Financial Accounting The Impact on Decision Makers 10e Gary A Porter Curtis L Norton - Test Bank Instant Download - Complete Test Bank With Answers Sample Questions Are Posted Below True / False 1. The three forms or states in the development of inventory for a manufacturer are direct materials, direct …
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Financial Accounting The Impact on Decision Makers 10e Gary A Porter Curtis L Norton – Test Bank
Instant Download – Complete Test Bank With Answers
Sample Questions Are Posted Below
| True / False |
1. The three forms or states in the development of inventory for a manufacturer are direct materials, direct labor, and finished goods.
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| 2. The three distinct types of cost to a manufacturer are direct materials, direct labor, and manufacturing overhead.
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3. Gross margin as a percentage of sales is a common analytical tool for service companies.
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4. Sales revenue is an inflow of assets.
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5. If a customer returns merchandise which has already been paid for, the retailer may give either a cash refund or a credit on account.
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6. Sales Returns and Allowances is a contra-asset account.
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7. Credit terms of n/30 mean that the net amount of the invoice, less any returns or allowances, is due within 30 days of the date of the invoice.
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8. On the income statement of a merchandising company, cost of goods is added to net sales to arrive at gross margin or gross profit.
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9. Like sales revenue, cost of goods sold represents an inflow of assets.
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10. Cost of goods sold represents an outflow of an asset, inventory, from the sale of products.
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11. If cost of goods sold does not equal the cost of merchandise purchased during the period, an adjustment must be made to correct the error.
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12. Net purchases equal purchases less purchase return, allowances, and discounts plus transportation-in.
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13. Cost of goods sold is the difference between costs available for sale and beginning inventory.
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14. With the periodic inventory system, the inventory account is updated after each sale or purchase.
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15. Under the periodic inventory system, a physical inventory must be taken at the end of the period to determine cost of goods sold.
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16. Under the perpetual inventory system, each time goods are purchased, the inventory account is transferred to sales revenue.
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17. A company using the periodic inventory system must total the selling prices of the units on hand at the end of the period to value the ending inventory.
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18. Purchase returns and allowances is subtracted from cost of goods sold to determine net purchases.
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19. Purchase discounts decrease the total cost of merchandise acquired.
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20. The buyer must include goods purchased FOB shipping point in its inventory account if the goods are still in transit.
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21. When merchandise is sold FOB shipping point, the buyer is responsible for the shipping costs.
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22. Cost of goods available for sale is equal to beginning inventory less cost of goods sold.
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23. The gross profit ratio is computed by dividing net sales by gross profit.
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24. The gross profit ratio is calculated as gross profit divided by net income.
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25. It important that the proper amount be assigned to inventory because the amount assigned to inventory will affect the amount eventually recorded as net sales.
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26. The inventory method that assigns the most recent costs to ending inventory is LIFO.
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27. The weighted average cost is calculated by adding up the units’ costs from each purchase and then dividing by the number of purchases.
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28. Under FIFO, the units in the ending inventory represent the oldest purchase(s).
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29. Specific identification relies on matching unit costs with the actual units sold.
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30. Under LIFO, the units in the ending inventory represent the most recent purchase(s).
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31. Changing inventory methods to take advantage of the tax breaks offered by LIFO is not a valid reason for a change in methods.
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32. A LIFO liquidation occurs when a company sells fewer units than it buys during the period.
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33. According to the IRS’s LIFO conformity rule, a company that chooses LIFO to report net income to its shareholders may not use LIFO in preparing its income tax return.
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34. A LIFO reserve represents the amount by which cost of goods sold on a FIFO basis exceeds the cost of goods sold on a LIFO basis for the current year.
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35. FIFO results in the least amount of income before taxes, assuming a period of rising prices.
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36. The LIFO conformity rule requires that if a company uses LIFO in reporting income to stockholders, it also must use LIFO on its tax return.
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37. Many countries prohibit the use of LIFO for tax or financial reporting purposes.
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38. A counterbalancing inventory error is one where the error on the balance sheet is offset by the same amount of error on the income statement.
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39. If ending inventory is understated, then cost of goods sold is overstated.
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40. If ending inventory is overstated, then net income is overstated as well.
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41. The lower of cost or market (LCM) rule violates the historical cost principle.
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42. The journal entry to write down inventory to its market value results in a loss on the income statement.
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43. Both U.S. GAAP and international financial reporting standards (IFRS) require the use of the lower-of-cost-or-market rule to value inventories.
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44. The inventory turnover ratio is defined as cost of goods sold divided by average inventory.
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45. The inventory turnover ratio is a measure of how many times during a period a company sells off its inventory.
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46. Under the indirect method, a decrease in inventory is added to net income to determine cash flow from operating activities.
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47. If a change in accounts payable was added back to net income on the statement of cash flows prepared using the indirect method, then the amount owed to suppliers during the period had decreased.
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48. Moving average is the name given to the use of an average cost method used with a periodic inventory system.
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49. Whether LIFO costing is applied at the time each sale is made or only at the end of the period, both the periodic and perpetual systems will yield the same ending inventory under LIFO.
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50. Ending inventory valued under the FIFO method will be the same regardless of whether the periodic system or the perpetual system is used.
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51. Finished goods are the equivalent of merchandise inventory for a retailer or wholesaler in that both represent the inventory of goods held for sale.
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52. When inventory is sold by a wholesaler or retailer, it is recorded in a different account on the income statement than a manufacturer would use.
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53. Assets are unexpired costs, and expenses are expired costs.
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54. The value assigned to an asset such as inventory on the balance sheet determines the amount eventually recognized as an expense on the income statement.
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55. The effect of a misstatement of the year-end inventory is limited to the net income for that year.
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56. If a company has a number of day’s sales in inventory equal to 60, that means that it takes about two months on average to sell its inventory.
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57. Under the indirect method, an increase in accounts payable is added to net income to determine cash flow from operating activities.
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| 58. If the direct method is used to prepare the Operating Activities category of the statement of cash flows, the amount of cash paid to suppliers of inventory is shown as an addition in this section of the statement.
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59. The inventory costing method is applied after each sale of merchandise to update the Inventory account.
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60. The lower the inventory turnover ratio, the less time inventory resides in storage.
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| Multiple Choice |
61. Which one of the following types of inventory accounts would be used by a wholesaler or retailer?
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62. The inventory account a manufacturer uses to record the cost of products completed and available for sale is called
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63. Items should be reported as part of the company’s “inventory” at year end, if they are
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64. For what reason might retailers like Target select an accounting period that ends on or near the end of January?
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65. Which one of the following accounts most likely would appear on the income statement of a merchandise company, but not on the income statement of a service company?
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66. Which one of the following ratios is a common analytical tool used by merchandise corporations, but not by service corporations?
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67. A customer returned damaged goods for credit. Which of the seller’s accounts decreases?
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68. Travelli Co. sold merchandise to Trapani Co. on account, $17,000, terms 2/15, net 45. The cost of the merchandise sold is $15,400. Tavella Co. issued a credit memo for $1,750 for merchandise returned that originally cost $1,400. The Trapani Co. paid the invoice within the discount period. What is amount of net sales from the above transactions?
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69. A company using the periodic inventory system has the following account balances: Merchandise Inventory at the beginning of the year, $3,600; Freight-In, $650; Purchases, $10,700; Purchases Returns and Allowances, $1,950; Purchases Discounts, $330. The cost of merchandise purchased is equal to
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70. Using the following information, what is the amount of cost of goods sold?
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71. Which of the following terms best describes “Cost of goods available for sale”?
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72. Ending inventory is equal to the cost of items on hand plus
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Takenson Corp.
Takenson Corp. is a merchandising company that uses the periodic inventory system. Selected account balances are listed below:
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| 73. Refer to information for Takenson Corp.
Calculate the cost of goods sold for Takenson Corp.
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| 74. Refer to the information for Takenson Corp.
Calculate the gross profit.
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| 75. Refer to the information for Takenson Corp.
Calculate net income.
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George’s Department Store
George’s Department Store is a merchandising company that uses the periodic inventory system. Selected account balances are listed below:
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| 76. Refer to the account information for George’s Department Store.
Calculate George’s net sales.
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| 77. Refer to the account information for George’s Department Store Calculate George’s cost of goods purchased
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| 78. Refer to the account information for George’s Department Store. Determine George’s gross profit.
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79. Anthony’s Shoe Company uses a perpetual inventory system. The beginning balance in its inventory account is $1,500 and the ending balance is $1,000. Cost of goods sold is $6,500. What was the amount of inventory purchased during the year?
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80. What effects on a retail store’s accounting equation occur when merchandise returned by customers is recorded?
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81. Vern Corp. sold merchandise to a customer on credit. The invoice amount was $2,000; the invoice date was June 10; credit terms were 1/20, n/30. Which one of the following statements is true?
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| 82. Grinn, Inc. offers terms of 2/10, n/30 to credit customers. Great Buy Corp. purchased 100 tile cutters with a list price of $20 each on March 5, 2016, on account. If Great Buy Corp. pays the amount of the invoice for its purchase on March 14, 2016, how much cash will Grinn receive from Great Buy Corp.?
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83. Floors, Inc. offers terms of 2/10, n/30 to credit customers. Tile Magic Corp. purchased 100 tile cutters with a list price of $20 each on August 5, 2016, on account. Tile Magic Corp. paid the invoice on August 31, 2016. How much sales discount will Floors recognize?
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84. Blenham, Inc. sells merchandise on credit. If a customer pays its balance due within the discount period, what is the effect of the payment on Blenham’s accounting equation?
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85. Blenham, Inc. sells merchandise on credit. If a customer pays its balance due after the discount period has passed, what is the effect of the payment on Blenham’s accounting equation?
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86. Sales Discounts is classified as what type of account?
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87. When an inventory system updates the Inventory account at the time of each sale, this is known as:
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88. Cost of goods sold is equal to
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89. The recognition of cost of goods sold expense in the same period that sales revenue is recognized from the sale of merchandise is a good example of the
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90. The following is from Goldman Inc.’s 2016 income statement.
How much will Goldman report as cost of goods purchased in its 2016 income statement?
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91. The following is from Goldman Inc.’s 2016 income statement.
How much will Goldman report as its cost of goods sold in its 2016 income statement?
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92. In a periodic inventory system, the cost of purchases is recognized as
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93. The cost of goods sold is
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94. Which one of the following statements is false?
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95. Chamberlain Company buys designer clothing to sell in its retail stores. Since much of the merchandise comes from Dallas and Europe, Chamberlain Company must pay freight charges to get the merchandise shipped in. Which statement is true?
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96. In order to determine inventory for its balance sheet, it is best for a company to count the inventory at the end of its accounting period for
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97. Which one of the following is correct?
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98. Texas Inc. sold merchandise to Fagin Corp. on December 28, 2016, with shipping terms of FOB destination. Fagin Corp. received the merchandise on January 3, 2017. Which one of the following statements is true?
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99. How are purchase discounts and purchase returns recorded by a company using the periodic inventory system?
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| 100. Park, Inc. purchased merchandise from Jay Zee Music Company on June 5, 2016. The goods were shipped the same day. The merchandise’s selling price was $15,000. The credit terms were 1/10, n/30. The shipping terms were FOB shipping point. Park received the merchandise on June 10, 2016. Park paid the amount due on June 13, 2016.
Park uses a perpetual inventory system. When will the cost of merchandise sold be recorded as an expense?
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| 101. Park, Inc. purchased merchandise from Jay Zee Music Company on June 5, 2016. The goods were shipped the same day. The merchandise’s selling price was $15,000. The credit terms were 1/10, n/30. The shipping terms were FOB shipping point. Park received the merchandise on June 10, 2016. Park paid the amount due on June 13, 2016.
Park uses the periodic inventory system. What effect does recording the purchase of merchandise on June 5, 2016 have on Park’s accounting equation?
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| 102. Park, Inc. purchased merchandise from Jay Zee Music Company on June 5, 2016. The goods were shipped the same day. The merchandise’s selling price was $15,000. The credit terms were 1/10, n/30. The shipping terms were FOB shipping point. Park received the merchandise on June 10, 2016. Park paid the amount due on June 13, 2016.
If Park uses the periodic inventory system, the effect of recording the payment on June 13, 2016, will include
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| 103. Park, Inc. purchased merchandise from Jay Zee Music Company on June 5, 2016. The goods were shipped the same day. The merchandise’s selling price was $15,000. The credit terms were 1/10, n/30. The shipping terms were FOB shipping point. Park received the merchandise on June 10, 2016. Park paid the amount due on June 13, 2016.
When did title to the merchandise transfer from Jay Zee Music Company to Park?
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| 104. Park, Inc. purchased merchandise from Jay Zee Music Company on June 5, 2016. The goods were shipped the same day. The merchandise’s selling price was $15,000. The credit terms were 1/10, n/30. The shipping terms were FOB shipping point. Park received the merchandise on June 10, 2016. Park paid the amount due on June 13, 2016.
Who is responsible for payment of the transportation costs on the merchandise sold by Jay Zee Music to Park?
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105. Herndon Corp. purchased merchandise on account from Likert Corp. on November 18, 2016. On November 21, 2016, Herndon returned damaged merchandise to Likert and was granted an adjustment on its account. Herndon uses the periodic inventory system. What effect does the merchandise return have on Herndon’s accounting equation?
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106. Transportation-in is
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107. Which one of the following is not a contra account?
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108. Sherman, Inc. counted its ending inventory as $178,000 at year-end, January 31, 2016. Upon review of the records, it was noted that the following items were in transit during the count:
Determine the correct inventory balance at January 31.
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109. At the year end inventory count, if goods in transit are shipped FOB destination, they should be included in the inventory count of
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110. At the year end inventory count, if goods in transit are shipped FOB shipping point, they should be included in the inventory count of
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111. Many companies assign only the net invoice price for merchandise to inventory and cost of goods sold. All other costs, including transportation and other costs of bringing merchandise to the place of business, are charged to expense of the period in which they are incurred. Which accounting principle or concept is applied in this example?
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112. In order to evaluate a company’s gross profit ratio,
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113. All of the following statements regarding the gross profit ratio are true except:
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114. The ending inventory balance represents
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115. Cost of goods sold represents
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116. The Ramien Store held inventory items at the end of 2016. Which items should Ramien include as part of its total inventory cost?
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117. Which one of the following statements is true?
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118. Which method assigns the cost of the most recent items purchased to ending inventory?
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119. Which method assigns the cost of the most recent items purchased to cost of goods sold?
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120. Roki Inc. uses the periodic inventory system.
If the June 30th inventory included 45 units from the June 5th purchase and 45 units from the June 14th purchase, Roki’s cost of goods sold for June under the specific identification method would be
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121. Which method assigns the same cost to all units whether sold or left in ending inventory?
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122. For which type of inventory would a company most likely use the specific identification method?
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123. Roki Inc. uses the periodic inventory system.
If Roki uses the FIFO inventory method, the amount assigned to the June 30 inventory would be
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124. Roki Inc. uses the periodic inventory system.
If Roki uses the weighted average cost inventory method, the amount assigned to the June 30th inventory would be
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125. Roki Inc. uses the periodic inventory system.
If Roki uses the LIFO inventory method, the cost of goods sold for June would be
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126. Roki Inc. uses the periodic inventory system.
How many units did Roki, Inc. sell during June?
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127. Quan uses a periodic inventory system. At the end of April, Quan had 20 units on hand.
If Quan, Inc. uses FIFO inventory costing, how much is cost of goods sold for April?
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128. Quan uses a periodic inventory system. At the end of April, Quan had 20 units on hand.
If Quan, Inc. uses the weighted average cost inventory method, how much is cost of goods sold for April?
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129. Quan uses a periodic inventory system. At the end of April, Quan had 20 units on hand.
If Quan uses the LIFO inventory method, how much is inventory on the balance sheet as of April 30?
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130. A major advantage of the weighted average method of inventory costing is that
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131. Which method of inventory costing is not acceptable for financial accounting purposes?
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132. Which inventory costing method results in the highest inventory balance during a period of rising prices?
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133. Which method might allow a company to make significant inventory purchases at year end for the purpose of manipulating income?
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134. Which inventory costing method results in the lowest income tax expense during a period of decreasing prices?
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135. During a period of increasing cost prices, which inventory costing method will yield the lowest cost of goods sold?
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136. Xu Corp. started business at the beginning of 2016. Xu selected the FIFO method for its inventory. In order to maximize its profits for 2016 under this method, prices must be
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| 137. Federal income tax rules allow businesses to use different inventory costing methods for tax reporting and financial reporting with one exception. Which of the following situations is not allowed by federal income tax rules?
Inventory Method Inventory Method
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138. Summer, Inc. has been in business for 20 years. During that time the company has consistently used the LIFO inventory costing method. Because of inflation, prices for merchandise have increased consistently over the 20 years. The company has maintained the same inventory quantities over the 20-year period. Which one of the following statements is true?
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139. Which one of the following statements regarding changing inventory methods is true?
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140. If cost of goods sold under FIFO was $8,000 and was $10,000 under LIFO, assuming a tax rate of 40%, how much tax savings resulted from using LIFO?
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141. Which one of the following statements is false?
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142. When would LIFO liquidation occur?
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143. Accountants should be aware that LIFO liquidations can potentially result in which of the following?
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144. Zebra Company overstated its December 31, 2016 inventory by $5,200. Which statement is true concerning Zebra’s financial statement amounts for 2016?
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145. If the amount assigned to ending inventory is incorrect,
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146. A company fails to record one storeroom full of inventory in its year-end inventory records. As a result, this will cause:
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147. Hawk Store counted some of its inventory twice. As a result, its operating expenses will be
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| 148. If a company overstates its ending inventory for the current year, what are the effects on cost of goods sold and net income for the current year?
Effect on Cost of Goods Sold Effect on Net Income
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| 149. If a company understates its ending inventory balance for 2016 by $15,500, what are the effects on its net income for 2017 and 2016?
Effect on 2017 Net Income Effect on 2016 Net Income
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| 150. If a company overstates its ending inventory balance for 2017 by $10,000, and understates its ending inventory balance for 2016 by $5,000 what are the effects on its net income for 2017 and 2016?
Effect on 2017 Net Income Effect on 2016 Net Income
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| 151. If a company overstates its ending inventory balance for 2017 by $10,000, and overstates its ending inventory balance for 2016 by $5,000 what are the effects on its net income for 2017 and 2016?
Effect on 2017 Net Income Effect on 2016 Net Income
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152. When the market value of inventory items has declined below its cost, which method would be the most appropriate in complying with GAAP?
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153. When inventories are written down due to the application of the lower of cost or market (LCM) rule, the account that is usually increased is
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154. Which one of the following statements regarding the application of the lower of cost or market method is true?
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155. All of the following statements are true except:
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156. Which of these is not an acceptable inventory costing method under IFRS?
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157. Selected data for Sorenta, Inc. and New World Corp., two companies in the same industry, are presented below:
Based on this data, which statement below is true?
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158. Caruso, Inc. has an inventory turnover rate of 8 times. If its cost of goods sold is $150,000, then
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159. A company began the year with $150,000 in inventory and ended the year with $170,000 in inventory. Cost of goods sold for the year amounted to $960,000. Assuming 360 days in a year, how long, on average, does it take the company to sell its inventory (to the nearest day)?
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160. The following information is reported in the operating activities section of Gateway’s statement of cash flows for 2016:
Which one of the following conclusions can be assumed from the information provided?
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161. The following information was taken from the operating activity section of the 2016 statement of cash flows for Limited Corp:
Based on the information provided, which one of the following conclusions is correct?
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162. Payment for the acquisition of inventories is shown on the statement of cash flows as
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163. Which of the following statements is true when using the indirect method of preparing the operating activities section of the statement of cash flows?
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164. Readers.com uses a perpetual inventory system.
If Readers.com uses the moving average method, how much is cost of goods sold for the units sold on February 15?
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165. Readers.com uses a perpetual inventory system.
If Readers.com uses the moving average method, how much is ending inventory on February 28?
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166. Adam Inc. uses a perpetual inventory system.
If Adam uses the FIFO method, how much is cost of goods sold for the month of January?
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167. Adam Inc. uses a perpetual inventory system.
If Adam uses the LIFO method, how much is cost of goods sold for the month of January?
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168. Adam Inc. uses a perpetual inventory system.
If Adam uses the FIFO method, how much is ending inventory on January 31?
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169. Which one of the following best explains the distinction between inventory and an operating asset?
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170. Which one of the following would not be found as an asset on the balance sheet of a manufacturer?
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171. Which one of the following statements is false regarding the gross profit ratio?
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172. Which of the following would not be included in inventory costs?
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| Completion |
173. The inventory of a(n) ____________________ consists of three distinct types of costs: direct materials, direct labor, and manufacturing overhead.
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174. Sales returns and allowances is a contra ____________________ account.
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175. A _________________________ is an amount deducted by customers for payment within the discount period.
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176. Cost of goods sold is equal to beginning inventory plus the net cost of purchases minus _________________________.
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177. Under the ____________________ inventory system, the inventory account is updated after each purchase or sale.
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178. The cost of goods purchased is equal to net purchases plus ____________________.
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179. Shipping terms of ___________________________________ mean that the buyer pays shipping costs.
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180. The amount recognized on the Income Statement as the cost of inventory will be recognized as a(n) _________________________.
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181. When a company using LIFO experiences a partial or complete liquidation of its older, lower-priced inventory, its gross margin will be ____________________ (higher, lower, or unchanged) for the period.
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182. The ____________________ method most nearly approximates replacement cost of inventory on the balance sheet.
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183. The excess of the value of a company’s inventory stated at FIFO over the value stated at LIFO is called a(n) _________________________.
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184. The ____________________ method results in the best approximation of replacement cost of goods sold on the income statement during periods of rising prices.
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185. The understatement of ending inventories in one period leads to a(n) ____________________ of cost of goods sold expense in the same period.
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186. A departure from the cost basis of accounting may be necessary when the _________________________ of the inventory is less than its cost to the company.
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187. Accountants define the market value of inventory as its ______________________________.
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188. The ratio of a company’s cost of goods sold to its average inventory is called its ________________________________________.
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189. Under the ____________________ method, the amount of cash paid to suppliers of inventory is shown as a deduction in the operating activities category of the cash flow statement.
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190. Under the ____________________ method, an increase in inventory is shown as an adjustment to net income in the operating activities category of the cash flow statement.
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191. When a weighted average cost assumption is applied with a perpetual system, it is sometimes called a __________________.
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| Matching |
Match the inventory-related accounts to costs that may be included in inventories for retailers and manufacturers.
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192. Cost of completed, but unsold items.
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193. Costs of direct materials, overhead, and direct labor used in goods that have been sold.
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194. Costs of direct materials, overhead, and direct labor used in unfinished goods.
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195. Cost of materials which are not yet entered into the production process.
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196. Costs to purchase goods ready to sell.
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Match the terms with the descriptions related to merchandise sales and purchases.
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197. The buyer must pay the shipping costs.
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198. The seller is responsible for the cost of delivering the merchandise to the buyer.
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199. Requires updating of the inventory account at the time of each purchase and each sale.
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200. Shipping costs paid to acquire merchandise.
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201. Relies on a count of inventory on the last day of the year to determine amount on hand.
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Maxim Company sells auto parts. The company employs a periodic inventory system. Identify all the effects on the accounting equation.
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202. Sold merchandise on credit to customers.
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203. Granted a customer a credit on its balance due for goods that were returned.
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204. Gave a customer a cash refund.
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205. Recorded cash sales for the day.
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Match the costs that might be included as part of the cost of inventory to the listed accounting treatment.
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206. Cost of insurance during transit to acquire inventory items
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207. Excise taxes paid on goods acquired
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208. Cost of storing the goods before they are sold to customers
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209. Invoice price paid for resale goods
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210. Freight costs incurred by the buyer to ship goods to its place of business
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211. Freight costs incurred by the seller to ship goods to its customers
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212. Income taxes paid on profits earned from selling goods to customers
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213. Sales taxes paid on goods acquired
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Identify which inventory costing method (LIFO or FIFO) achieves the effect listed in the following items:
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214. Prices are rising; profits are higher with this method.
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215. Prices are declining; income taxes are higher with this method.
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216. Prices are rising; cost of goods sold is lower with this method.
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217. Prices are declining; gross margin is higher with this method.
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| Subjective Short Answer |
| 218. During the current period, Mercado Corp. sold products to customers for a total of $76,000. Due to defective products, customers were given $2,800 in refunds for products that were returned and another $3,500 in reductions to their account balances. Discounts in the amount of $5,500 were given for early payment of account balances.
REQUIRED:
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219. Based upon the following data, determine the cost of merchandise sold for April.
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220. Complete the following data taken from the condensed income statements for merchandising companies: Action, Break, & Connors.
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221. For each of the following, calculate the cost of inventory reported on the balance sheet.
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222. Hound Dog Bisquits reported the following financial data for 2016 and 2017:
Provide the answer for each missing letter above.
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223. Presented below is a partially completed income statement of Lake, Inc. for 2016.
Using the partially completed income statement for Lake, Inc., determine each of the following for 2016.
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224. The cost of goods sold for Johnnie, Inc. totaled $1,305,000. Sales returns and purchase returns were $3,000 and $4,000, respectively. Purchases totaled $1,300,000. Discounts taken by Johnnie totaled $7,000, while discounts taken by customers totaled $5,000. Beginning inventory was $90,000. Determine the amount of ending inventory to be reported on Johnnie, Inc.’s balance sheet.
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225. Gently Used Cars is a dealer that uses the periodic inventory system. The data presented below is from the accounting records of Gently for the year ended December 31, 2016.
Using the amounts provided above, calculate the cost of goods sold for 2016.
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Grappa, Inc.
Grappa, Inc. reported the following information for 2017 and 2016:
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| 226. Refer to the information for Grappa, Inc.
How much is the cost of purchases for 2017?
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| 227. Refer to the information for Grappa, Inc.
What amount is cost of goods available for sale for 2017?
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| 228. Refer to the information for Grappa, Inc.
How much is cost of goods sold for 2017?
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| 229. Refer to the information for Grappa, Inc.
How much is net sales for 2017? What other components that Grappa did not report could be included in this computation?
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| 230. Refer to the information for Grappa, Inc.
How much of every dollar is gross profit for 2017?
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| Cooking Corner
Cooking Corner reported inventory on its balance sheet at December 31, 2015 at $32,000. During 2016, Cooking Corner purchased goods totaling $634,000 on account with terms of 2/10, n/30, FOB shipping point. Total charges paid by Cooking Corner directly to the freight company were $1,000. At the end of 2016, inventory on hand totaled to $45,000. Net sales for 2016 totaled $1,300,000. Cooking Corner employs a periodic inventory system. |
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| 231. Refer to the information about Cooking Corner.
How much would Cooking Corner pay its supplier if Cooking Corner paid for one-half of the goods acquired within the discount period, and the other half after the expiration of the discount period?
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| 232. Refer to the information about Cooking Corner.
How much is cost of goods available for sale for 2016 assuming Cooking Corner takes advantage of one-half of the cash discounts?
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| 233. Refer to the information about Cooking Corner.
How much is Cooking Corner’s cost of goods sold assuming that Cooking Corner takes advantage of one-half of the cash discount?
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Digital Forces
Selected data from the financial statements for Digital Forces is presented below.
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| 234. Refer to the financial statement information for Digital Forces. Determine the dollar amount of cost of goods purchased for Digital Forces for 2017.
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| 235. Refer to the financial statement information for Digital Forces.
What portion of every dollar is available to cover operating costs and to contribute to profits for 2017?
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236. The following data is available for one of the products sold by Wild Optics Company, which uses the periodic inventory system:
At the end of December, Wild Optics had 25 units on hand. The 75 units sold created revenue of $13 each. Determine the amounts for the December 31 ending inventory, the cost of goods sold for December, and the gross margin for December for each of the inventory costing methods listed below.
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237. School Time Corp. completed a physical inventory at the end of 2016. A review of the physical inventory procedures and records uncovered several errors that are described below. In the columns provided, indicate the effect, if any, on the four financial statement items listed. Use the following codes for your answers:
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238. The cost of Garmin Corp.’s inventory at the end of the year was $85,000; however, due to obsolescence, the cost to replace the inventory was only $65,000. Prepare the journal entry needed at the end of the year.
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| 239. Carrington, Inc. began the year with $130,000 in merchandise inventory and ended the year with $190,000. Sales and cost of goods sold for the year were $900,000 and $640,000, respectively. (Use a 360 day year in your calculations.)
Required:
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| Learning Tree, Inc. The following data is available for one of the products sold by Learning Tree, Inc., which uses the perpetual inventory system:
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| 240. Refer to the data for Learning Tree, Inc.
If the moving average method is used, what is the amount assigned to cost of goods sold for the 2,500 units sold on May 10?
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| 241. Refer to the data for Learning Tree, Inc. If the moving average method is used, what is the amount assigned to the ending inventory on May 30?
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| 242. Refer to the data for Learning Tree, Inc.
If the LIFO method is used, what is the amount assigned to cost of goods sold for the 2,500 units sold on May 10?
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| 243. Refer to the data for Learning Tree, Inc.
If the LIFO method is used, what is the amount assigned to the ending inventory on May 30?
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| 244. Refer to the data for Learning Tree, Inc. Explain why the amounts for ending inventory are different under the two average cost methods—weighted average (periodic) and moving average (perpetual).
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| 245. Refer to the data for Learning Tree, Inc.
Explain why the amounts are different for LIFO under periodic and perpetual inventory systems.
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Share, Inc.
The following data is available for one of the products sold by Share, Inc., which uses a perpetual inventory system.
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| 246. Refer to the data for Share, Inc. If the moving average method is used, how much is cost of goods sold for May?
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| 247. Refer to the data for Share, Inc.
If the moving average method is used, how much is ending inventory on May 30?
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| 248. Refer to the data for Share, Inc.
Required:
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| 249. Refer to the data for Share, Inc.
If the LIFO method is used, how much is cost of goods sold for May?
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| Essay |
250. Describe how the inventories of manufacturers differ from the inventories of retailers.
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251. Several transactions of sales and purchase activities for Genoa Department Store are described below.
Required: For each transaction described above, describe the economic effects of the transaction on the company under a periodic inventory system.
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| 252. Flores Department Store currently uses the periodic inventory system.
Required: Explain what the advantages would be to Flores if it uses the perpetual inventory system. Assume that Flores can use a computer system which is linked to its cash registers and that all products have bar codes that can be read by bar code readers attached to the cash registers.
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| 253. Giant-Mart purchased a big shipment of shoes from Right Balance, Inc. on credit near the end of its accounting period. Right Balance shipped the shoes in January and Giant-Mart received the shoes in February. Assume that Giant-Mart’s accounting period ends on January 31, while Right Balance’s accounting period ends on May 31.
Required: If the shoes are shipped FOB destination, who will pay the freight costs? If the shoes are shipped FOB shipping point, who will pay the freight costs?
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| 254. Giant-Mart purchased a large shipment of shoes from Primus, Inc. on credit near the end of its accounting period. Primus shipped the shoes in January and Giant-Mart received the shoes in February. Assume that Giant-Mart’s accounting period ends on January 31, while Primus’ accounting period ends on May 31. Answer each independent question in the set that follows. Required: If the shoes are shipped FOB destination, when should Giant-Mart record the purchase? If the shoes are shipped FOB shipping point, when should Giant-Mart record the purchase?
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| 255. Giant-Mart purchased a large shipment of shoes from Primus, Inc. on credit near the end of its accounting period. Primus shipped the shoes in January and Giant-Mart received the shoes in February. Assume that Giant-Mart’s accounting period ends on January 31, while Giant’s accounting period ends on May 31. Answer each independent question in the set that follows. Required: Under what shipping terms would Giant-Mart include the shoes as part of inventory on its January 31 balance sheet?
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256. Explain the relationship between the valuation of inventory and income measurement as it relates to the balance sheet and the income statement.
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257. In the following information from the 2017 annual reports of Focal Point Industries all figures have been rounded to millions of dollars.
Required: (2) Even though the footnote describing the inventory costing method(s) used by Focal Point Industries is not provided above, what can you conclude about the inventory costing method(s) used by the company?
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258. In the following information from the 2017 annual reports of Focal Point Industries all figures have been rounded to millions of dollars.
Required: (2) What method of determining cash flows from operating activities has Focal Point Industries used in preparing its statement of cash flows? Explain your answer. (3) From 2016 to 2017, what change in the inventory balance (increase or decrease) occurred in each year as a result of operating activities? What was the effect on the company’s cash flow each year as a result of the inventory change?
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259. What is LIFO inventory liquidation? Why is it important to disclose the effects of a LIFO inventory liquidation
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260. Carrington Inc. manufactures digital cameras and has experienced noticeable declines in the purchase price of many of the components it uses, including memory components. Which inventory costing method should Carrington use if it wants to maximize net income? Explain your answer.
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261. If an entity overstates its ending inventory for the current year, what are the effects on assets, cost of goods sold, income before taxes, and retained earnings for the current year?
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262. Assume that a company is experiencing increasing inventory prices and prepares its financial statements in accordance with IFRS. Which costing method should it use to pay the least amount of taxes? Explain your answer.
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263. Bower Corp.’s cost of sales has remained steady over the last two years. During this same time period, however, its inventory has increased considerably. What does this information tell you about the company’s inventory turnover? Explain your answer.
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Original price was: $30.00.$20.00Current price is: $20.00.
Original price was: $30.00.$20.00Current price is: $20.00.
Original price was: $30.00.$20.00Current price is: $20.00.
Original price was: $30.00.$20.00Current price is: $20.00.
Original price was: $30.00.$20.00Current price is: $20.00.
Original price was: $30.00.$20.00Current price is: $20.00.
