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Accounting Chapter 6

End-of-Chapter Quiz Questions

QuestionAnswer
True or False. The invoice is the purchaser's request for collection from the customer. False
True or False. Gross profit is the excess of sales revenue over cost of goods sold. True
True or False. The Sales account is used to record only sales on account. False
True or False. A service company purchases products from suppliers and then sells them. False
Sales discounts should appear in the financial statements as a: Deduction from Sales
How is inventory classified in the financial statements? As an Asset
Beginning inventory UNITS: 15; UNIT COST: $5; TC: $75 Purchase on Apr 25 UNITS: 40; UNIT COST: 8; TC: 320 Purchase on Nov 13 UNITS: 10; UNIT COST: 9; TC: 90 Sales UNITS: 40; UNIT COST: ?; TC: ? Tortoise uses a FIFO inventory system. Cost of goods sold $275 [(15 x $5) + (25 x $8)]
Beginning inventory UNITS: 15; UNIT COST: $5; TC: $75 Purchase on Apr 25 UNITS: 40; UNIT COST: 8; TC: 320 Purchase on Nov 13 UNITS: 10; UNIT COST: 9; TC: 90 Sales UNITS: 40; UNIT COST: ?; TC: ? Tortoise's LIFO cost of ending inventory would be: $155 (15 x $5) + (10 x $8)
Beginning inventory UNITS: 15; UNIT COST: $5; TC: $75 Purchase on Apr 25 UNITS: 40; UNIT COST: 8; TC: 320 Purchase on Nov 13 UNITS: 10; UNIT COST: 9; TC: 90 Sales UNITS: 40; UNIT COST: ?; TC: ? Tortoise's average cost of ending inventory is: $187 [($75 + $320 + $90) / 65]
When applying lower-of-cost-or-market to inventory, "market" generally means: Replacement Cost
During a period of rising prices, the inventory method that will yield the highest net income and asset value is: FIFO
True or False. When prices are rising, the inventory method that results in the lowest ending inventory value is FIFO. False
True or False. The inventory method that best matches current expense with current revenue is FIFO. False
True or False. Application of the lower-of-cost-or-market rule often results in a lower inventory value. True
True or False. An error overstating ending inventory in 2010 will understate 2010 net income. False
The ending inventory of Misty Harbor Co. is $57,000. If beginning inventory was $68,000 and goods available totaled $117,000, the cost of goods sold is: $60,000 ($117,000 - $57,000)
Lantern Company had cost of goods sold of $145,000. The beginning and ending inventories were $15,000 and $25,000, respectively. Purchases for the period must have been: $155,000 ($145,000 + $25,000 - $15,000)
Fairway Company had a $28,000 beginning inventory and a $35,000 ending inventory. Net Sales were $184,000; purchases, $93,000; purchase returns and allowances, $7,000; and freight-in, $3,000. Cost of goods sold for the period is: $82,000 ($28,000 + $93,000 + $3,000 - $7,000 - $35,000)
Fairway Company had a $28,000 beginning inventory and a $35,000 ending inventory. Net Sales were $184,000; purchases, $93,000; purchase returns and allowances, $7,000; and freight-in, $3,000. What is Fairway's gross profit percentage (rounded to %)? 55% ($184,000 - 82,000)/$184,000
Fairway Company had a $28,000 beginning inventory and a $35,000 ending inventory. Net Sales were $184,000; purchases, $93,000; purchase returns and allowances, $7,000; and freight-in, $3,000. What is Fairway's rate of inventory turnover? 2.6 times [$82,000/($28,000 + $35,000)/2]
Beginning inventory is $110,000, purchases are $260,000 and sales total $470,000. The normal gross profit is 40%. Using the gross profit method, how much is ending inventory? $88,000; $110,000 + $260,000 - [$470,000 x (1-0.40)]
An overstatement of ending inventory in one period results in: An understatement of net income of the next period
Created by: 1482116593