Chapter 5
When goods are sold to a customer with credit terms of 2/15, n/30, the customer will: (explain credit terms)
receive a 2% discount if they pay within 15 days
A new textbook is published in the spring of 2011. Your campus bookstore buys 400 copies at $70 each in June, an additional 1,000 copies in August at $72 each, and 600 copies in December at $75 each. At the end of December 2011, the bookstore has sold 1,900 copies of the text. Find the cost of goods sold and the cost of ending inventory for FIFO system:
Ending Cost: $750
COGS: $137,500
Which of the following bank reconciliation items would not result in an adjusting journal entry in the
company's books?
A. Service charge.
B. Outstanding checks.
C. A customer's check returned NSF.
D. Interest earned on deposits
B. Outstanding checks.
When a customer returns a defective product for credit, the seller would record the transaction using which of
the following accounts?
A. Purchase Returns and Allowances
B. Sales Returns and Allowances
C. Sales
D. Sales Discounts
B. Sales Returns and Allowances
The entry to replenish a petty cash fund includes a credit to
a. Petty Cash.
b. Cash.
c. Freight-In.
d. Depreciation Expense
b. Cash.
B-Mart sells $5,000 of blue jeans. The customer later tells B-Mart that $200 of them are defective. The sale of the $5,000 of blue jeans on account has already been recorded. The customer agrees to keep the blue jeans with a credit allowance, B-Mart will journalize:
debit Sales Returns & Allowances for $200 and credit Accounts Receivable for $200.
If a company purchased 200 units of inventory at $9 per unit and 300 units at $10 per unit, the weighted average unit cost for this inventory would be:
$9.60.
When you identify interest received from the bank in performing a bank reconciliation, you must:
A. add the amount of interest to the balance per bank.
B. deduct the amount of interest from the balance per books.
C. add the amount of interest to the balance per books.
D. deduct the amount of interest from the balance per bank.
C. add the amount of interest to the balance per books.
Deposits in transit:
A. have been recorded by the company but not yet by the bank.
B. have been recorded by the bank but not yet by the company.
C. have not been recorded by the bank or the company.
D. are customers' checks that have not yet been received by the company.
A. have been recorded by the company but not yet by the bank.
Which of the following best describes the equation for cost of goods sold?
A. Beginning inventory + net purchases - Ending inventory
B. Beginning inventory + net purchases + Ending inventory
C. Net purchases - Beginning inventory
D. Ending inventory + net purchases - Beginning inventory
A. Beginning inventory + net purchases - Ending inventory
BetterBuy sells $50,000 of TVs to a customer. The credit terms state a 2% discount if paid in 7 days and a 1% discount if paid in 8-14 days. The customer pays in 12 days. How would BetterBuy record the customer's payment?
C. Debit Cash for $49,500, debit Sales Discounts for $500, and credit Accounts Receivable for $50,000
ABC Company uses a periodic inventory system. During June, the following inventory activity occurred:
Beginning inventory: 400 units at a total cost of $1,200
June 8 purchase: 600 units at a total cost of $2,400
June 18 purchase: 500 units at a total cost of $1,750
June 25 purchase: 300 units at a total cost of $1,050
A total of 1,800 units were available for sale at a total cost of $6,400.
The company sold 1,100 units during June, and 700 units were in ending inventory on June 30.
If the company uses the weighted average inventory costing method, what is the cost of its ending inventory?
A. $4,680
B. $2,488
C. $1,488
D. $1,365
B. $2,488
Higgins Company gathered the following reconciling information in preparing its October bank reconciliation:
Cash balance per books, 10/31 $16,800
Deposits in transit 600
Notes receivable and interest collected by bank 3,400
Bank charge for check printing 80
Outstanding checks 8,000
NSF check 680
The adjusted cash balance per books on October 31 is
a. $18,840. b. $16,040. c. $11,440. d. $19,440.
d. $19,440.
A company sells goods at a selling price of $20,000. The cost of the goods is $15,000 Under a perpetual inventory system the journal entries to adjust the inventory will include:
A. $15,000 will be debited to Inventory and $15,000 will be credited to Accounts Payable.
B. $15,000 will be debited to Cost of goods sold and $15,000 will be credited to Inventory.
C. $15,000 will be credited to Inventory and $15,000 will be credited to Sales.
D. $15,000 will be debited to Cost of goods sold and $15,000 will be credited to Sales.
B. $15,000 will be debited to Cost of goods sold and $15,000 will be credited to Inventory.
A company starts the period with 100 computers in inventory, purchases 30 more, returns 4 of them to
suppliers, and has 83 in inventory at the end of the period. How many computers were sold?
A. 47 computers.
B. 43 computers.
C. 17 computers.
D. 83 computers
B. 43 computers.
A company had the following partial list of account balances at year-end:
Sales Returns and Allowances 500
Accounts Receivable 9,000
Sales Discounts 700
Sales Revenue 57,200
Selling and Administrative Expenses 300
Find net sales:
$56,000.
BAF Company uses a periodic inventory system. During June, the following inventory activity occurred:
Beginning inventory: 300 units at a total cost of $780
June 10 purchase: 400 units at a total cost of $1,170
June 15 purchase: 500 units at a total cost of $1,260
June 28 purchase: 300 units at a total cost of $990
A total of 1,500 units were available for sale at a total cost of $4,200.
The company sold 1,000 units during June, and 500 units were in ending inventory on June 30.
If the company uses the FIFO costing method, what is the cost of its ending inventory?
A. $1,494.
B. $2,290.
C. $2,580.
D. $2,706.
A. $1,494.
For which of the following errors should the appropriate amount be added to the balance per bank on a bank reconciliation?
a. Check for $63 recorded by the company as $36.
b. Deposit of $600 recorded by the bank as $60.
c. A returned $300 check recorded by the bank as $30.
d. Check for $75 recorded by the company as $57.
b. Deposit of $600 recorded by the bank as $60.
A NSF check should appear in which section of the bank reconciliation?
a. Addition to the balance per books.
b. Deduction from the balance per bank.
c. Addition to the balance per bank.
d. Deduction from the balance per books.
d. Deduction from the balance per books.
Which of the following would be added to the balance per bank on a bank reconciliation?
a. Outstanding checks.
b. Deposits in transit.
c. Notes collected by the bank.
d. Service charges.
b. Deposits in transit.
Sales revenue is $367,810 while sales returns and allowances and sales discounts total $24,180. The cost of goods sold is $216,490, operating and other expenses are $28,500, and the company pays $31,640 in income tax. What is net sales and gross profit amount?
Net sales is $343,630 and gross profit is $127,140.
BAF Company uses a periodic inventory system. During June, the following inventory activity occurred:
Beginning inventory: 300 units at a total cost of $780
June 10 purchase: 400 units at a total cost of $1,170
June 15 purchase: 500 units at a total cost of $1,260
June 28 purchase: 300 units at a total cost of $990
A total of 1,500 units were available for sale at a total cost of $4,200.
The company sold 1,000 units during June, and 500 units were in ending inventory on June 30.
If the company uses the LIFO costing method, what is the cost of its ending inventory?
A. $1,365
B. $1,494
C. $1,620
D. $2,355
A. $1,365
Before reconciling to its bank statement, Lauren Cosmetics Corporation's general ledger had a month-end balance in the cash account of $5,250. The bank reconciliation for the month contained the following items:
Deposits in transit $750
Outstanding checks $465
Interest earned $ 20
NSF check returned to bank $100
Bank service charge $ 10
Given the above information, what adjusted cash balance should Lauren report at month-end?
$5,160.
In a period of rising prices, the inventory costing method that will cause the company to have the lowest cost
of goods sold is
A. LIFO.
B. FIFO.
C. Weighted average.
D. Specific identification.
B. FIFO.
A check written by the company for $167 is incorrectly recorded by a company as $176. On the bank reconciliation, the $9 error should be
a. added to the balance per books.
b. deducted from the balance per books.
c. added to the balance per bank.
d. deducted from the balance per bank.
a. added to the balance per books.