final exam acct

The financial statements of a merchandising company will? show:

inventory as a current asset on the balance sheet.

The cost of the inventory that a business has sold to customers is? called:

cost of goods sold

The cost of inventory that is still on hand is? called:

?inventory, a current asset that appears on the balance sheet.

Another term for gross profit? is:

gross margin.

Two accounts that appear on the financial statements of a merchandising company but are not needed by a service company? are

cost of goods sold and inventory.

Sales revenue is based on the? ________ of the? inventory, while cost of goods sold is based on the? ________ of the inventory.

sale? price; cost

Which is the CORRECT order for items to appear on the income? statement?

sales? revenue, cost of goods? sold, gross? profit, operating expenses

A periodic inventory? system:

is all of the above.

The inventory system that uses computer software to keep a running record of inventory on hand is? the:

perpetual inventory system.

Under a perpetual inventory? system, when a sale is? made, the seller needs to? prepare:

two journal entries.

How do purchase returns and allowances and purchase discounts affect gross? purchases?

Both are subtracted from purchases.

Which of the following is NOT used to determine the cost of net? purchases?


When inventory is shipped from the seller to the buyer with shipping terms of FOB? destination:

the seller has title to the goods while they are in transit.

Company A has inventory out on consignment and held for sale by Company B. Which company will include the goods in their? inventory?

Company A

Using a perpetual inventory? system, which journal? entry(ies) is(are) prepared when two units of merchandise are sold on? account?

debit Accounts Receivable and credit Sales? Revenue; debit Cost of Goods Sold and credit Inventory

Under a perpetual inventory? system, the journal entry to record the purchase of inventory on account will include? a:

debit to Inventory and a credit to Accounts Payable

The selling price of a television is $1,500 and the cost to the retailer is $225. What is the? retailer's gross profit from the sale of the? television?


Sanfran Company purchased inventory for $130,000. In addition they had purchase returns of$7,000 and paid? freight-in of $11,000. Sanfran? Company's net cost of purchases would? be:


On June? 1, Nicholson Company purchased inventory on account with a cost of $ 900$900. Credit terms were? 2/10, net 30. On June? 2, Nicholson Company returned 5050 percent of the inventory. Nicholson Company uses the perpetual inventory system. What journ

debit Accounts Payable for $ 450$450 and credit Inventory for $ 450$450.

On July? 1, Corrao Company purchased $ 900$900 of inventory on account with credit terms of 22?/10, net 30. Corrao Company uses the perpetual inventory system. On July? 5, Corrao Company paid the amount due. What journal entry did they prepare on July? 5?

debit Accounts Payable for$900?, credit Inventory for $ 18$ and credit Cash for $ 882

The LIFO method assigns the most recent inventory cost to cost of goods sold.


The inventory cost under the average cost per unit method will generally fall in between the inventory cost using the LIFO and FIFO methods.


If a company uses LIFO for tax? purposes, they must use LIFO for financial reporting purposes.


When inventory costs are? rising, a company using the LIFO costing method will generally pay less taxes than if the company had been using the FIFO method.


All of the following costs would be included in the cost of inventory EXCEPT? for:

sales commission paid to salesperson when the inventory is sold.

ABC Furniture Unlimited sells antique furniture. ABC will most likely use the? ________ method to cost its ending inventory.

specific unit cost

The inventory method used by a company? affects:


To determine the cost of ending inventory using the LIFO? method:

the beginning inventory and earliest purchase costs are used.

Under the averageminus?cost inventory? method, to determine the average cost per? unit:

the cost of beginning inventory plus the cost of purchases is divided by the number of units available.

When inventory costs are? increasing, the FIFO costing method will generally yield a cost of goods sold that? is:

lower than cost of goods sold under the LIFO method.

If inventory costs are rising and a company is using? LIFO, large purchases of inventory near the end of the year? will:

decrease income taxes paid.

A LIFO liquidation occurs when? ________ fall(s) below the ending inventory quantities in the previous period.

ending inventory quantities

Given the following? data, calculate the cost of ending inventory using the average cost method.? (Round any intermediary and final answers to two decimal? places.)
Beginning inventory
4040 units at $ 20$20 per unit
Purchase of in


?Tomasino's inventory records show the following data at January? 31:
Beginning inventory Jan. 1
100100 units at $ 6$6 per unit
Jan. 10 purchase
300300 units at $ 11$11 per unit
Jan. 22 purchase
9090 units at $ 12$12 per unit
At January? 31, 230230 units


?Thelen's inventory records show the following data at January? 31:
Beginning inventory Jan. 1
9090 units at $ 6$6 per unit
Jan. 10 purchase
300300 units at $ 10$10 per unit
Jan. 22 purchase
100100 units at $ 11$11 per unit
At January? 31, 200200 units ar


Given the following? data, what is cost of goods sold as determined by the FIFO? method?
270270 units
Beginning inventory
250250 units at $ 6$6 per unit
108108 units at $ 11$11 per unit


Given the following? data, calculate cost of goods sold using the FIFO costing method.
Beginning inventory
3232 units at $ 9$9 per unit
Purchase of inventory
1010 units at $ 13$13 per unit
Purchase of inventory
2525 units a


Given the following? data, calculate the cost of goods sold using the LIFO costing method.
Beginning inventory
1313 units at $ 19$19 per unit
Purchase of inventory
1111 units at $ 21$21 per unit
Purchase of inventory
66 uni


Which inventory costing method provides the most realistic measure of net? income?


Which inventory costing method provides the most? current, upminus?tominus?date cost of inventory on the balance? sheet?


A company uses LIFO in one? year, then switches to FIFO and then to averageminus?cost. This is a violation of? the:

consistency principle.

Under U.S.? GAAP, inventories are reported on the balance sheet? at:


Following? IFRS, the lowerminus?ofminus?costminus?orminus?market rule requires a company to report inventories at the lower? of:

historical cost or net realizable value

When applying the lowerminus?ofminus?costminus?orminus?market rule to? inventories, market value generally refers to? ________ under U.S. GAAP and? ________ under IFRS.

current replacement? cost; net realizable value

Perfect Catering? Company's ending inventory was $ 108 comma 700$108,700 at historical cost and $ 110 comma 500$110,500 at current replacement cost. Before consideration of the? lower-of-cost-or-market rule, the? company's cost of goods sold was $ 53 comm

The Ending Inventory balance will be $ 108 comma 700$108,700?, and Cost of Goods Sold will be $ 53 comma 000$53,000.

Mariah Company has inventory at the end of the year with a historical cost of $ 79 comma 000$79,000. Mariah Company uses the perpetual inventory system. Under the LCM? rule, the current replacement cost is $ 72 comma 600$72,600. Under U.S.? GAAP, the jour

debit Cost of Goods Sold for $ 6 comma 400$6,400 and credit Inventory for $ 6 comma 400$6,400.

The historical cost of Jahn? Company's ending inventory was less than the current replacement cost. Following U.S.? GAAP, which journal entry is? required?

No journal entry is needed.

The lowerminus?ofminus?costminus?orminus?market rule for inventory is based on the accounting? principle(s) of:

representational faithfulness.

For most? firms, the gross profit percentage changes significantly from year to year.


The gross profit percentage equals net sales divided by gross profit.


The inventory turnover ratio should be the same for all types of industries


An inventory turnover of 3.65 means? that, on? average, items of inventory sat on a? retailer's shelves for 100 days before being sold.


A? 30% gross profit percentage means? that:

for each dollar of? sales, the company has a cost of goods sold of seventy cents.
for each dollar of? sales, the company has a gross profit of thirty cents.

The inventory turnover? ratio

shows how many times the company sold its average level of inventory.

The gross profit percentage is calculated? as:

gross profit divided by net sales revenue.

Marian Company reported the following items for the month of? July:
Sales revenue
$ 472 comma 300$472,300
Cost of goods sold
$ 350 comma 000$350,000
Beginning inventory
$ 66 comma 400$66,400
Ending inventory
$ 77 comma 200$77,200
Inventory turnover? is: (


Maydak Company reported the following items for the month of? July:
Sales revenue
$ 610 comma 000$610,000
Cost of goods sold
$ 280 comma 000$280,000
Beginning inventory
$ 63 comma 400$63,400
Ending inventory
$ 73 comma 200$73,200
The gross profit percenta


Thomas Industries reported the? following:
Net sales
$ 460 comma 000$460,000
Cost of goods sold
$ 320 comma 000$320,000
Operating expenses
$ 57 comma 000$57,000
Tax rate
The gross profit percentage? is: (Round your final answer to the nearest? perc


Margaret Company reported the following information for the current? year:
Net sales
$ 2 comma 800 comma 000$2,800,000
$ 1 comma 679 comma 000$1,679,000
Beginning Inventory
$ 225 comma 000$225,000
Ending Inventory
$ 125 comma 000$125,000
Cost of

Margaret Company has superior gross profit percentage and inventory turnover.

Scott Walker Company reported the following data for the past? year:
Net sales
$ 450 comma 000$450,000
$ 200 comma 000$200,000
Beginning Inventory
$ 140 comma 000$140,000
Ending Inventory
$ 130 comma 000$130,000
Cost of Goods Sold
$ 280 comma 00

Walker Company is inferior on both measures

The costminus?ofminus?goodsminus?sold model can be used to estimate ending inventory.


The gross profit method cannot be used for calculating inventory destroyed by a? disaster, such as a fire.


The costminus?ofminus?goodsminus?sold model? is

beginning? inventory, plus? purchases, less ending inventory equals cost of goods sold.

Kennel Company reported the? following:
Cost of goods sold? (estimated for next? period)
$ 270 comma 000$270,000
Ending inventory? (estimated for next? period)
$ 75 comma 000$75,000
Beginning inventory for the period
$ 60 comma 000$60,000
Based on this? i


Lolita Company has the following? information:
Beginning Inventory
$ 170 comma 000$170,000
Net Purchases
$ 410 comma 000$410,000
Net Sales
$ 800 comma 000$800,000
Gross Profit Percentage
Lolita? Company's estimated ending inventory? is: (Round your


The longminus?term asset that is not depreciated or amortized? is:


Major Company purchased equipment to be used in its distribution center. All of the following should be included in the cost of the equipment EXCEPT? for:

insurance costs after the equipment is up and running.

Which of the following should be included in the cost of land? improvements?


Minor Company purchased land and which is being prepared for the construction of a new office building. Which of the following should be included in the cost of the? land?

cost of removing an old building
cost of clearing and grading the land

The cost of installing lights in a? company's parking lot should be recorded as a cost? of:

land improvements

The? ________ method is used to allocate the cost of multiple assets acquired in a basket purchase.


A lumpminus?sum purchase of? multiple, longminus?term plant assets requires the company? to:

divide the total cost among the various assets according to their market values

?Land, a building and equipment are acquired for a lump sum of $ 5 comma 000 comma 000$5,000,000. The market values of the? land, building and equipment are $ 500 comma 000$500,000?, $ 900 comma 000$900,000 and $ 300 comma 000$300,000?, respectively. What


Land is purchased for $ 400 comma 000$400,000. Back taxes paid by the purchaser were $ 6 comma 700$6,700?; total costs to demolish an existing building were $ 8 comma 000$8,000 and the cost to clear the land was $ 15 comma 000$15,000. The cost of paving t


Barbarino Corporation purchased land and a building for $ 1 comma 700 comma 000$1,700,000. An appraisal indicates that the? land's market value is $ 700 comma 000$700,000 and the? building's market value is $ 1 comma 300 comma 000$1,300,000. When recordin

land 595000

A machine is purchased for $ 50 comma 000$50,000. The transportation from the seller was $ 2 comma 000$2,000?, installation costs were $ 1 comma 000$1,000 and taxes on the purchase price were $ 700$700. Testing runs of the new machine cost $ 4 comma 000$4


correct, 7.1-23a Question Help
A company incurred the following? costs:
Purchase price of land
$ 250 comma 000$250,000
Survey fees
2 comma 0002,000
Payment for demolition of old building on land
40 comma 00040,000
Back property taxes on land
3 comma 0003,


Which of the following is NOT included in the cost of a building that was constructed by the? company?

cost of removing an unwanted building from the property

Miscellaneous costs associated with the purchase of new equipment? include:
Insurance costs before the equipment is ready for use
$ 1 comma 000$1,000
Maintenance costs before the equipment is ready for use
Insurance costs after the equipment is pla


Costs that do not extend a plant? asset's capacity or its useful? life, but merely maintain the asset or restore it to working order are recorded? as:


Which of the following costs associated with a delivery van should NOT be? capitalized?

The van is repainted.

The journal entry to record an addition to an office building would? include:

debit to Office Building

?Pat's Pets recently paid? $15,000 to have the engine in its delivery van overhauled. The estimated useful life of the van was originally estimated to be 4 years. The overhaul is expected to extend the useful life of the van to 10 years. The overhaul is r

capital expenditure.

Morgan Oaks Company replaced the windshields and painted several of its vehicles during the year. These costs should? be:

debited to Repair Expense.

On June? 1, Roadway's Trucking Company paid $ 4 comma 000$4,000 to overhaul the engine on a delivery truck to allow it to be used for two additional years. It also paid $ 7 comma 500$7,500 to change the storage capacity of the truck so that it could haul

Both items are capital expenditures.

Treating a capital expenditure as an immediate? expense:

understates assets and? stockholders' equity in the year of the error.

?WorldCom's fraudulent scheme of capitalizing telephone line costs instead of expensing them was discovered? by:

internal auditors

Which of the following statements is? INCORRECT?

The rules for determining whether a cost should be expensed or capitalized are so complete and clear that judgment is not needed.

Costs that maintain a plant asset in its present condition should be? ________. Costs that restore a plant asset to working order or its prior condition should be? ________.

?expensed; expensed

The depreciation process follows the? ________ principle.

expense recognition

An asset is? ________ when another asset can do the job more efficiently.


All of the following are needed to measure? depreciation, EXCEPT? for:

market value

A depreciation method in which an equal amount of depreciation expense is assigned to each year of the? asset's use is? the:

straightminus?line method.

The expected cash value of a plant asset at the end of its useful life is known? as:

all of the above

The book value of a plant asset is defined? as:

historical cost minus accumulated deprecation

The depreciable cost of a plant asset equals? the:

historical cost of the asset minus the estimated residual value.

Cost minus residual value divided by useful? life, in? years, is the formula for? the:

straightminus?line method.

The journal entry to record depreciation expense? is:

debit Depreciation? Expense, credit Accumulated Depreciation.

As a plant asset is used in? operations:

accumulated depreciation increases and the book value of the asset decreases.

When computing depreciation using the unitsminus?ofminus?production ?method:

a fixed amount of depreciation is assigned to each unit of output.
the depreciation expense depends directly on the amount of output or usage.

Doubleminus?decliningminus?balance ?depreciation:


Which of the following depreciation methods best applies to those assets that generate greater revenue earlier in their useful? lives?

double declining balance method

When compared to the other methods of? depreciation, the doubleminus?decliningminus?balance method of depreciation gives depreciation expense that? is:

higher in earlier periods

Which of the following is an accurate statement regarding financial statement and income tax depreciation? methods?

the irs has its own set of rules to compute depreciatoin for income tax purposes

Under the doubleminus?decliningminus?balance method of? depreciation, residual value is initially ignored.


To account for the disposal of a plant? asset, the cost of the asset and its related accumulated depreciation are removed from the books


A Loss on Sale of Equipment will result when the book value of the equipment exceeds the cash received from the sale of the equipment


Gains on the sale of equipment increase net income while losses on the sale of equipment decrease net income


A company purchased a machine for? $100,000. The accumulated depreciation on the machine is now? $100,000. Which of the following statements is TRUE regarding the disposal of the machine for no cash? proceeds?

There will be no gain or loss on the disposal.

Franco Company sold office furniture for $ 2 comma 600$2,600 cash. The furniture cost $ 50 comma 000$50,000 and had accumulated depreciation through the date of sale totaling $ 30 comma 000$30,000. The company will? recognize:

loss 17400

Smiley Corporation sold equipment costing $ 74 comma 000$74,000 with $ 65 comma 000$65,000 of accumulated depreciation for $ 10 comma 000$10,000 cash. Which of the following journal entries should be? prepared?

debit Cash for $ 10 comma 000$10,000?, debit Accumulated? Depreciation-Equipment for $ 65 comma 000$65,000?, credit Equipment for $ 74 comma 000$74,000 and credit Gain on Sale of Equipment for $ 1 comma 000$1,000.