Accounting – Section2

 

 

 

 

 

_____1.

On July 9, Sheb Company sells goods on credit to Wooley Company for $5,000, terms 1/10, n/60. Sheb receives payment on July 18. The entry by Sheb on July 18 is:

 

A)

Cash

5,000

 

          Accounts Receivable

 

5,000

 

 

B)

Cash

5,000

 

          Sales Discounts

 

50

          Accounts Receivable

 

4,950

 

 

C)

Cash

4,950

 

Sales Discounts

50

 

          Accounts Receivable

 

5,000

 

 

D)

Cash

5,050

 

          Sales Discounts

 

50

          Accounts Receivable

 

5,000

 

 

 

 

 

 

_____2.

The collection of a $1,000 account after the 2 percent discount period will result in a

 

A)

debit to Cash for $980.

 

B)

credit to Accounts Receivable for $1,000.

 

C)

credit to Cash for $1,000.

 

D)

debit to Sales Discounts for $20.

 

 

 

 

 

_____3.

Gross profit does not appear

 

A)

on a multiple-step income statement.

 

B)

on a single-step income statement.

 

C)

to be relevant in analyzing the operation of a merchandiser.

 

D)

on the income statement if the periodic inventory system is used because it cannot be calculated.

 

 

 

 

 

_____4.

During 2014, Parker Enterprises generated revenues of $90,000. The company’s expenses were as follows: cost of goods sold of $45,000, operating expenses of $18,000 and a loss on the sale of equipment of $3,000.

 

Parker’s gross profit is

 

A)

$24,000.

 

B)

$27,000.

 

C)

$45,000.

 

D)

$90,000.

 

 

 

 

 

_____5.

At the beginning of September, 2014, Stella Company reported Inventory of $8,000. During the month, the company made purchases of $35,600. At September 30, 2014, a physical count of inventory reported $8,400 on hand. Cost of goods sold for the month is

 

A)

$35,200.

 

B)

$35,600.

 

C)

$36,000.

 

D)

$43,600.

 

 

 

 

 

_____6.

The Freight-In account

 

A)

increases the cost of merchandise purchased.

 

B)

is contra to the Purchases account.

 

C)

is a permanent account.

 

D)

has a normal credit balance.

 

 

 

 

 

______7.

A company purchased inventory as follows:

 

150 units at $5

 

350 units at $6

The average unit cost for inventory is

 

A)

$5.00.

 

B)

$5.50.

 

C)

$5.70.

 

D)

$6.00.

 

 

 

 

 

______8.

A company just starting business made the following four inventory purchases in June:

June

1

 

150 units

$   390

June

10

 

200 units

585

June

15

 

200 units

630

June

28

 

150 units

     510

 

 

 

 

$2,115

 

A physical count of merchandise inventory on June 30 reveals that there are 250 units on hand. Using the FIFO inventory method, the amount allocated to cost of goods sold for June is

 

A)

$683.

 

B)

$825.

 

C)

$1,290.

 

D)

$1,432.

 

 

 

 

 

PART II — BASIC INVENTORY COMPUTATIONS (18 points)

 

 

 

 

 

9.

Joe Poultry uses a periodic inventory system. Its beginning inventory on May 1 consisted of 300 units of Product A at a cost of $6.25 per unit. During May, the following purchases and sales were made.

 

Purchases

 

Sales

May

6

300

 

units at $7.20

May

4

275

 

units

 14

400

 

units at $9.10

 

8

300

 

units

 21

100

 

units at $11.50

 

22

400

 

units

 28

 500

 

units at $11.80

 

24

   225

 

units

 

1,300

 

 

 

1,200

 

                     

 

Instructions: Compute the May 31 ending inventory and May cost of goods sold under (a) Average Cost, (b) FIFO, and (c) LIFO. Provide appropriate supporting calculations.

 

  1. Average – Ending Inventory = $_________; Cost of Goods Sold = $_________.

 

 

 

  1. FIFO – Ending Inventory = $_________; Cost of Goods Sold = $_________.

 

 

 

   3. LIFO – Ending Inventory = $_________; Cost of Goods Sold = $_________.

 

 

 

 

 

 

 

 

 

 

 

Use the following to answer question 10:

 

 

 

Instructions: Given the information provided below, prepare a bank reconciliation in proper format for the month of April for Hanlon Mowers.

 

 

 

1.

Balance per Bank on April 30—$20,601

2.

Balance per Books on April 30—$19,262

3.

Total outstanding checks at April 30—$2,180

4.

Debit memoranda:

 

a. NSF check from Watts Co.—$475

 

b. Printing company checks—$45

 

c. Payment to bank of $1,200 note owed bank by Hanlon Mowers plus $100 interest.

5.

Credit memorandum: Collection of note receivable for $1,600 plus $240 interest less $50 collection fee.

6.

Errors:

 

a. A check written this month to Pharm Co. for office supplies cleared the bank at the correct amount of $420, but was recorded by Hanlon at $240.

 

b. The bank charged a $270 check of Atrin Company against Hanlon’s account this month.

7.

Deposit in transit on April 30—$361.

 

 

 

 

 

 

 

10.

Bank Reconciliation

 

 

 

 

 

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