Question 1

Up-a-Creek Company had ending inventory of $60,000,purchases of $200,000,beginning accounts payable of $100,000,ending accounts payable of $80,000 and cost of goods sold of $150,000.What was the amount of beginning inventory?

Accepted Answer

A)  $90,000
B)  $10,000
C)  $30,000
D)  $150,000E) B) and C)
F) A) and C)

Question 2

Sales returns and allowances is a contra-asset account.

Accepted Answer

A) True 
 B)False

Question 3

In a time of rising prices,the main reason a company would choose to use LIFO is to save on income taxes.

Accepted Answer

A) True 
 B)False

Question 4

Net sales is net of ________.

Accepted Answer

A)  goods in transit
B)  cost of goods sold
C)  sales returns and allowances
D)  gross profitE) B) and C)
F) A) and D)

Question 5

Rigby Company buys merchandise from Shoshone Company with an invoice cost of $10,000 and shipping terms of FOB shipping point.The freight costs amount to $1,000.Which of the following statements is TRUE?

Accepted Answer

A)  Rigby Company will record freight-in costs of $1,000.
B)  Shoshone Company will record freight-out costs of $1,000.
C)  Shoshone Company will record freight-in costs of $1,000.
D)  Rigby Company will have inventory cost of $10,000.E) B) and C)
F) C) and D)

Question 6

A company that uses the first-in,first-out method of valuing cost of goods sold must sell its older inventory before selling any of its newer inventory,even though some of the newer items may be more accessible.

Accepted Answer

A) True 
 B)False

Question 7

Which statement below is TRUE regarding the lower of cost or market rule?

Accepted Answer

A)  Inventory should be reported on the balance sheet at the lower of the replacement value or historical cost.
B)  Inventory should be revalued at the end of each period to its market value.
C)  Inventory should be reported on the balance sheet at whatever amount management honestly believes it is worth.
D)  The LCM rule is based on the cost principle.E) C) and D)
F) B) and D)

Question 8

Which statement below is TRUE about the purchase of inventory?

Accepted Answer

A)  Large firms tend to have entire departments for purchasing and for accounts payable.
B)  All firms,large and small,need to keep detailed records of what they are buying and paying for.
C)  The person who records inventory purchases should not have access to the inventory.
D)  All of these statements are true.E) A) and C)
F) B) and D)

Question 9

On December 29,Perch X,Inc.purchased $2,000 of merchandise from a supplier.The shipping terms were FOB shipping point.The merchandise did not arrive until after yearend.Perch X should ______.

Accepted Answer

A)  exclude the merchandise from its inventory but should record the related accounts payable as of yearend.
B)  include the merchandise in its inventory and record the related accounts payable.
C)  exclude the merchandise from its inventory and the related accounts payable as of yearend.
D)  expense the merchandise as cost of goods sold at yearend.E) None of the above
F) All of the above

Question 10

The following information is from the accounting records of JackCo:

Required:
1. Determine the cost of goods sold assuming JackCo uses the first-in, first-out (FIFO) inventory method.
2. Determine the cost of goods sold assuming JackCo uses the last-in, first-out (LIFO) inventory method.
3. Which inventory method results in LOWER taxable income for the period? Why?

Accepted Answer

1.FIFO: $2,390 = (200 X $2.50)+ (700 X $...

Question 11

On May 1,Starnes TV had two TV sets in inventory.During May,six additional TV sets were purchased--two on May 10,one on May 16,and three on May 24.The company sold two of the TV sets on May 13,another one on May 18,and two more on May 27.
Part A: Using the FIFO perpetual cost flow method,fill in the number of TV sets in the appropriate column:
  Part B: Using the LIFO perpetual cost flow method,fill in the number of TV sets in the appropriate column:

Accepted Answer

Part A:
FIFO perpetu...

Question 12

Tiny Toy Company makes toys and sells them to retail stores on account.The company has a December 31 year-end.In the past,Tiny Toy always sold on account but never offered sales discounts to its customers.However,this year on November 1,the beginning of the holiday sales season,Tiny Toy began offering stores terms of 2/90,n/120.The stores can return anything,no questions asked,but only after December 31.
Required:
A.Why would Tiny Toy offer such a liberal credit and return policy?
B.Put an X in the appropriate box to describe the effect of this credit and return policy on Tiny Toy's financial statements for this year.
  C.Is Tiny Toy's new credit and return policy ethical?

Accepted Answer

A.Tiny Toy is trying to increase sales f...

Question 13

Which statement below is Strength in controls over inventory?

Accepted Answer

A)  Have an employee order the merchandise and also be the one to sign for the delivery of the merchandise ordered.
B)  Have the accountant order the merchandise so that the amounts will be accurately reflected in the accounting records.
C)  Have the employee who keeps inventory records also make payments for the goods to avoid overpayment of merchandise purchased.
D)  The accountant who records inventory purchases should not have access to the inventory.E) B) and D)
F) B) and C)

Question 14

Souper Bowls sold $500 of merchandise to a customer for cash.The sales tax was 5%.How much cash did Souper Bowls receive?

Accepted Answer

A)  $525
B)  $371
C)  $329
D)  $210E) B) and C)
F) A) and C)

Question 15

On January 5,Boise Cascade Company purchases $5,000 of merchandise from a vendor with credit terms of 2/10,n/30.If Boise Cascade pays the vendor on January 20,the amount of the payment should be ________.

Accepted Answer

A)  $5,000
B)  $4,900
C)  $4,500
D)  $3,500E) B) and D)
F) A) and B)

Question 16

Buy & Large,Inc.'s inventory activity in October was:
  Show the correct effect on the accounting equation of the October 25th sale of 25 units on account using the perpetual FIFO method of accounting for inventory.

Accepted Answer

Question 17

The cost flow method a firm uses is disclosed in the notes to the financial statements.

Accepted Answer

A) True 
 B)False

Question 18

Match between columns
                        Premises: RFV Company pays the purchasing manager a $70
YUH Company paid $12
RXD was billed $500 for merchandise that it had already returned to the vendor.
EOP Inc.pays for freight on goods that it purchased with credit terms of FOB shipping point.
GLO Company pays $560 of import tariffs associated with a purchase of merchandise from an overseas supplier.
UIO Co.pays $330 to insure merchandise while it is on the shelves waiting to be sold.
TGF Company purchases 500 units of merchandise at a cost of $1.40 each.

Accepted Answer

The Answer of A = The expenditure should be included is...

Question 19

Which statement below best explains the credit terms of 2/10,n/30?

Accepted Answer

A)  The buyer will receive a 2 percent discount if it pays within ten days of the purchase.
B)  The buyer will receive a 10 percent discount if it pays within two days.
C)  The buyer will receive a 10 percent discount if it pays within thirty days.
D)  The buyer will receive a 2 percent discount if it pays within thirty days.E) B) and C)
F) A) and D)

Question 20

Records for the Short Company showed the following at the end of the year:
  A physical inventory was taken and showed that the ending inventory was actually $29,000.
Required: Put an X in the appropriate box to show the effect the error will have on the following financial statement line items for the year if Short Company fails to correct it:

Accepted Answer

The answer of Records for the Short Company showed the...

Exam 5: The Purchase and Sale of Inventory

In a time of rising prices,the main reason a company would choose to use LIFO is to save on income taxes.

Correct Answer
verified

The cost flow method a firm uses is disclosed in the notes to the financial statements.

Correct Answer
verified

Up-a-Creek Company had ending inventory of $60,000,purchases of $200,000,beginning accounts payable of $100,000,ending accounts payable of $80,000 and cost of goods sold of $150,000.What was the amount of beginning inventory?

Correct Answer
verified

Which statement below is TRUE regarding the lower of cost or market rule?

Correct Answer
verified

Which statement below is TRUE about the purchase of inventory?

Correct Answer
verified

Rigby Company buys merchandise from Shoshone Company with an invoice cost of $10,000 and shipping terms of FOB shipping point.The freight costs amount to $1,000.Which of the following statements is TRUE?

Correct Answer
verified

A company that uses the first-in,first-out method of valuing cost of goods sold must sell its older inventory before selling any of its newer inventory,even though some of the newer items may be more accessible.

Correct Answer
verified

Which statement below is Strength in controls over inventory?

Correct Answer
verified

Buy & Large,Inc.'s inventory activity in October was: Show the correct effect on the accounting equation of the October 25^th sale of 25 units on account using the perpetual FIFO method of accounting for inventory.

Correct Answer
verified

Correct Answer
verified
A.Tiny Toy is trying to increase sales f...
View Answer

Which statement below best explains the credit terms of 2/10,n/30?

Correct Answer
verified

Souper Bowls sold $500 of merchandise to a customer for cash.The sales tax was 5%.How much cash did Souper Bowls receive?

Correct Answer
verified

Net sales is net of ________.

Correct Answer
verified

Sales returns and allowances is a contra-asset account.

Correct Answer
verified

Correct Answer
verified

Match the items below with the appropriate statements.

Correct Answer
verified
1.FIFO: $2,390 = (200 X $2.50)+ (700 X $...
View Answer

On January 5,Boise Cascade Company purchases $5,000 of merchandise from a vendor with credit terms of 2/10,n/30.If Boise Cascade pays the vendor on January 20,the amount of the payment should be ________.

Correct Answer
verified

On December 29,Perch X,Inc.purchased $2,000 of merchandise from a supplier.The shipping terms were FOB shipping point.The merchandise did not arrive until after yearend.Perch X should ______.

Correct Answer
verified

Correct Answer
verified
Part A:
FIFO perpetu...
View Answer

Exam 5: The Purchase and Sale of Inventory

In a time of rising prices,the main reason a company would choose to use LIFO is to save on income taxes.

Correct AnswerverifiedShow Answer

The cost flow method a firm uses is disclosed in the notes to the financial statements.

Correct AnswerverifiedShow Answer

Up-a-Creek Company had ending inventory of $60,000,purchases of $200,000,beginning accounts payable of $100,000,ending accounts payable of $80,000 and cost of goods sold of $150,000.What was the amount of beginning inventory?

Correct AnswerverifiedShow Answer

Which statement below is TRUE regarding the lower of cost or market rule?

Correct AnswerverifiedShow Answer

Which statement below is TRUE about the purchase of inventory?

Correct AnswerverifiedShow Answer

Rigby Company buys merchandise from Shoshone Company with an invoice cost of $10,000 and shipping terms of FOB shipping point.The freight costs amount to $1,000.Which of the following statements is TRUE?

Correct AnswerverifiedShow Answer

A company that uses the first-in,first-out method of valuing cost of goods sold must sell its older inventory before selling any of its newer inventory,even though some of the newer items may be more accessible.

Correct AnswerverifiedShow Answer

Which statement below is Strength in controls over inventory?

Correct AnswerverifiedShow Answer

Buy & Large,Inc.'s inventory activity in October was: Show the correct effect on the accounting equation of the October 25th sale of 25 units on account using the perpetual FIFO method of accounting for inventory.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedA.Tiny Toy is trying to increase sales f...View AnswerShow Answer

Which statement below best explains the credit terms of 2/10,n/30?

Correct AnswerverifiedShow Answer

Souper Bowls sold $500 of merchandise to a customer for cash.The sales tax was 5%.How much cash did Souper Bowls receive?

Correct AnswerverifiedShow Answer

Net sales is net of ________.

Correct AnswerverifiedShow Answer

Sales returns and allowances is a contra-asset account.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Match the items below with the appropriate statements.

Correct Answerverified1.FIFO: $2,390 = (200 X $2.50)+ (700 X $...View AnswerShow Answer

On January 5,Boise Cascade Company purchases $5,000 of merchandise from a vendor with credit terms of 2/10,n/30.If Boise Cascade pays the vendor on January 20,the amount of the payment should be ________.

Correct AnswerverifiedShow Answer

On December 29,Perch X,Inc.purchased $2,000 of merchandise from a supplier.The shipping terms were FOB shipping point.The merchandise did not arrive until after yearend.Perch X should ______.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedPart A:FIFO perpetu...View AnswerShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Buy & Large,Inc.'s inventory activity in October was: Show the correct effect on the accounting equation of the October 25^th sale of 25 units on account using the perpetual FIFO method of accounting for inventory.

Correct Answer
verified

Correct Answer
verified
A.Tiny Toy is trying to increase sales f...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
verified
1.FIFO: $2,390 = (200 X $2.50)+ (700 X $...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
verified
Part A:
FIFO perpetu...
View Answer