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Question(s) / Instruction(s):

Davies Company purchased merchandise inventory with an invoice price of $7,500 and credit terms of 2/10, n/30. What is the net cost of the goods if Davies Company pays within the discount period?

a.            $7,380

b.            $7,350

c.             $6,000

d.            $7,500

 

 

2. Olympus Climbers Company has the following inventory data:

July 1                     Beginning inventory                       20 units at $19                   $380

7                              Purchases                                           70 units at $20                   1,400

22                           Purchases                                           10 units at $22                   220

                                                                                                                                                $2,000

A physical count of merchandise inventory on July 30 reveals that there are 40 units on hand. Using the FIFO inventory method, the amount allocated to cost of goods sold for July is

a.            $780.

b.            $1,220.

c.             $820.

 

 

3. Financial information is presented below:

Operating Expenses                       $21,000

Sales Returns and Allowances    7,000

Sales Discounts                                 3,000

Sales Revenue                                  150,000

Cost of Goods Sold                          105,000

The gross profit rate would be

a.            .27.

b.            .30.

c.             .75.

d.            .25.

 

 

4. Piper Company sells merchandise on account for $1,800 to Morton Company with credit terms of 2/10, n/30. Morton Company returns $600 of merchandise that was damaged, along with a check to settle the account within the discount period. What entry does Piper Company make upon receipt of the check?

a Cash                                                   1,200    

          Accounts Receivable                                            1,200

B Cash                                                   1,176    

Sales Returns and Allowances    624        

          Accounts Receivable                                            1,800

C Cash                                                   1,176    

Sales Returns and Allowances    600        

Sales Discounts                                 24          

          Accounts Receivable                                            1,800

D Cash  1,764    

Sales Discounts 36          

          Sales Returns and Allowances                          600

          Accounts Receivable                                            1,200

 

A physical count of merchandise inventory on July 30 reveals that there are 40 units on hand. Using the average cost method, the value of ending inventory is

a.            $780.

b.            $813.

c.             $820.

d.            $800.

 

 

6. At the beginning of the year, Uptown Athletic had an inventory of $400,000. During the year, the company purchased goods costing $1,500,000. If Uptown Athletic reported ending inventory of $600,000 and sales of $2,000,000, their cost of goods sold and gross profit rate would be

a.            $900,000 and 65%

b.            $1,300,000 and 35%

c.             $900,000 and 35%

d.            $1,300,000 and 65%

 

 

7. Barnett Company had the following records:

2012                                       2011                                       2010

Ending inventory                              $34,580                 $27,650                 $30,490

Cost of goods sold                           273,000                 255,250                 261,300

What is Barnett’s average days in inventory for 2011? (rounded)

a.            41.0 days

b.            83.0 days

c.             41.5 days

d.            40.6 days

 

8. A buyer borrows money at 12% interest to pay a $6,000 invoice with terms 1/10, n/30 on the 10th day of the discount period. The loan is repaid on the 30th day of the invoice. What is the buyer’s net savings for this total event?

a.            $40.00

b.            $20.40

c.             $0

d.            $20.00

 

 

9. Expected direct materials purchases in Rees Company are $70,000 in the first quarter and $90,000 in the second quarter. Forty percent of the purchases are paid in cash as incurred, and the balance is paid in the following quarter. The budgeted cash payments for purchases in the second quarter are:

a.            $96,000.

b.            $90,000.

c.             $78,000.

d.            $72,000.

 

 

10. The following information was taken from Molina Company cash budget for the month of November:

Beginning cash balance                 $48,000

Cash receipts                                     58,000

Cash disbursements                       80,000

If the company has a policy of maintaining an end-of-the-month cash balance of $40,000, the amount the company would have to borrow is

a.            $22,000.

b.            $0.

c.             $40,000.

d.            $14,000.

 

 

11. The following credit sales are budgeted by Milford Company:

May                       $238,000

June                      350,000

July                        490,000

August                  420,000

The company’s past experience indicates that 70% of the accounts receivable are collected in the month of sale, 20% in the month following the sale, and 8% in the second month following the sale. The anticipated cash inflow for the month of August is

a.            $411,600.

b.            $432,040.

c.             $392,000.

d.            $420,000.

 

 

12. At December 31, 2012 Mohling Company’s inventory records indicated a balance of $652,000. Upon further investigation it was determined that this amount included the following:

â–ª $112,000 in inventory purchases made by Mohling shipped from the seller 12/27/12 terms FOB destination, but not due to be received until January 2nd

â–ª $74,000 in goods sold by Mohling with terms FOB destination on December 27th. The goods are not expected to reach their destination until January 6th

â–ª $6,000 of goods received on consignment from Dollywood Company

What is Mohling’s correct ending inventory balance at December 31, 2012?

a.            $534,000

b.            $460,000

c.             $646,000

d.            $540,000

 

 

13. Hogan Industries had the following inventory transactions occur during 2012:

Units                     Cost/unit

Feb. 1, 2012                        Purchase                             18                           $45

Mar. 14, 2012                     Purchase                             31                           $47

May 1, 2012                        Purchase                             22                           $49

The company sold 51 units at $63 each and has a tax rate of 30%. Assuming that a periodic inventory system is used, what is the company’s gross profit using FIFO?

a.            $848

b.            $2,441

c.             $2,365

d.            $772

 

 

14. Tony’s Market recorded the following events involving a recent purchase of inventory:

 Received goods for $30,000, terms 2/10, n/30.

 Returned $600 of the shipment for credit.

 Paid $150 freight on the shipment.

 Paid the invoice within the discount period.

As a result of these events, the company’s inventory

a.            increased by $29,550.

b.            increased by $28,812.

c.             increased by $28,962.

d.            increased by $28,959.

 

 

15. Alpha First Company just began business and made the following four inventory purchases in June:

June   1                                 150 units                              $780

June   10                               200 units                              1,170

June   15                               200 units                              1,260

June   28                               150 units                              990

                                                                                                $4,200

A physical count of merchandise inventory on June 30 reveals that there are 250 units on hand. Using the LIFO inventory method, the value of the ending inventory on June 30 is

a.            $1,365.

b.            $1,300.

c.             $1,650.

d.            $1,620.

 

 

16. Ferguson Company is preparing a cash budget for September. The company’s cash balance on September 1 is $11,600. The company anticipates cash receipts of $55,900 and cash disbursements of $58,660. If Ferguson desires a cash balance of $12,000, it must

a.            acquire financing of $2,360.

b.            acquire financing of $9,240.

c.             acquire financing of $400.

d.            acquire financing of $3,160.

 

 

17. Financial information is presented below:

Operating Expenses                       $45,000

Sales Revenue                                  150,000

Cost of Goods Sold                          90,000

The profit margin ratio would be

a.            .40.

b.            .70.

c.             .10.

d.            .30.

 

18. Use the following information regarding Black Company and Red Company to answer the question “Which of the following is Black Company\'s \"cost of goods sold\" for 2011 (to the closest dollar)?”

                                                Year                       Inventory Turnover Ratio                             Ending Inventory

Black Company                 2010                                                                                                                       $26,340

                                                2011                                       10.7                                                                        $29,890

                                                2012                                       10.2                                                                        $30,100

 

Red Company                    2010                                                                                                                       $25,860

                                                2011                                       8.8                                                                          $24,750

                                                2012                                       9.5                                                                          $22,530

 

a.            $281,838

b.            $300,830

c.             $320,946

d.            $319,823

 

 

19. Financial information is presented below:

Operating Expenses                       $45,000

Sales Returns and Allowances    13,000

Sales Discounts                                 6,000

Sales Revenue                                  160,000

Cost of Goods Sold                          77,000

The gross profit rate would be

a.            .45.

b.            .55.

c.             .54.

d.            .50.

 

 

20. Dole Industries had the following inventory transactions occur during 2012:

Units                     Cost/unit

Feb. 1, 2012                        Purchase                             54                           $90

Mar. 14, 2012                     Purchase                             93                           $94

May 1, 2012                        Purchase                             66                           $98

The company sold 153 units at $126 each and has a tax rate of 30%. Assuming that a periodic inventory system is used, and operating expenses of $2,000, what is the company’s after-tax income using LIFO? (rounded to whole dollars)

a.            $2,632

b.            $3,242

c.             $2,162

d.            $1,842

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