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Questions 1 and 2 are based on the following information.
Questions 1 and 2 are based on the following information. Selected account balances from a retail firm’s adjusted trial balance at the end of the first quarter of operations for the current fiscal year include the following:
· Sales……………………………………………………$16,700,000
· Executive & administrative salary expense…………… $1,550,000
· Sales salary expense…………………………………… $1,230,000
· Sales commissions……………………………………... $167,000
· Cost of goods sold………………………………………$11,690,000
· Advertising expense……………………………………. $860,000
· Utility expense………………………………………….. $180,000
· Depreciation expense…………………………………… $135,000
· Rent expense……………………………………………. $480,000
· Insurance expense………………………………………. $110,000
· Income tax expense……………………………………... $74,500
1. Based solely on the account information provided, what was the gross profit ratio for the quarter?
2. Based solely on the account information provided, what was the net profit margin for the quarter?
3. The basic entry to record inventory purchases on account under the periodic approach is:
a. Inventory…………………………XX
Accounts payable…………………………..XX
b. Inventory………………………….XX
Cash………………………………………...XX
c. Purchases……………………….....XX
Accounts payable……………………………XX
d. Purchases………………………….XX
Cash………………………………………….XX
4. The basic entry to record inventory purchases on account under the perpetual approach is:
a. Inventory…………………………XX
Accounts payable…………………………..XX
b. Inventory………………………….XX
Cash………………………………………...XX
c. Purchases……………………….....XX
Accounts payable……………………………XX
d. Purchases………………………….XX
Cash………………………………………….XX
Questions 5 and 6 are based on the following information. ABC Co. sold merchandise inventory for $12,000 that cost $8,000.
5. Under the perpetual approach, the entry (entries) at the time of the sale of the inventory on account is (are) as follows:
a. Cost of goods sold……………………………….8,000
Inventory…………………………………………………8,000
b. Cash…………………………………………….12,000
Accounts receivable…………………………………….12,000
and
Cost of goods sold……………………………….8,000
Inventory…………………………………………………8,000
c. Accounts receivable……….……………………12,000
Sales…………………………………………………….12,000
and
Cost of goods sold……………………………….8,000
Inventory………………………………………………...8,000
d. Accounts receivable……………………………12,000
Sales…………………………………………………….12,000
6. Under the periodic approach, the entry (entries) at the time of the sale of the inventory on account is (are) as follows:
a. Cost of goods sold……………………………….8,000
Inventory…………………………………………………8,000
b. Cash…………………………………………….12,000
Accounts receivable…………………………………….12,000
and
Cost of goods sold……………………………….8,000
Inventory…………………………………………………8,000
c. Accounts receivable……….……………………12,000
Sales…………………………………………………….12,000
and
Cost of goods sold……………………………….8,000
Inventory………………………………………………...8,000
d. Accounts receivable……………………………12,000
Sales…………………………………………………….12,000
7. At year-end, the inventory account contains a balance of $400,000. A physical count shows that the inventory total is actually $397,000 as a result of normal shrinkage. The entry needed to record normal inventory shrinkage is as follows:
a. Cost of goods sold…………………………………3,000
Inventory………………………………………………….3,000
b. Inventory…………………………………………..3,000
Cost of goods sold……………………………………….3,000
c. Inventory shrinkage loss…………………………..3,000
Inventory…………………………………………………3,000
d. Cost of goods sold…………………………………3,000
Inventory shrinkage loss………………………………….3,000
Questions 8, 9, 10, and 11 are based on the following information. ABC Co. uses a periodic approach to accounting for inventory. On December 31, 20X7, an inventory count was performed resulting in a determination that the year-end inventory balance was $465,000. December 31, 20X7 year-end account balances before considering the inventory count were as follows:
Sales…………………………………………….$5,100,000
Inventory………………………………………….$455,000
Purchases…………………………………..……$2,900,000
8. What adjusting entries are needed on December 31, 20X7 to account for inventory?
9. What is the cost of goods sold for the year ended December 31, 20X7?
10. What is the gross profit for the year ended December 31, 20X7?
11. What is the gross profit ratio for the year ended December 31, 20X7?
12. ABC Co. purchased inventory from XYZ Co. on January 30, 20X7, the date on which the goods were shipped by the seller. The goods arrived at ABC. Co.’s place of business on February 3, 20X7. Terms of sale are FOB shipping point. Which one of the following statements is true?
a. The seller records a sale on January 30, 20X7, the buyer records a purchase on January 30, 20X7, and the seller is responsible for shipping costs and insuring goods in transit.
b. The seller records a sale on January 30, 20X7, the buyer records a purchase on January 30, 20X7, and the buyer is responsible for shipping costs and insuring goods in transit.
c. The seller records a sale on February 3, 20X7, the buyer records a purchase on February 3, 20X7, and the seller is responsible for shipping costs and insuring goods in transit.
d. The seller records a sale on February 3, 20X7, the buyer records a purchase on February 3, 20X7, and the buyer is responsible for shipping costs and insuring goods in transit.
13. ABC Co. purchased inventory from XYZ Co. on January 30, 20X7, the date on which the seller shipped the goods. The goods arrived at ABC Co.’s place of business on February 3, 20X7. Terms of sale are FOB destination. Which one of the following statements is true?
a. The seller records a sale on January 30, 20X7, the buyer records a purchase on January 30, 20X7, and the seller is responsible for shipping costs and insuring goods in transit.
b. The seller records a sale on January 30, 20X7, the buyer records a purchase on January 30, 20X7, and the buyer is responsible for shipping costs and insuring goods in transit.
c. The seller records a sale on February 3, 20X7, the buyer records a purchase on February 3, 20X7, and the seller is responsible for shipping costs and insuring goods in transit.
d. The seller records a sale on February 3, 20X7, the buyer records a purchase on February 3, 20X7, and the buyer is responsible for shipping costs and insuring goods in transit.
Questions 14 through 19 are based on the following information.
Peoples Printer Co. sells printers and uses a periodic inventory approach. The PX4015 Brand is one of the printers it sells and this brand had the following beginning inventory, purchase, and sales history for the current year:
Number of Cost per Total
Printers Printer Cost
January 1 inventory 8 $144.00 $1,152.00
July 16 purchases 12 $152.00 $1,824.00
December 8 purchases 5 $160.00 $800.00
Available for sale 25 $3,776.00
July 18 sales 19
December 31 inventory 6
The selling price of the printer was $230.
14. Determine cost of goods sold for the year ended December 31 if the LIFO cost flow assumption is used.
15. Determine ending inventory as of December 31 if the LIFO cost flow assumption is used.
16. Determine gross profit for the year ended December 31 if the LIFO cost flow assumption is used.
17. Determine cost of goods sold for the year ended December 31 if the FIFO cost flow assumption is used.
18. Determine ending inventory as of December 31 if the FIFO cost flow assumption is used.
19. Determine gross profit for the year ended December 31 if the FIFO cost flow assumption is used.
Questions 20 through 25 are based on the following information.
Peoples Printer Co. sells printers and uses a perpetual inventory approach. The PX4015 Brand is one of the printers it sells and this brand had the following beginning inventory, purchase, and sales history for the current year:
Number of Cost per Total
Printers Printer Cost
January 1 inventory 8 $144.00 $1,152.00
July 16 purchases 12 $152.00 $1,824.00
December 8 purchases 5 $160.00 $800.00
Available for sale 25 $3,776.00
July 18 sales 19
December 31 inventory 6
The selling price of the printer was $230.
20. Determine cost of goods sold for the year ended December 31 if the LIFO cost flow assumption is used.
21. Determine ending inventory as of December 31 if the LIFO cost flow assumption is used.
22. Determine gross profit for the year ended December 31 if the LIFO cost flow assumption is used.
23. Determine cost of goods sold for the year ended December 31 if the FIFO cost flow assumption is used.
24. Determine ending inventory as of December 31 if the FIFO cost flow assumption is used.
25. Determine gross profit for the year ended December 31 if the FIFO cost flow assumption is used.
26. For a company that uses U.S. GAAP, in a period of falling prices, the inventory cost flow assumption that results in the lowest gross profit is
a. FIFO.
b. LIFO.
c. Weighted average.
d. Specific identification.
