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True/False = The sales account is used to record only sales on account
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True/False = Gross profit is the excess of sales revenue over cost of goods sold
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ACCT 6

EXAM 2

QuestionAnswer
True/False = The sales account is used to record only sales on account False
True/False = Gross profit is the excess of sales revenue over cost of goods sold True
True/False = Purchase returns and allowances increase the net amount of purchases False
Sales discounts should appear where in the financial statements? As a deduction from sales
How is inventory classified in the financial statements? As an asset
When applying the lower-of-cost-or-market rule to inventory, 'market' generally means? Current replacement cost
During a period of rising prices, the inventory method that will yield the highest net income and asset value is? FIFO NOT specific identification, average cost or LIFO
True/False = Application of the lower-of-cost-or-market rule often results in a lower inventory value True
True/False = An error overstating ending inventory in 2014 will understate 2014 net income False
True/False = The inventory method that best matches current expense with current revenue is FIFO False
The ending inventory of Carroll Co. is $46,000. If beginning inventory was $70,000, & goods available (costs of goods available for sale) totaled $115,000, the cost of goods sold is? $69,000
Bell Comp had cost of goods sold of $160,000. The beginning and ending inventories were $8,000 and $23,000, respectively. Purchases for the period must have been $175,000 (160,000 + 23,000 - 8,000 =) Cost of GS + ending inventory - beginning inventory)
P had $18,000 beg inventory & $21,000 ending inventory. Net sales were $200,000; purchases. $95,000; purchase returns & allowances, $6,000 and freight in, $8,000. Cost of GS for the period is? >What is Palaminos Gross Profit %? >Inventory Turnover? $94,000 (net sales - purchases - purchase returns/allowances - freight + ending - beginning =) Gross profit = (net sales - Cost of GS) / net sales revenue = gross profit % 53% (HOW!) Inventory Turnover: 4.8 times
What is the Inventory turnover rate calculation? (Beg Inventory + Ending Inventory) / 2 = average inventory THEN Cost of GS / Average Inventory = Inventory Turnover
What model does the gross profit method use? What is this model? Cost-of-goods-sold model Beg Inventory + Purchases - Ending inventory = Cost of GS (ask about #18)
An overstatement of ending inventory in one period results in... An understatement of net income of the next period
When does the cost of inventory become an expense? When inventory is DELIVERED to a customer NOT when cash is collected, NOT when it is purchased from a supplier, and NOT when a payment is made to the supplier
In a period of rising prices... Gross profit under FIFO will be higher than under LIFO
The income statement for Truly Fresh Foods shows gross profit of $153,000, operating expenses of $123,000, and cost of goods sold of $213,000. What is the amount of net sales revenue? $366,000
The word market as used in "the lower of cost or market" generally means... the CURRENT replacement cost
The sum of ending inventory and cost of goods sold is Cost of goods available (or cost of goods available for sale)
Flirt Cosmetics ended the month of March with inventory of $25,000. They expect to end April with inventory of $17,000 after selling goods with a cost of $92,000. How much inventory must they purchase during April in order to accomplish these results? $84,000
Sales are $580,000 and Cost of GS is $310,000. Beg and end inventories and $23,000 and $38,000, respectively. How many times did the company turn its inventory over during this period? 10.2 times
An error understated RLR Corporations Dec 31, 2014, ending inventory by $36,000. What effect will this error have on net income for 2015? Overstate
 

 



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