1. On July 9, Sheb Company sells goods on credit to Wooley Company for $5,000, terms 1/10, n/60. Sheb receives payment on July 18. The entry by Sheb on July 18 is:
A) Cash 5,000
Accounts Receivable 5,000
B) Cash 5,000
Sales Discounts 50
Accounts Receivable 4,950
C) Cash 4,950
Sales Discounts 50
Accounts Receivable 5,000
D) Cash 5,050
Sales Discounts 50
Accounts Receivable 5,000
2. The collection of a $1,000 account after the 2 percent discount period will result in a
A) debit to Cash for $980.
B) credit to Accounts Receivable for $1,000.
C) credit to Cash for $1,000.
D) debit to Sales Discounts for $20.
3. Gross profit does not appear
A) on a multiple-step income statement.
B) on a single-step income statement.
C) to be relevant in analyzing the operation of a merchandiser.
D) on the income statement if the periodic inventory system is used because it cannot be calculated.
4. During 2014, Parker Enterprises generated revenues of $90,000. The company's expenses were as follows: cost of goods sold of $45,000, operating expenses of $18,000 and a loss on the sale of equipment of $3,000.
Parker's gross profit is
A) $24,000.
B) $27,000.
C) $45,000.
D) $90,000.
5. At the beginning of September, 2014, Stella Company reported Inventory of $8,000. During the month, the company made purchases of $35,600. At September 30, 2014, a physical count of inventory reported $8,400 on hand. Cost of goods sold for the month is
A) $35,200.
B) $35,600.
C) $36,000.
D) $43,600.
6. The Freight-In account
A) increases the cost of merchandise purchased.
B) is contra to the Purchases account.
C) is a permanent account.
D) has a normal credit balance.
7. A company purchased inventory as follows:
150 units at $5
350 units at $6
The average unit cost for inventory is
A) $5.00.
B) $5.50.
C) $5.70.
D) $6.00.
8. A company just starting business made the following four inventory purchases in June:
June 1 150 units $ 390
June 10 200 units 585
June 15 200 units 630
June 28 150 units 510
$2,115
A physical count of merchandise inventory on June 30 reveals that there are 250 units on hand. Using the FIFO inventory method, the amount allocated to cost of goods sold for June is
A) $683.
B) $825.
C) $1,290.
D) $1,432.
PART II - BASIC INVENTORY COMPUTATIONS
9. Joe Poultry uses a periodic inventory system. Its beginning inventory on May 1 consisted of 300 units of Product A at a cost of $6.25 per unit. During May, the following purchases and sales were made.
Purchases Sales
May 6 300 units at $7.20 May 4 275 units
14 400 units at $9.10 8 300 units
21 100 units at $11.50 22 400 units
28 500 units at $11.80 24 225 units
1,300 1,200
Instructions: Compute the May 31 ending inventory and May cost of goods sold under (a) Average Cost, (b) FIFO, and (c) LIFO. Provide appropriate supporting calculations.
1. Average - Ending Inventory = $ ____; Cost of Goods Sold = $ ____.
2. FIFO - Ending Inventory = $ ____; Cost of Goods Sold = $ ____.
3. LIFO - Ending Inventory = $ ____; Cost of Goods Sold = $ ____.
Instructions: Given the information provided below, prepare a bank reconciliation in proper format for the month of April for Hanlon Mowers.
1. Balance per Bank on April 30-$20,601
2. Balance per Books on April 30-$19,262
3. Total outstanding checks at April 30-$2,180
4. Debit memoranda:
a. NSF check from Watts Co.-$475
b. Printing company checks-$45
c. Payment to bank of $1,200 note owed bank by Hanlon Mowers plus $100 interest.
5. Credit memorandum: Collection of note receivable for $1,600 plus $240 interest less $50 collection fee.
6. Errors:
a. A check written this month to Pharm Co. for office supplies cleared the bank at the correct amount of $420, but was recorded by Hanlon at $240.
b. The bank charged a $270 check of Atrin Company against Hanlon's account this month.
7. Deposit in transit on April 30-$361.
8. Bank Reconciliation