Assignment
1. Which of the following items is not a product cost?
A. Transportation cost on goods delivered to customers.
B. Cost of merchandise purchased for resale.
C. Transportation cost on merchandise purchased from suppliers.
D. All of these answer choices are product costs.
2. Which of the following is considered a period cost?
A. Transportation cost on goods received from suppliers.
B. Advertising expense for the current month.
C. Cost of merchandise purchased.
D. None of these answer choices are considered a period cost.
3. Product costs are matched against sales revenue
A. in the period immediately following the purchase.
B. in the period immediately following the sale.
C. when the merchandise is purchased.
D. when the merchandise is sold.
4. The Cost of Goods Sold account is classified as:
A. a liability.
B. an asset.
C. a contra asset.
D. an expense.
5. The following entry is taken from the journal of a merchandising company:
Cost of Goods Sold 6,000
Merchandise Inventory 6,000
What is the effect of this entry on the accounting equation?
A. Assets and equity will increase.
B. Assets and liabilities will increase.
C. Assets and equity will decrease.
D. Assets will decrease and equity will increase.
Use the following for questions 6-8:
Assume the perpetual inventory method is used.
1) The company purchased $12,500 of merchandise on account under terms 2/10, n/30.
2) The company returned $1,200 of merchandise to the supplier before payment was made.
3) The liability was paid within the discount period.
4) All of the merchandise purchased was sold for $18,800 cash.
6. What effect will the return of merchandise to the supplier have on the accounting equation?
A. Assets and equity are reduced by $1,176.
B. Assets and liabilities are reduced by $1,176.
C. Assets and liabilities are reduced by $1,200.
D. None. It is an asset exchange transaction.
7. The amount of gross margin from the four transactions is:
A. $5,100.
B. $7,726.
C. $6,550.
D. $11,074.
8. The term "FOB Shipping Point" means
A. The buyer pays the shipping cost.
B. The seller pays the shipping cost.
C. The buyer records transportation cost as an expense.
D. The seller records transportation-out cost.
9. In an inflationary period, which inventory cost flow method, FIFO or LIFO, is more desirable from a tax standpoint? Why?
10. The following are the income statements for Ace and Diamond Companies.
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Ace
|
Diamond
|
|
Revenue
|
$70,000
|
$76,000
|
|
Cost of goods sold
|
49,000
|
45,600
|
|
Gross margin
|
21,000
|
30,400
|
|
Operating expenses
|
9,500
|
12,500
|
|
Net income
|
$11,500
|
$17,900
|
What are the net income percentages for the above companies?
A. 6.09% 4.25%
B. 1.83% 1.70%
C. 16.4% 23.6%
D. 30% 40%
11. Aaron Company uses the periodic inventory cost flow method. If Aaron's ending inventory is understated due to an accounting error, what is the effect on net income and the ending balance of retained earnings?
Net Income Retained Earnings
A. Understated Understated
B. Understated Overstated
c. Overstated Understated
D. Overstated Overstated
Use the following information for questions 12-16:
The inventory records for Radford Co. reflected the following
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Beginning inventory @ May 1
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100 units @ $4.00
|
|
First purchase @ May 7
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300 units @ $4.40
|
|
Second purchase @ May 17
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500 units @ $4.60
|
|
Third purchase @ May 23
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100 units @ $4.80
|
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Sales @ May 31
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900 units @ $7.80
|
12. Determine the weighted average cost per unit (rounded) for May.
A. $4.45
B. $4.50
C. $5.12
D. $6.34
13. Determine the amount of cost of goods sold assuming the LIFO cost flow method.
A. $4,100
B. $4,320
C. $2,360
D. $3,600
14. Determine the amount of ending inventory assuming the FIFO cost flow method.
A. $480
B. $440
C. $400
D. $940
15. Determine the amount of gross margin assuming the weighted average cost flow method.
A. $3,015
B. $2,412
C. $1,314
D. $2970
16. Determine the amount of gross margin assuming the FIFO cost flow method.
A. $2,920
B. $3,420
C. $3,000
D. $4,020.