INTERMEDIATE ACCOUNTING

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QUESTION 1

 

In a perpetual inventory system, the cost of inventory sold is:

 

Debited to accounts receivable.

 

Credited to cost of goods sold.

 

Not recorded at the time goods are sold.

 

Debited to cost of goods sold.

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QUESTION 2

 

In a periodic inventory system, the cost of inventories sold is:

 

Debited to accounts receivable.

 

Credited to cost of goods sold.

 

Debited to cost of goods sold.

 

Not recorded at the time goods are sold.

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QUESTION 3

 

In a period when costs are rising and inventory quantities are stable, the inventory method that would result in the highest ending inventory is:

 

Weighted average

 

Moving average

 

FIFO

 

LIFO

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QUESTION 4

 

Company A is identical to Company B in every regard except that Company A uses FIFO and Company B uses LIFO. In an extended period of rising inventory costs, Company A’s gross profit, compared to Company B’s, would be:

 

 

Higher

 

Lower

 

The same

 

Cannot be determined

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QUESTION 5

 

Northwest Fur Co. started 2013 with $94,000 of merchandise inventory on hand. During 2013, $400,000 in merchandise was purchased on account with credit terms of 1/15, n/45. All discounts were taken. Purchases were all made f.o.b. shipping point. Northwest paid freight charges of $7,500. Merchandise with an invoice amount of $5,000 was returned for credit. Cost of goods sold for the year was $380,000. Northwest uses a perpetual inventory system.  What is ending inventory assuming Northwest uses the gross method to record purchases?

 

$112,480

 

$112,550

 

$116,500

 

$120,300

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QUESTION 6

 

Assuming Northwest uses the gross method to record purchases, what is the cost of goods available for sale?

 

$492,500

 

$496,500

 

$490,500

 

$492,550

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QUESTION 7

 

Inventory records for Herb’s Chemicals revealed the following:

 

March 1, 2013, inventory: 1,000 gallons @ $7.20 = $7,200

 

Purchases:

 

March 10  600 gals @ $7.25

March 16  800 gals @ $7.30

March 23  600 gals @ $7.35

 

Sales:

 

March   5  400 gals

March 14  700 gals

March 20  500 gals

March 26  700 gals

 

Ending inventory assuming LIFO in a periodic inventory system would be:

 

 

$5,075

 

$5,135

 

$5,055

 

$5,040

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QUESTION 8

 

Ending inventory assuming LIFO in a perpetual inventory system would be:

 

$4,960

 

$5,060

 

$5,080

 

$5,140

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QUESTION 9

 

The ending inventory under a periodic inventory system assuming average cost (rounding unit cost to three decimal places) is:

 

$5,077

 

$5,005

 

$5,107

 

$5,087

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QUESTION 10

 

The ending inventory assuming FIFO is:

 

$5,140

 

$5,080

 

$5,060

 

$5,050

 

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