Question 1

James Sales sold 450 units of product to a customer on account.The company uses the perpetual inventory system and the FIFO inventory costing method.The selling price was $28 per unit,and the cost,according to the company's inventory records,was $12 per unit.Prepare the journal entries to record the sale.Omit explanations.

Accepted Answer

The answer of James Sales sold 450 units of product...

Question 2

Which of the following inventory costing methods uses the cost of the oldest purchases to compute the cost of goods sold?

Accepted Answer

First-in, first-out (FIFO) uses the cost of the oldest purchases to compute the cost of goods sold, assuming that the first items purchased are also the first items sold.

Question 3

A company purchased 130 units for $30 each on January 31.It purchased 150 units for $35 each on February 28.It sold 150 units for $80 each from March 1 through December 31.If the company uses the first-in,first-out inventory costing method,what is the amount of Cost of Goods Sold on the income statement for the year ending December 31? (Assume that the company uses a perpetual inventory system.)

Accepted Answer

C) 11ea8873_d477_0dab_bb89_f3e08c95d190_TB5026_00 Number of units sold = 150 units. As FIFO is used, 130 units will be valued at $30 per unit (Jan 31) and remaining 20 units will be valued at $35 per unit (Feb 28.)
Cost of Goods Sold = ((130 units × $30) + (20 units × $35)) = $3,900 + $700 = $4,600

Question 4

Under which of the following inventory costing methods is the ending inventory based on the costs of the most recent purchases?

Accepted Answer

The first-in, first-out (FIFO) method assumes that the oldest inventory items are sold first, and thus, the ending inventory is based on the costs of the most recent purchases.

Question 5

Western Sky Company sold 500 units of inventory at $25 per unit for cash.The company uses the perpetual inventory system and the FIFO inventory costing method.The beginning inventory included 550 units at a cost of $15 per unit.The cost of the most recent purchases is $10 per unit.Prepare the journal entries to record the sale.Omit explanations.

Accepted Answer

The answer of Western Sky Company sold 500 units of...

Question 6

A company that uses the perpetual inventory system sold goods for $2,400 to a customer on account.The company had purchased the inventory for $800.Which of the following journal entries correctly records the cost of goods sold?

Accepted Answer

The correct journal entry to record the cost of goods sold in a perpetual inventory system debits Cost of Goods Sold and credits Merchandise Inventory for the cost of the inventory sold, which is $800 in this case.

Question 7

When a company uses the first-in,first-out (FIFO)method,the cost of goods sold represents the cost of the most recently purchased goods and the value of ending inventory represents the cost of the oldest goods in stock.

Accepted Answer

When a company uses the first-in, first-out (FIFO) method, the cost of goods sold represents the oldest purchases and the value of ending inventory represents the most recent purchases.

Question 8

A company that uses the perpetual inventory system sold goods to a customer on account for $2,300.The cost of the goods sold was $1,150.Which of the following journal entries correctly records this transaction?

Accepted Answer

Option D correctly records the sale on account by increasing Accounts Receivable and Sales Revenue for the sale amount ($2,300), and it also correctly records the cost of the goods sold by increasing Cost of Goods Sold and decreasing Merchandise Inventory for the cost amount ($1,150).

Question 9

First Street Merchandisers has total cost of goods sold of $54,500,total beginning inventory of $18,500,and total ending inventory of $22,100.Cost of goods available for sale is $73,000

Accepted Answer

Cost of goods sold $54,500 plus ending inventory $22,100 equals cost of goods available for sale $76,600

Question 10

Which of the following statements regarding FIFO is incorrect?

Accepted Answer

The statement "FIFO is a specific identification costing method because companies sell their oldest inventory first" is incorrect. Specific identification involves identifying and tracking the cost of each individual item, whereas FIFO assumes that the first items purchased are the first items sold regardless of their specific cost.

Question 11

The total cost spent on inventory that was available to be sold during a period is called the cost of goods sold.

Accepted Answer

The total cost spent on inventory that was available to be sold during a period is called the cost of goods available for sale.

Question 12

A company purchased 200 units for $30 each on January 31.It purchased 220 units for $33 each on February 28.It sold a total of 350 units for $45 each from March 1 through December 31.What is the cost of ending inventory on December 31 if the company uses the first-in,first-out (FIFO)inventory costing method? (Assume that the company uses a perpetual inventory system.)

Accepted Answer

A) Ending merchandise inventory = (200 + 220 - 350) × $33 = 11ea8873_d477_0daa_bb89_8d6aec9107a6_TB5026_00

Question 13

Nichols Company had the following balances and transactions during 2018: $$\begin{array} { | l | l | } 
\hline \text { Beginning Merchandise Inventory as of } & \
\text { January } 1,2018 & 300 \text { units at } \$ 82 \
\hline \text { March } 10 & \text { Sold } 70 \text { units } \
\hline \text { June } 10 & \text { Purchased } 600 \text { units at } \$ 85 \
\hline \text { October } 30 & \text { Sold } 370 \text { units } \
\hline
\end{array}$$ What would be reported for Ending Merchandise Inventory on the balance sheet at December 31,2018 if the perpetual inventory system and the first-in,first-out inventory costing method are used?

Accepted Answer

The answer of Nichols Company had the following balances and...

Question 14

Meadows Company sold 500 units of inventory at $25 per unit on account.The company uses the perpetual inventory system and the FIFO inventory costing method.The beginning inventory included 400 units at $15 per unit.The most recent purchases include 600 units at $18 per unit.Prepare the journal entries to record the sale.Omit explanations.

Accepted Answer

The answer of Meadows Company sold 500 units of inventory...

Question 15

Modern Lifestyle Furniture began June with merchandise inventory of 45 sofas that cost a total of $31,500.During the month,Modern purchased and sold merchandise on account as follows:
 $$\begin{array} { | r | r | r | } 
\hline \text { June } 7 & \text { Purchase } & 25 \text { sofas @ } \$ 750 \text { each } \
\hline 14 & \text { Sale } & \text { 30 sofas @ } \$ 1,150 \text { each } \
\hline 18 & \text { Purchase } & 50 \text { sofas @ } \$ 775 \text { each } \
\hline 27 & \text { Sale } & \text { 35 sofas @ } \$ 1,200 \text { each } \
\hline
\end{array}$$ Prepare a perpetual inventory record,using the FIFO inventory costing method,and determine the company's cost of goods sold,ending merchandise inventory,and gross profit.

Accepted Answer

The answer of Modern Lifestyle Furniture began June with merchandise...

Question 16

A company that uses the perpetual inventory system purchased 500 pallets of industrial soap for $7,000 and paid $800 for the freight-in.The company sold the whole lot to a supermarket chain for $15,000 on account.Which of the following entries correctly records the sale?

Accepted Answer

Option A is correct because it records the sale by increasing Accounts Receivable and Sales Revenue for the sale amount ($15,000), and it correctly records the cost of goods sold (COGS) by including both the purchase cost ($7,000) and the freight-in costs ($800), totaling $7,800, and decreasing Merchandise Inventory by the same amount.

Question 17

Countrywide Sales sold 400 units of product to a customer on account.The selling price was $28 per unit,and the cost,according to the company's inventory records,was $14 per unit.Prepare the journal entry to record the cost of goods sold.(Assume a perpetual inventory system and the FIFO inventory costing method.)Omit explanation.

Accepted Answer

The answer of Countrywide Sales sold 400 units of product...

Question 18

Baldwin Company had the following balances and transactions during 2019: $$\begin{array} { | l | l | } 
\hline \text { Beginning Merchandise Inventory as of } & \
\text { January } 1,2019 & 125 \text { units at } \$ 82 \
\hline \text { March 10 } & \text { Sold } 80 \text { units } \
\hline \text { June } 10 & \text { Purchased } 250 \text { units at } \$ 86 \
\hline \text { October 30 } & \text { Sold 205 units } \
\hline
\end{array}$$ What would be reported as Cost of Goods Sold on the income statement for the year ending December 31,2019 if the perpetual inventory system and the first-in,first-out inventory costing method are used?

Accepted Answer

Using the FIFO (First-In, First-Out) method under a perpetual inventory system, we calculate the Cost of Goods Sold (COGS) by selling the oldest inventory first. 1. The first sale of 80 units would come from the beginning inventory of 125 units at $82 each. So, 80 units * $82 = $6,560.2. The second sale of 205 units would first use up the remaining 45 units from the beginning inventory (125 - 80 = 45 units) at $82 each, and then 160 units from the June 10 purchase. So, for the 45 units: 45 units * $82 = $3,690. For the 160 units from the June purchase: 160 units * $86 = $13,760.3. Adding these amounts together gives us the total COGS: $6,560 (from the first sale) + $3,690 (remaining units from the beginning inventory for the second sale) + $13,760 (units from the June purchase for the second sale) = $24,010.

Question 19

A company that uses the perpetual inventory system sold goods to a customer for cash for $4,600.The cost of the goods sold was $1,000.Which of the following journal entries correctly records this transaction?

Accepted Answer

The transaction involves a sale, so we need to credit the Inventory account to reflect the cost of the goods sold. We also need to debit Cash for the amount received. Therefore, the correct journal entry is:

Debit Cash $4,600
Credit Inventory $1,000
Credit Sales $3,600

Option A is incorrect because it only debits Cash and credits Sales, and does not reflect the cost of the goods sold. Option C is incorrect because it credits Cost of Goods Sold instead of Inventory. Option D is incorrect because it debits Sales instead of Cash.

Question 20

Costas Company purchased inventory on account for $6,500.Prepare the journal entry to record the purchase of inventory on account.(Assume a perpetual inventory system.)Omit explanation.

Accepted Answer

The answer of Costas Company purchased inventory on account for...

Quiz 6: Merchandise Inventory