part 1?

AccountingPrinciples 1

Exam 3 (Chapters

5

& 6)

Businsky Spring

2

013

Name ________________________

POINTS

 

 

 

 

 

POINTS

PROBLEM

POSSIBLE

RECEIVED

1

16

2

30

3

14

4

15

TOTAL

75


PROBLEM 1 (16 points)

The merchandise inventory of Planter Co was destroyed by flood on August 15. The following data was obtained from the accounting records:

Jan 1

Inventory

$650,000

Jan 1 – August 15
Purchases (net)
1,100,000

Sales (net)
2,

600

,000

Gross Profit

Rate
40%


Instructions:

Estimate the cost of the inventory destroyed in the flood. Show all work.

Sales (1/1 – 8/15)

100%

Cost of Goods Sold (1/1 – 8/15)

60%

Gross Profit

40%

Inventory

Beg Inventory (1/1) –

COGS (1/1 – 8/15):

Purchases (1/1 – 8/15):

Ending (8/15):


Problem 2 (30 points)

Beginning inventory, purchases, and sales data for personal organizers are as follows:

Jan 1
Beginning Inventory
45 units @ $24

3
Sold
35 units

8
Purchased
70 units @ $32

21

Sold
65 units

30
Purchased

25

units @ $47


Instructions:
1 – Using the above transactions prepare the perpetual inventory record using each of the costing methods listed below. 2 – In the space provided below identify the ending inventory balance and cost of goods sold for

June

under each method.

a) FIFO

b) LIFO

c) Weighted Average (Round unit cost to the nearest cent and total

costs to the nearest dollar)

FIFO

Quantity

Unit Cost

Total Cost

Quantity

Unit Cost

Total Cost

$24

$24

70

$32

$2,240

10

$24

$240

$32

15

$32

25

$47

$1,175

 

 

 

FIFO

Purchases

Cost of Goods Sold

Inventory On Hand

Date

Quantity

Unit Cost

Total Cost

Jan 1

45

$24

$1,080

Jan 3

35

$840

10

$240

Jan 8

70

$32

$2,240

Jan21

55

$1,760

$480

Jan30

25

$47

$1,

17

5

 

100

$2,840

40

$1,655


Ending Inventory: $1,655


Cost of Goods Sold: $2,840


LIFO

Purchases

Cost of Goods Sold

Inventory On Hand

Date

Quantity

Unit Cost

Total Cost

Quantity

Unit Cost

Total Cost

Quantity

Unit Cost

Total Cost

Jan 1

45

$24

$1,080

Jan 3

35

$24

$840

10

$24

$240

Jan 8

70

$32

$2,240

70

$32

$2,240

Jan21

$32

10

$24

$240

$32

Jan30

25

$47

$1,175

25

$47

$1,175

 

 

 

100

40

LIFO

65

$2,080

5

$160

Ending 

$2,9

20

$1,575


Ending Inventory: $1,575


Cost of Goods Sold: $2,920

Weighted Average

Purchases

Cost of Goods Sold

Inventory On Hand

Date

Quantity

Unit Cost

Total Cost

Quantity

Unit Cost

Total Cost

Quantity

Unit Cost

Total Cost

Jan 1

45

$24

$1,080

Jan 3

35

$24

$840

10

$24

$240

Jan 8

70

$32

$2,240

70

$32

$2,240

Jan21

65

$31

15

$31

Jan30

25

$47

$1,175

25

$47

$1,175

Ending 

100

40

Weighted Average

80

$31

$2,480

$2,015

$465

$2,855

$1,130


Ending Inventory: $1,130


Cost of Goods Sold: $2,855


Problem 3 (14 points)

Lawlor Lawn Service had the following transactions in June. Prepare journal entries for these transactions assuming Lawlor Lawn Service uses a perpetual inventory system.

Jun
2
Completed lawn service and received cash of $

800

5
Purchased 110 plants on account for inventory, $304, plus freight in

of $15

15
Sold 60 plants on account, $600

17

Consulted with a client on landscaping design for a fee of $

250

on

account

20

Purchased 120 plants on account for inventory, $

384

21
Paid on account, $

400

25
Sold 110 plants for cash, $

990

Extra Credit for June 30th transaction

30
Recorded the following adjusting entries

Depreciation, $30

Physical count of plant inventory, 30 plants

800

319

15

600

15

174

17

Accounts receivable

250

20

Plant inventory

Accounts payable

384

21

400

25

Cash

Sales revenue

990

25

Cost of goods sold

337

June

30

30

30

30

Cost of goods sold

96

GENERAL JOURNAL

DATE

DESCRIPTION

REF

DEBIT

CREDIT

June 2

Cash

800

Service Revenue

5

Plant inventory

319

Accounts payable

Accounts receivable

600

Sales revenue

Cost of goods sold

174

Plant inventory

250

Service Revenue

384
Accounts payable 400
Cash
990

337

Plant inventory

Depreciation expense – equip.

Accumulated depr. – equip.

96

Plant inventory


Problem 4 (15 total points)

1) FOB shipping point means that the:

A) seller normally pays the transportation costs.

B) buyer normally pays the transportation costs.

C) buyer and the seller split the shipping costs.

D) shipping costs are billed to the seller.

2) Which of the following is GENERALLY a merchandiser’s major cost?

A) Salary expense

B) Buildings

C) Advertising

D) Cost of goods sold

3) Which of the following describes Net sales revenue?

A) Sales less Cost of goods sold

B) Sales less Sales discounts

C) Sales less Sales returns and allowances

D) Sales less Sales discounts less Sales returns and allowances

4) Which of the following are the normal balances of Sales, Sales discounts, and Sales returns and allowances, respectively?

A) Debit, credit, and credit

B) Debit, debit, and credit

C) Credit, debit, and debit

D) Credit, credit, and debit

5) Which of the following is subtracted from Net sales revenue to arrive at Gross profit?

A) Cost of goods available for sale

B) Cost of goods sold

C) Sales discounts and Sales returns and allowances

D) Operating expenses

6) In a multi-step income statement, Operating expenses are subtracted from Gross profit to compute:

A) Net loss.

B) Other income.

C) Net income.

D) Operating income.

7) Which of the following is NOT shown on a single-step income statement?

A) Gross profit

B) Net sales revenue

C) Cost of goods sold

D) Sales discounts

8) Which of the following is the result of cost of goods sold divided by average inventory?

A) Current ratio

B) Gross profit percentage

C) Debt ratio

D) Rate of inventory turnover

9) Which of the following states that the business should use the same accounting methods from period to period?

A) Materiality concept

B) Consistency principle

C) Accounting conservatism

D) Disclosure principle

10) Which of the following states that a company must perform strictly proper accounting ONLY for items that are significant to the business’s financial statements?

A) Accounting conservatism

B) Materiality concept

C) Disclosure principle

D) Consistency principle

11) A company decides to ignore a very small error in their inventory balance. This is an example of which of the following principles?

A) Accounting conservatism
B) Materiality concept
C) Disclosure principle
D) Consistency principle

12) Which of the following states that a business must report enough information for outsiders to make knowledgeable decisions about the company?

A) Accounting conservatism
B) Materiality concept
C) Disclosure principle
D) Consistency principle

13) Which of the following requires that financial statements should report the LEAST favorable figures?

A) Accounting conservatism
B) Materiality concept
C) Disclosure principle
D) Consistency principle

14) Which of the following inventory costing methods is based on the actual cost of each particular unit of inventory?

A) Specific-unit-cost

B) Average-cost

C) Last-In, First-Out

D) First-In, First-Out

15) Ending inventory for the current accounting period is overstated by $3,500. What will be effect of this error?

A) Net income for the current period will be overstated by $3,500.

B) Cost of goods sold for the current period will be overstated by $3,500.

C) Ending inventory for the next period will be overstated by $3,500.

D) Equity at the end of the next accounting period will be overstated by $3,500.

Businsky Chapters 5 & 6 Test #3
Page 1

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