dividend income $  500 Interest.
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166.  1. Buying and holding merchandise until it is sold and then collecting payment for the sales.      Operating cycle.    2. Net sales - Cost of goods sold.      Manufacturing company.    3. Continuous records are kept of the quantity and, usually, the cost of individual items as they are bought and sold.      Perpetual inventory system.    4. Discount for early payment.      Gross margin.    5. Makes and sells.
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133. Use the following information to calculate the liquidity and profitability ratios listed below. Round to two decimal places. Average stockholders' equity $  13,875 Net income $  2,250 Average total assets 27,000 Net sales 23,437.50 Current assets 16,875 Total liabilities 13,125 Current liabilities 11,250 a. Current ratiob. Working capitalc. Return on equityd. Profit margine. Debt to equity ratiof. Return on assetsg. Asset turnover 134. Use the following information.
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21. Advertising expense appears as a general and administrative expense on the income statement.  22. An advantage of the single-step income statement is that it is less complex than the multistep form.  23. Freight paid on goods shipped to customers is classified as a selling expense.  24. Cost of Goods Sold would not be found on a.
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31. Sales Discounts and Sales Returns and Allowances have normal credit balances.  32. If a retailer makes a sale of $100 on a MasterCard, and MasterCard takes a 5 percent discount on the sale, the retailer would record Cash for $100 and Accounts Payable for $5.  33. When the terms of sale include a sales.
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129.  1. Quality that different knowledgeable and independent observers could reach consensus, although not necessarily complete agreement, that a particular depiction is a faithful representation.      Qualitative characteristics.    2. Related to both the nature of an item and its size.      Predictive value.    3. When faced with choosing between two equally acceptable procedures or estimates, accountants should choose the one.
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180. Using the following information, calculate for 20x5 (a) net sales, (b) cost of goods sold, (c) gross margin, and (d) net income. Freight-In $  11,400 Merchandise Inventory, December 31, 20x4 130,000 Sales 320,000 Purchases Returns and Allowances 1,600 Advertising Expense 18,000 Purchases 140,000 Merchandise Inventory, December 31, 20x5 110,000 Sales Returns and Allowances 11,000 General and Administrative Expenses 114,000 181. Assuming the use of the periodic inventory system, use the.
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137. A. From the simplified balance sheet and income statement of the business below, compute the following ratios. Assume that the June 30 amounts for total assets and stockholders' equity also represent their average amounts for the period. Round percentages to the nearest whole percent.a. Working capitalb. Current ratioc. Profit margind..
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173. Assume that on July 24, Adele Company had a sale on credit totaling $22,038 with a related cost of goods sold of $15,208. Record this transaction in journal form assuming the perpetual inventory system was in use. General Journal Page 1 Date Description Post.Ref. Debit Credit 174. Highland, Inc. entered into the transactions listed below. In the journal provided,.
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189. Prepare entries in journal form without explanations for the merchandising transactions listed below for Kona Company. Assume use of the periodic inventory system. July 1 Sold merchandise to Tubman Company for $2,000, terms n/15. 2 Purchased merchandise from Apple Company for $8,000, terms n/15. 3 Gave credit to Tubman Company for merchandise returned, $200. 5 Purchased merchandise from Middleton.
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61. Adding freight-out expenses to net purchases gives net cost of purchases.  62. Under the periodic inventory system, the return of goods to the supplier is recorded with a debit to Purchases Returns and Allowances.  63. The net cost of purchases is found by adding freight-in to net purchases.  64. Ending merchandise inventory is not included in.
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185. Using the following information, calculate for 20x5 (a) net sales, (b) cost of goods sold, (c) gross margin, and (d) net income. Freight-In $    200 Merchandise Inventory, December 31, 20x4 15,000 Sales 60,000 Purchases Returns and Allowances 300 Advertising Expense 4,000 Purchases 20,000 Merchandise Inventory, December 31, 20x5 5,000 Sales Returns and Allowances 500 General and Administrative Expenses 7,000 186. Using the following information, calculate for 20x5 (a) net sales,.
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123. Why is it important for a company to maintain the same accounting methods and practices from period to period? 124. The following lettered items represent a classification scheme for a balance sheet, and the numbered items represent accounts. In the blank next to each account, write the letter indicating to which category.
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131. Using the following data, prepare a classified balance sheet for Blanchard Company as of December 31, 20x5. Cash $   200 Accumulated Depreciation– Building $  1,000 Investments in Short-Term Government Securities 400 Franchise 1,800 Accounts Receivable 800 Accounts Payable 1,600 Inventory 3,000 Revenues Received in Advance 400 Prepaid Rent 100 Notes Payable (in two years) 4,000 Investment in Land Held for future use 2,700 Common Stock 12,000 Land 2,000 Building 8,000 132. Using the following data, prepare a classified balance.
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111. A retailer accepted Visa charge sales totaling $1,000 and deposited the charge slips in the bank. Assuming a credit card discount expense of 4 percent, what would be the increase to Cash and the increase to Sales, respectively? A. $1,000 and $960B. $960 and $1,000C. $960 and $960D. $1,000 and $1,000 112. The entry to record a.
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121. Under the perpetual inventory system, which of the following accounts would not be used? A. Cost of Goods SoldB. Merchandise InventoryC. SalesD. Purchases 122. The entry to record a sales return from a customer would require a(n) A. decrease to Sales.B. increase to Sales.C. decrease to Sales Returns and Allowances.D. increase to Sales Returns and Allowances. 123. Under the perpetual inventory system, the entry.
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141. Copper, Inc. purchased merchandise worth $1,800 on credit, terms n/30. What is the required journal entry to record the transaction under the periodic inventory system? A. Accounts Receivable            1,800      Purchases                        1,800B. Purchases            1,800      Accounts Payable                  1,800C. Merchandise Inventory                   1,800      Accounts Payable           .
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41. When the average-cost method is applied to a perpetual inventory system, a moving average cost per unit is computed with each purchase.  42. Under the perpetual inventory system, cost of goods sold is not recorded until the end of the accounting period.  43. In verifying a claim for a loss of inventory, an insurance.
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183. Demmler Company entered into the transactions listed below. In the journal provided, prepare Demmler's journal entries, assuming use of the periodic inventory system. Omit explanations. Oct. 3 Purchased $1,500 of merchandise on credit, terms n/15. 6 Returned $300 of the goods purchased on October 3. 7 Paid freight charges of $150 on goods purchased on October 3. 12 Paid.
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155. Under a perpetual inventory system, is it necessary to take a physical inventory at the end of the period? Why or why not? 156. Distinguish between cost of goods sold and operating expenses, describing the nature of these two items and their placement on a multistep income statement. 157. Joan and Pat Clair are.
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120. Each of the following statements is justified by a concept or convention of accounting. Write the letter in the blank next to each statement corresponding to the concept or convention involved. a. Consistency d. Full disclosure b. Materiality e. Cost-benefit c. Conservatism _____ 1. This convention best enhances comparability of financial statements between years._____ 2. A.
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51. The lower the inventory turnover, the lower the days' inventory on hand.  52. Inventory turnover is a measure expressed in terms of a percentage.  53. The costs included in work in process and finished goods inventories would properly contain manufacturing overhead costs.  54. Supply-chain management helps companies maintain lower levels of inventory.  55. To increase their levels of.
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92. Use this information to answer the following question. Oct. 1 Inventory 200 units @ $12.00 6 Purchase 300 units @ $13.20 13 Purchase 100 units @ $14.40 20 Purchase 200 units @ $15.60 25 Purchase   40 units @ $16.80 Total sales 620 units A periodic inventory system is used.Using the average-cost method, the cost assigned to ending inventory is A. $3,036.B. $3,168.C. $3,384.D. $8,556. 93. Use this information to answer the following question. Oct. 1 Inventory 200 units.
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175. Scuilli Company purchased $5,000 worth of merchandise, terms n/30, from Zupcic Company on June 4. The cost of the merchandise to Zupcic was $3,600. On June 10, Scuilli returned $700 worth of goods to Zupcic for full credit. The goods had a cost of $450 to Zupcic. On June 12,.
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