Ending inventory is equal to the cost of items on hand plus: Inventory items in
ID: 2572428 • Letter: E
Question
Ending inventory is equal to the cost of items on hand plus:
Inventory items in transit sold f.o.b. destination, which did not arrive to the buyer yet.
inventory purchased with f.o.b. destination, which did not arrive yet.
Inventory items in transit sold f.o.b. shipping point, which have been shipped to the buyer already.
None of these answer choices is correct.
4 points
QUESTION 2
In a period when costs are rising and inventory quantities are stable, the inventory method that would result in the highest ending inventory is:
Moving average.
Weighted average.
FIFO.
LIFO.
4 points
QUESTION 3
As of January 1, 2018, Barley Co. had a credit balance of $520,000 in its allowance for uncollectible accounts. Based on experience, 2% of Farley's gross accounts receivable have been uncollectible. During 2018, Farley wrote off $650,000 of accounts receivable. Barley's gross accounts receivable as December 31, 2018 is $18,000,000.
In its December 31, 2018, balance sheet, what amount should Farley report as allowance for uncollectible accounts?
$360,000.
$490,000.
$230,000.
$880,000.
4 points
QUESTION 4
Marilee's Electronics uses a periodic inventory system and the average cost retail method to estimate ending inventory and cost of goods sold. The following data is available from the company records for the month of June 2018:
The average cost-to-retail percentage is:
52.2%.
56.8%.
61.5%.
55%.
4 points
QUESTION 5
Poppy Co. uses a periodic inventory system. Beginning inventory on January 1 was understated by $30,000, and its ending inventory on December 31 was understated by $17,000.None of these errors were discovered until the next year. As a result, Poppy's cost of goods sold for this year was:
Understated by $13,000.
Overstated by $13,000.
Overstated by $47,000.
Understated by $47,000.
4 points
QUESTION 6
Fulbright Corp. uses the periodic inventory system. During its first year of operations, Fulbright made the following purchases (listed in chronological order of acquisition):
January 1, year 1: 40 units at $100
March 1, year 1: 70 units at $80
July 1, year 1: 170 units at $60
Sales for the year totaled 270 units, leaving 10 units on hand at the end of the year.
Ending inventory using the average cost method (rounded) is:
$1,000.
$707.
$550.
$600.
4 points
QUESTION 7
Cost of goods sold is given by:
Beginning inventory + accounts payable net purchases.
Net Purchases + beginning inventory ending inventory.
Beginning inventory net purchases + ending inventory.
Net purchases + ending inventory beginning inventory.
4 points
QUESTION 8
Calistoga Produce estimates bad debt expense at 0.5% of credit sales. The company reported accounts receivable and allowance for uncollectible accounts of $471,000 and $1,650, respectively, at December 31, 2017. During 2018, Calistoga's credit sales and collections were $315,000 and $319,000, respectively, and $1,720 in accounts receivable were written off.
Calistoga's ending balance in its allowance for uncollectible accounts at December 31, 2018, is:
$1,505.
$1,575.
$1,720.
$1,650.
4 points
QUESTION 9
In a perpetual inventory system, making the journal entry to record the purchase of inventory need to debited to:
Inventory.
Purchases.
Cost of goods sold.
Accounts payable.
4 points
QUESTION 10
In a perpetual inventory system, which of the following is recorded at the time of the sale?
Cost of goods sold only.
Sales revenue only.
Neither sales revenue or cost of goods sold.
Both sales revenue and cost of goods sold.
4 points
QUESTION 11
Important elements of an internal control system for cash disbursements include each of the following except:
All disbursements, other than very small disbursements, should be made by check.
All expenditures should be authorized before a check is prepared.
Only authorized personnel should sign checks.
The same person that prepares the check should also record it in the proper journal.
4 points
QUESTION 12
The balance in accounts receivable at the beginning of 2018 was $300. During 2018, $1,600 of credit sales were recorded. If the ending balance in accounts receivable was $250 and $100 in accounts receivable were written off during the year, the amount of cash collected from customers during 2018 was:
$1,650.
$1,900.
$1,550.
$1,600.
4 points
QUESTION 13
Retrospective treatment of prior years' financial statements is required when there is a change from:
Average cost to FIFO.
LIFO to average cost.
FIFO to average cost.
All of these answer choices are correct.
4 points
QUESTION 14
For companies using LIFO, inventory is valued at:
Cost.
Replacement cost.
Purchase price.
Lower of cost or market.
4 points
QUESTION 15
Net realizable value is selling price less costs of completion, disposal, and transportation.
True
False
4 points
QUESTION 16
Cash may not include:
Restricted cash.
Foreign currency.
Money orders.
Undeposited customer checks.
4 points
QUESTION 17
Data related to the inventories of Costco Medical Supply are presented below:
In applying the lower of cost or net realizable value rule, the inventory of rehab equipment would be valued at:
$315.
$340.
$225.
$250.
4 points
QUESTION 18
The allowance for uncollectible accounts is a:
Deferred charge to expense.
Contra asset account.
Deferred revenue account.
Quasi-liability account.
4 points
QUESTION 19
Under the retail method, in determining the cost-to-retail percentage for the current year:
Net markups are included.
Net markdowns are excluded.
Net sales are included.
All of these answer choices are correct.
4 points
QUESTION 20
Bond Company adopted the dollar-value LIFO inventory method on January 1, 2018. The ending inventory, valued at current cost and base-year cost, and the relative cost index for the two years following the adoption of LIFO is below:
Under the dollar-value LIFO method, the inventory at December 31, 2019, should be
$357,600.
$350,000.
$351,600.
None of these answer choices are correct.
4 points
QUESTION 21
Inventory does not include:
The cost of office equipment.
Materials used in the production of goods to be sold.
Assets currently in production for normal sales.
Assets intended to be sold in the normal course of business.
4 points
QUESTION 22
On November 10 of the current year, Flores Mills sold carpet to a customer for $8,000 with credit terms 2/10, n/30. Flores uses the gross method of accounting for cash discounts.
What entry would Flores Mills make on November 18 of the current year, assuming the customer made the correct payment on that date?
4 points
QUESTION 23
On July 8, a fire destroyed the entire merchandise inventory on hand of Larrenaga Wholesale Corporation. The following information is available:
What is the estimated ending inventory on July 8 immediately prior to the fire?
$490,000.
$192,000.
$510,000.
$280,000.
4 points
QUESTION 24
Collection of accounts receivable that previously have been written off results in an increase in cash and an increase in:
Bad debts expense.
Allowance for uncollectible accounts.
Retained earnings.
Accounts receivable.
4 points
QUESTION 25
On October 20 of the current year, Cherokee Industries sold materials to a customer for $8,000 with credit terms 2/10, n/30. Cherokee uses the net method of accounting for cash discounts.
What entry would Cherokee make on October 20?
Inventory items in transit sold f.o.b. destination, which did not arrive to the buyer yet.
inventory purchased with f.o.b. destination, which did not arrive yet.
Inventory items in transit sold f.o.b. shipping point, which have been shipped to the buyer already.
None of these answer choices is correct.
Explanation / Answer
1. Inventory items in transit sold f.o.b. destination, which did not arrive to the buyer yet.
2. FIFO
3. $18,000,000 x 2% = $360,000 + 520,000 - 650,000 = $230,000
4. BI 80k 130k
+Purchase 261k 500k
+Markup 25k
-Markdown (35k)
GAS 341k 620k
-Sales 520k
Estimated EI at Retail 100k
Estimated EI at cost = 100k * 55%=55k i.e. 55%
5. Understatement of beginning inventory understates (-) cost of goods sold and the understatement of ending inventory overstates (+) cost of goods sold
- $30,000 + 17,000 = -$13,000 understatement of cost of goods sold
6. (40 x $100 + 70 x $80 + 170 x $60) / (40 + 70 + 170) = $70.71
10 units x $70.71 = $707
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