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ewelers uses the perpetual inventory system. On April 2, Forever sold merchandis

ID: 2540715 • Letter: E

Question

ewelers uses the perpetual inventory system. On April 2, Forever sold merchandise tomer on account with berms of 2/15, In/30. Which of the with a cost of $4,500 for $7,500 to a cus following joumal entries correstly records the sales revenue A) Sales Revenoe Cost of Goods Sold B) Accounts Receivable C) Sales Revenue D) 15) Which of the following inventory valusation methods should be used for unique, easily identified inventory isems? A) last-in, first-out C) specific identification U) weighted-average D) first-in, first-out 19) Which of the folowing states that the business should use the same accounting methods fromm period to period? A) materiality concept C) consistency principle B) disclosure principle 20) Which of the following is an application of conservatise A) reporting only material amounts in the financial statements B) using the same depreciation method from period to period C) reporting all relevant information in the financial stabements D) reporting inventory at the lower of cost or market 21) Which of the following inventory costing methods results in the highest value of ending inventory during a period of rising inventory costs? A) last-in, first-out C) weighted-average B) first-in, first-out D) specific identification 22) Martha, Inc. had 20,000 units of ending inventory that were recorded at the cost of $7.00 per unit using the FIFO method. The current replacement cost is $$4 50 per unit. Which of the following amounts would be reported as ending Merchandise Inventory on the balance sheet using the lower-of-cost-or-market rule? A) $230,000 B) $140,000 C) $160,000 D) $90,000 23) Ending inventory for the current accounting period is overstated by $1,500. What effect will this error have on Cost of Goods Sold and Net Income for the current accounting period? A) B) derstated C) D) verstated

Explanation / Answer

17. Answer : B

Account Receivables $7350

Sales Revenue $7350

18. Answer : C Specific identification

19. Answer : C Consistency Principle

20. Answer : D Reporting inventory at the lower of cost or market

21. Answer : B first-in, first- out (because you wouldve already gotten rid of the ones that were older, so the "last/most recent" ones would be left)

22. Answer : D $90,000 (20000 x $4.50)

23. Answer : A COGS - Understated & Net Income - Overstated