Exam #2

1.
On June 1, Robertson Company sold merchandise in the amount of $5,400 to

Alberts, whith credit terms of 2/10, n/30. The cost of the items sold is $2,600.
Robertson uses the perpetual inventory system. Alberts pays the invoice on
June 8, and takes the appropriate discount. The journal entry that Robertson
makes on June 8 is:
Cash
5,292
Sales Discounts
108
Accounts Receivable
5,400
2. The credit terms 3/10, n/30 are interpreted as:
3% cash discount if the paid within 10 days, with the balance due in 30 days.
3. On June 1, Robertson Company sold merchandise in the amount of $4,900 to
Adam, with credit terms of 4/10 n/30. The cost of the terms sold is $4,000.
Robertson uses the perpetual inventory system. On June 4, Adam returns
some of the merchandise. The selling price of the merchandise is $490 and
the cost of the merchandise returned is $400. The entry or entries that
Robertson must make on June 4 is:
Sales Returns and Allowances
490
Accounts Receivable
490
Merchandise inventory
400
Cost of Goods Sold
490
4. On July 22, a company purchased merchandise inventory at a cost of $5,900
with credit terms 2/10, net 30. If the company pays for the purchase on
August 7, what would be the appropriate journal entry?
Accounts Payable
5,900
Cash
5,900
5. A company purchased $3,500 of merchandise on December 5. On December
7, it returned $460 worth of merchandise. On December 8, it paid the balance
in full, taking a 4% discount. The amount of the cash paid on December 8 is:
$2,918
($3,500 - $460) * 0.96 = $2,918
6. A companys net sales were $670,000. Its cost of goods sold was $237,400,
and its net income was $34,050. Its gross margin ratio (rounded) equals:
64.57%
($670,000 - $237,400) / $670,000 = 64,57%
7. Burlington Company uses the perpetual inventory method. On February 12,
Burlington Company purchased merchandise inventory from Huffington Inc.
with an invoice price of $140,000 and credit terms of 2/10, n/30. Burlington
Company paid Huffington on February 20. How would Burlington Company
record this transaction?
Debit Accounts Payable for $140, credit Merchandise Inventory for $2,800,
and credit Cash for $137,200.
Purchase discount (decreases Merch.Inv.): $140,000 * 0.20 = $4.800
Cash : $140,000 - $2,800 = $137,200
8. A company has the following accounts. What is the acid test ratio?
3.17 %
($6,754 + $13,733) / $6,463 = 3.17%

9. Mooncake Company uses the perpetual inventory method. The unadjusted
balance in the companys Merchandise Inventory account is $120,000 at
December 31, 2014. A physical count of its inventory on that date discloses
that the cost of the merchandise inventory available is $119,000. How would
the company record the adjusting entry relating to the inventory shrinkage at
December 31, 2014?
Debit Cost of Goods Sold for $1,000 and credit Merchandise Inventory for
$1,000.
$120,000 - $119,000 = $1,000
10.Acme Jones Corporation uses a weighted average perpetual inventory
system.
August 2, 7 units were purchased at $12 per unit.
August 18, 14 were purchased at $16 per unit.
August 29, 14 units were sold
What was the amount of the cost of goods sold for this sale? Round your final
answer to the nearest whole dollar. Round your cost per to 2 decimal places.
$205
Average cost = ( (7*$12) + (14*$16) ) / 21 units = $14.67/unit
Cost of sale = 14 units * $14.67/unit = $205
11.A company had the following purchase during the current year:
On December 31, there were 31 units remaining in ending inventory. These

31 units consisted of 2 from January, 8 from April, 3 from July, 8 from October,
and 10nfrom November. Using the specific identification method, what is the
cost of the ending inventory?
$4,380
12.A company had inventory on October 1 of 4 units at a cost of $10 each. On

October 2, they purchased 8 units at $27 each. On October 6 they purchased
4 units at $30 each. On October 8, 8 units were sold for $58 each. Using the
LIFO perpetual inventory method, what was the value of the inventory on
October 8 after the sale?
$148
LIFO Units available = 4+8+4 = 16 units
Units in inventory = 16-8 = 8 units
Cost of Inventory = (4*$10) + (4*$27) = $148
13.The inventory valuation method that tends to smooth out erratic changes in
costs is:
Weighted average
14.The inventory turnover ratio is calculated as:
Cost of goods sold divided by average merchandise inventory.
Inventory turnover ratio = Cost of goods sold / average merchandise
inventory
15.Which inventory valuation method assigns a value to the inventory on the
balance sheet that approximates current cost and also mimics the actual flow
of goods for most businesses?
FIFO
16.Physical inventory counts:
Are necessary to measure and adjust for inventory shrinkage.
17.Given the following events, what is the per-unit value of ending inventory on
November 30 if this company uses a weighted average perpetual inventory
system?
$8.80
$105 / 15 units = $7.00/units
$176 / 20 units = $8.50/units
18.Merchandise inventory includes:
All goods owned by a company and held for sale.
19.In comparing the canceled checks on the bank statement with the entries in
the accounting records, it is found that check number 2889 for Decembers
utilities was correctly written and drawn for $890, but was erroneously
entered in the accounting records as $980. The journal entry to adjust the
books for the bank reconciliation would include which of the following for this
situation?
$90 increase to Cash and a $90 decrease to Utility Expense
$980-$890 = $90
20.Fluffy Pet Grooming deposits all cash receipts on the day when they are
received and all cash payment are by check. At the close of business on June
30, its Cash account shows a $14,821, debit balance. Fluffy Pet Groomings
June 30 bank statement shows $14,581 on deposit in the bank. The following
information is available:
$14,849
$14,581-$2,271+$2,539 = $14,849
21.Which of the following procedures would weaken the control over cash
receipts that arrive through the mail?
For safety, only one person should open the mail and that person should
immediately deposit the cash received in the bank.
22.The account for Hyde Park Inc. prepared the bank reconciliation when the
November 30 bank statement was received in the mail. A credit
memorandum enclosed with the bank statement indicated that interest in the
amount of $1,200 was earned on the average account balance during
November. How would the company record the required adjusting entry for
this item?
Debit Cash for $1,200 and credit Interest Revenue for $1,200
23.A companys internal control system:
Monitors and controls business activities.
24.The main principles of internal control include which of the following:
Establish responsibilities.
25.The accountant for Gotham Inc. prepared the bank reconciliation when the
June 30 bank statement was received in the mail. A debit memorandum
enclosed with the bank statement listed service charges in the amount of
$50. These charges were not recorded by Gotham prior to receiving the bank
statement. How would the company record the required adjusting entry for
item?
Debit Bank Service Charges for $50 and credit Cash for $50.
26. A company wrote a check on September 30 that did not appear on the bank
statement dated September 30. In preparing the September 30 bank
reconciliation the company should:
Deduct the check from the bank statement balance.
27.A company reports the following beginning inventory and purchases for the
month of January. On January 26, the company sells 390 units. 150 units
remain in ending inventory at January 31.
Assume the perpetual inventory system is used. Determine the costs

assigned to ending inventory when costs are assigned based on LIFO.
28.On September 15, Krug Company purchased merchandise inventory from

Makarov with an invoice price of $47,500 and credit terms of 3/10, n/30. Krug
Company paid Makarov on September 28. Prepare any required journal
entry(ies) for Krug Company (the purchaser) on:
(a) September 15, and (b) September 28. Assume Krug uses the perpetual
inventory method.
29.Which of the following statement best describes how GAAP and IFRS treat
cash?
Accounting definitions for cash are similar for U.S. GAAP and IFRS.

Exam #2

Uploaded by

Copyright:

Available Formats

Exam #2

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Exam #2

Uploaded by

Copyright:

Available Formats

1.

On June 1, Robertson Company sold merchandise in the amount of $5,400 to

($6,754 + $13,733) / $6,463 = 3.17%

On December 31, there were 31 units remaining in ending inventory. These

12.A company had inventory on October 1 of 4 units at a cost of $10 each. On

Assume the perpetual inventory system is used. Determine the costs

28.On September 15, Krug Company purchased merchandise inventory from

You might also like