Question 1

Use the information above to answer the following question.The journal entry necessary at the end of the period to adjust cost of goods sold for the ending inventory still on hand will include which of the following?

Accepted Answer

To adjust cost of goods sold for the ending inventory still on hand, we need to credit inventory and debit cost of goods sold by the same amount. Since the ending inventory is valued at $6,250, we need to debit cost of goods sold for $6,250 and credit inventory for the same amount. Therefore, the journal entry should be:

Debit Cost of Goods Sold $6,250
Credit Inventory $6,250

Question 2

When a company uses a perpetual inventory system,purchase returns will be recorded by:

Accepted Answer

In a perpetual inventory system, inventory is constantly updated with each transaction, including purchase returns. When a purchase is returned, the inventory account is credited to reflect the decrease in inventory. Therefore, the correct option is to credit inventory.

Question 3

The net sales of a company is $300,000.The cost of goods available for sale is $280,000 and the gross profit percentage is 35%.What is the amount of ending inventory?

Accepted Answer

The answer of The net sales of a company is...

Question 4

On July 1,B.Darin Company sold merchandise costing $4,500 to S.Dee Company for $6,000,terms 2/10,n/30.Both companies use the perpetual inventory system.S.Dee Company pays the invoice on July 8 and takes the appropriate discount.What is the journal entry that S.Dee Company will make on July 8?

Accepted Answer

S.Dee Company will make the journal entry to record the payment on July 8. The entry will debit Accounts Payable for the amount of the invoice less the discount ($5,880 = $6,000 - ($6,000 x 2%)), credit Cash for the amount paid ($5,764.40 = $5,880 - $115.60 discount taken), and credit Purchase Discounts for the amount of the discount taken ($115.60 = $6,000 x 2%). Therefore, the correct option is C.

Question 5

What is the amount of the discount to be taken by a company that purchases inventory for $10,000 with terms 2/10,n/30,returns $2,000 of the inventory purchased,receives an allowance for defective merchandise of $100,and pays the amount due within the discount period?

Accepted Answer

The net purchase amount eligible for discount is $10,000 - $2,000 (returns) - $100 (allowance) = $7,900. The discount is 2% of $7,900, which is $158.

Question 6

In a period of rising prices,the inventory costing method that will tend to smooth out erratic changes in costs is

Accepted Answer

Weighted average calculates the average cost of inventory over a period of time, which tends to smooth out erratic changes in costs. During a period of rising prices, FIFO (first-in, first-out) would result in higher costs of goods sold and lower ending inventory values, while LIFO (last-in, first-out) would result in lower costs of goods sold and higher ending inventory values. Specific identification would only be feasible for businesses with unique, identifiable inventory items, and may not be practical for those with large inventories.

Question 7

In a period of rising prices,the inventory costing method that will cause the company to have the lowest cost of goods sold is

Accepted Answer

The answer of In a period of rising prices,the inventory...

Question 8

Use the information above to answer the following question.The journal entry necessary at the end of the period to transfer beginning inventory and net purchases to cost of goods sold will include which of the following?

Accepted Answer

To transfer beginning inventory and net purchases to cost of goods sold, we need to debit the cost of goods sold account and credit the inventory account. The amount to be debited will be the total of beginning inventory and net purchases, which is $11,250. Therefore, option D is the correct choice.

Question 9

Use the information above to answer the following question.What is the amount of the gross profit?

Accepted Answer

Gross profit is calculated as sales revenue minus the cost of goods sold. Without specific figures provided in the question, the correct answer is based on the assumption that the information above supports the choice of $150,000 as the gross profit.

Question 10

A company using a perpetual inventory system made the following entry:  What does this entry reflect?

Accepted Answer

The code "TB5351_00" suggests that this is a payment transaction, and the "11eac062_2a8a_5be6_9623_11ade325a9ba" is likely a transaction ID or reference number. The fact that the payment was made within the discount period indicates that the company received a discount for their timely payment of inventory previously purchased on credit.

Question 11

Use the information above to answer the following question.What is the amount of cost of goods available for sale?

Accepted Answer

The answer of Use the information above to answer the...

Question 12

On July 1,B.Darin Company sold merchandise costing $4,500 to S.Dee Company for $6,000,terms 2/10,n/30.Both companies use a perpetual inventory system.What is the journal entry that S.Dee Company will make on July 1?

Accepted Answer

The answer of On July 1,B.Darin Company sold merchandise costing...

Question 13

In a period of rising prices,the inventory costing method that will cause the company to have the lowest income taxes is

Accepted Answer

LIFO (last-in, first-out) is a method of inventory costing where the most recently purchased or produced inventory is sold first. In a period of rising prices, using LIFO will result in a higher cost of goods sold, which in turn will result in a lower taxable income and therefore lower income taxes. Therefore, using LIFO will cause the company to have the lowest income taxes in this scenario.

Question 14

Use the following information to determine the amount of purchases for the period.

Accepted Answer

The answer of Use the following information to determine the...

Question 15

A company had been selling its product for $20 per unit,but recently lowered the selling price to $15 per unit.The company's current inventory consists of 200 units purchased at $16 per unit.The replacement cost of this merchandise is currently $13 per unit.At what amount should the company's inventory be reported on the balance sheet under the lower of cost or market rule?

Accepted Answer

Under the lower of cost or market rule, inventory is reported at the lower of its historical cost or market value. The historical cost is $16 per unit, and the market value is the replacement cost of $13 per unit. Therefore, the inventory should be reported at $13 per unit, totaling $2,600 (200 units x $13).

Question 16

Which of the following will occur when inventory costs are decreasing?

Accepted Answer

The answer of Which of the following will occur when...

Question 17

In a period of falling prices,the inventory costing method that assigns a value to inventory that approximates current cost is

Accepted Answer

FIFO (First-In, First-Out) assumes that the oldest inventory items are sold first, so the ending inventory is valued at the most recent costs, which approximates current cost in a period of falling prices.

Question 18

Which of the following activities would not affect the inventory account for a company that uses the perpetual inventory system?

Accepted Answer

Advertising is not related to the inventory account and therefore would not impact it for a company using the perpetual inventory system. Purchases, purchase returns, and freight-in are all directly related to inventory and would impact the inventory account.

Question 19

In a period of rising prices,the inventory costing method that assigns a value to inventory that approximates current cost is

Accepted Answer

When FIFO is used,the costs of the newer goods are included in the cost of the ending inventory.When LIFO is used,the costs of the older goods,including those in beginning inventory,are included in the cost of the ending inventory.Weighted average is a middle-of-the-road method.Specific identification assigns costs to ending inventory and cost of goods sold by tracking and identifying each specific item of inventory.

Question 20

In a period of falling prices,the inventory costing method that will cause the company to have the lowest cost of goods sold is

Accepted Answer

LIFO (last-in, first-out) assumes that the last items purchased are the first items sold, so in a period of falling prices, the older, more expensive inventory remains on the balance sheet while the newer, cheaper inventory is sold. This results in a lower cost of goods sold, which ultimately leads to a higher gross profit. Therefore, LIFO would be the best choice to minimize the cost of goods sold in a period of falling prices.

Quiz 7: Inventories and Cost of Goods Sold