Accounting Fundamentals, Inventory, Cost of Goods Sold – Final Quiz
The key terms in these Financial Accounting chapters include Accounts Payable, Inventory, Cost of Goods Sold, Perpetual Inventory, Accounts Receivable, Debit And Credit Accounts, Ending Inventory. Financial Accounting Fundamentals Final Quiz.
A company has sales of $742,600 and cost of goods sold of $297,600. Its gross profit equals:
$(445,000).
$742,600.
$297,600.
$445,000. – Correct
$1,040,200.
Explanation
Gross Margin = Sales – Cost of Goods Sold
Gross Margin = 742,600 – $297,600 = $445,000
A company purchased $3,500 of merchandise on July 5 with terms 3/10, n/30. On July 7, it returned $700 worth of merchandise. On July 12, it paid the full amount due. Assuming the company uses a perpetual inventory system, and records purchases using the gross method, the correct journal entry to record the payment on July 12 is:
Debit Merchandise Inventory $2,800; credit Cash $2,800.
Debit Cash $2,800; credit Accounts Payable $2,800.
Debit Accounts Payable $2,800; credit Merchandise Inventory $84; credit Cash $2,716. – Correct
Debit Accounts Payable $3,500; credit Cash $3,500.
Debit Accounts Payable $2,800; credit Cash $2,800.
On May 1, a two-year insurance policy was purchased for $48,000 with coverage to begin immediately. What is the amount of insurance expense that would appear on the company’s income statement for the first year ended December 31?
$2,000.
$14,000.
$16,000. – Correct
$18,000.
$48,000.
Explanation
$48,000 x 8/24 = $16,000
A company purchased $4,600 worth of merchandise. Transportation costs were an additional $405. The company returned $315 worth of merchandise and then paid the invoice within the 1% cash discount period. The total cost of this merchandise is:
$4,510.00.
$4,476.00.
$4,644.00.
$4,647.15. – Correct
$4,690.00.
Explanation
Cash Paid = [($4,600 – $315) x 0.99] + $405 = $4,647.15 No discount may be taken on the transportation costs.
On February 3, Smart Company sold merchandise in the amount of $4,500 to Truman Company, with credit terms of 1/10, n/30. The cost of the items sold is $3,100. Smart uses the perpetual inventory system and the gross method. Truman pays the invoice on February 8, and takes the appropriate discount. The journal entry that Smart makes on February 8 is:
| Cash | 3,100 | |
| Accounts receivable | 3,100 |
| Cash | 4,500 | |
| Accounts receivable | 4,500 |
| Cash | 4,420 | |
| Sales discounts | 31 | |
| Accounts receivable | 4,451 |
| Cash | 3,020 | |
| Accounts receivable | 3,020 |
| Cash | 4,455 | |
| Sales discounts | 45 | |
| Accounts receivable | 4,500 |
Correct
Explanation
Sales Discounts = $4,500 * .01 = $45
Cash = $4,500 – $45 = $4,455
On September 12, Vander Company sold merchandise in the amount of $7,100 to Jepson Company, with credit terms of 2/10, n/30. The cost of the items sold is $5,300. Vander uses the periodic inventory system and the gross method of accounting for sales. The journal entry or entries that Vander will make on September 12 is:
| Sales | 7,100 | |
| Accounts receivable | 7,100 |
| Sales | 7,100 | |
| Accounts receivable | 7,100 | |
| Cost of goods sold | 5,300 | |
| Merchandise Inventory | 5,300 |
| Accounts receivable | 7,100 | |
| Sales | 7,100 |
Correct
| Accounts receivable | 7,100 | |
| Sales | 7,100 | |
| Cost of goods sold | 5,300 | |
| Merchandise Inventory | 5,300 |
| Accounts receivable | 5,300 | |
| Sales | 5,300 |
Cushman Company had $846,000 in sales, sales discounts of $12,690, sales returns and allowances of $19,035, cost of goods sold of $401,850, and $291,025 in operating expenses. Net income equals:
$814,275.
$153,125.
$412,425.
$121,400. – Correct
$184,850.
Explanation
Net Income = $846,000 – $12,690 – $19,035 – $401,850 – $291,025 = $121,400
A company’s Office Supplies account shows a beginning balance of $760 and an ending balance of $720. If office supplies expense for the year is $3,900, what amount of office supplies was purchased during the period?
Multiple Choice
$3,180.
$3,860. – Correct
$3,300.
$4,620.
$4,660.
Explanation
$760 + Supplies Purchased – $3,900 = $720
Supplies Purchased -$3,140 = $720
Supplies Purchased = $3,860
If a check correctly written and paid by the bank for $748 is incorrectly recorded in the company’s books for $784, how should this error be treated on the bank reconciliation?
Subtract $36 from the bank’s balance.
Add $36 to the book balance. – Correct
Subtract $36 from the bank’s balance and add $45 to the book’s balance.
Add $36 to the bank’s balance.
Subtract $36 from the book balance.
Explanation
$784 – $748 = $36 too much deducted from the company’s cash account balance that must be added back to cash.
During the month of July, Clanton Industries issued a check in the amount of $856 to a supplier on account. The check did not clear the bank during July. In preparing the July 31 bank reconciliation, the company should:
Deduct the check amount from the book balance of cash.
Add the check amount to the book balance of cash.
Deduct the check amount from the bank balance. – Correct
Add the check amount to the bank balance.
Make a journal entry in the company records for an error.
A company has sales of $742,600 and cost of goods sold of $297,600. Its gross profit equals:
$(445,000).
$742,600.
$297,600.
$445,000. – Correct
$1,040,200.
Explanation
Gross Margin = Sales – Cost of Goods Sold
Gross Margin = 742,600 – $297,600 = $445,000
A company purchased $3,500 of merchandise on July 5 with terms 3/10, n/30. On July 7, it returned $700 worth of merchandise. On July 12, it paid the full amount due. Assuming the company uses a perpetual inventory system, and records purchases using the gross method, the correct journal entry to record the payment on July 12 is:
Debit Merchandise Inventory $2,800; credit Cash $2,800.
Debit Cash $2,800; credit Accounts Payable $2,800.
Debit Accounts Payable $2,800; credit Merchandise Inventory $84; credit Cash $2,716. – Correct
Debit Accounts Payable $3,500; credit Cash $3,500.
Debit Accounts Payable $2,800; credit Cash $2,800.
On May 1, a two-year insurance policy was purchased for $48,000 with coverage to begin immediately. What is the amount of insurance expense that would appear on the company’s income statement for the first year ended December 31?
$2,000.
$14,000.
$16,000. – Correct
$18,000.
$48,000.
Explanation
$48,000 x 8/24 = $16,000
A company purchased $4,600 worth of merchandise. Transportation costs were an additional $405. The company returned $315 worth of merchandise and then paid the invoice within the 1% cash discount period. The total cost of this merchandise is:
$4,510.00.
$4,476.00.
$4,644.00.
$4,647.15. – Correct
$4,690.00.
Explanation
Cash Paid = [($4,600 – $315) x 0.99] + $405 = $4,647.15 No discount may be taken on the transportation costs.
Bedrock Company reported a December 31 ending inventory balance of $416,000. The following additional information is also available:
- The ending inventory balance of $416,000 included $72,800 of consigned inventory for which Bedrock was the consignor.
- The ending inventory balance of $416,000 included $23,600 of office supplies that were stored in the warehouse and were to be used by the company’s supervisors and managers during the coming year.
Based on this information, the correct balance for ending inventory on December 31 is:
$247,000
$392,400 – Correct
$309,000
$363,600
$343,400
Explanation
Start with beginning inventory of $416,000. The information in the first bullet point was handled correctly since inventory should include consigned goods for which the subject company is the consignor. No adjustment. With respect to the second bullet point, inventory should not include office supplies held for use. Subtract $23,600. Ending inventory should be $416,000 − $23,600 = $392,400.
A company had the following purchases and sales during its first year of operations:
| Purchases | Sales | |
| January: | 28 units at $210 | 19 units |
| February: | 38 units at $215 | 18 units |
| May: | 33 units at $220 | 22 units |
| September: | 30 units at $225 | 21 units |
| November: | 28 units at $230 | 35 units |
On December 31, there were 42 units remaining in ending inventory. Using the Perpetual LIFO inventory valuation method, what is the cost of the ending inventory? (Assume all sales were made on the last day of the month.)
$14,174.
$9,060. – Correct
$13,596.
$14,751.
$20,945.
Explanation
Ending Inventory
| 9 | @ | $210 | = | $ | 1,890 |
| 20 | @ | $215 | = | 4,300 | |
| 11 | @ | $220 | = | 2,420 | |
| 2 | @ | $225 | = | 450 | |
| 0 | @ | $230 | = | 0 | |
| 42 units | $ | 9,060 | |||
What is the proper adjusting entry at December 31, the end of the accounting period, if the balance in the prepaid insurance account is $9,150 before adjustment, and the unexpired amount per analysis of policies is, $3,950?
Debit Insurance Expense, $3,950; credit Prepaid Insurance, $3,950.
Debit Insurance Expense, $5,200; credit Prepaid Insurance, $5,200. – Correct
Debit Prepaid Insurance, $5,200; credit Insurance Expense, $5,200.
Debit Insurance Expense, $9,150; credit Prepaid Insurance, $9,150.
Debit Cash, $9,150; Credit Prepaid Insurance, $9,150.
Explanation
$9,150 – $3,950 = $5,200
Marquis Company uses a weighted-average perpetual inventory system and has the following purchases and sales:
| August 2 | 16 units were purchased at $7 per unit. |
| August 18 | 21 units were purchased at $9 per unit. |
| August 29 | 18 units were sold. |
What is the amount of the cost of goods sold for this sale? (Round average cost per unit to 2 decimal places.)
$130.00
$189.00
$301.00
$132.50
$146.52 – Correct
Explanation
Average cost = [(16 * $7) + (21 * $9)]/37 units = $8.14/unit
Cost of sale = 18 units * $8.14/unit = $146.52
Grays Company has inventory of 21 units at a cost of $9 each on August 1. On August 3, it purchased 31 units at $11 each. 23 units are sold on August 6. Using the FIFO perpetual inventory method, what amount will be reported as cost of goods sold for the 23 units that were sold?
$152.
$211. – Correct
$215.
$483.
$217.
Explanation
(21 units * $9) + (2 units * $11) = $211.00
A company’s normal selling price for its product is $20 per unit. However, due to market competition, the selling price has fallen to $15 per unit. This company’s current inventory consists of 200 units purchased at $16 per unit. Replacement cost has fallen to $13 per unit. Calculate the value of this company’s inventory at the lower of cost or market.
$2,600. – Correct
$2,550.
$3,000.
$3,200.
$2,700.
Explanation
200 units @ $13 per unit = $2,600
A company had beginning inventory of 11 units at a cost of $23 each on March 1. On March 2, it purchased 11 units at $40 each. March 6 it purchased 5 units at $28 each. On March 8, it sold 25 units for $71 each. Using the FIFO perpetual inventory method, what was the cost of the 25 units sold?
$833
$621
$693
$700
$777 – Correct
Explanation
(11 * $23) + (11 * $40) + (3 * $28) = $777
At the end of the day, the cash register’s record shows $1,258, but the count of cash in the cash register is $1,249. The correct entry to record the cash sales is
Debit Cash $1,249; Credit Sales $1,249.
Debit Cash Over and Short $9, credit Sales $9.
Debit Cash $1,258; credit Sales $1,258.
Debit Cash $1,249; debit Cash Over and Short $9; credit Sales $1,258. – Correct
Debit Cash $1,258; credit Cash Over and Short $1,249; credit Sales $9.
Assume that the custodian of a $450 petty cash fund has $57.10 in coins and currency plus $388.00 in receipts at the end of the month. The entry to replenish the petty cash fund will include:
A credit to Cash Over and Short for $4.90.
A credit to Cash for $392.90. – Correct
A debit to Cash for $383.10.
A Cash debit for $392.90.
A debit to Petty Cash for $388.00.
Explanation
$450 – $57.10 – $388.00 = $4.90 cash shortage
$450 – $57.10 = $392.90 cash reimbursement needed
If a check correctly written and paid by the bank for $748 is incorrectly recorded in the company’s books for $784, how should this error be treated on the bank reconciliation?
Subtract $36 from the bank’s balance.
Add $36 to the book balance. – Correct
Subtract $36 from the bank’s balance and add $45 to the book’s balance.
Add $36 to the bank’s balance.
Subtract $36 from the book balance.
Explanation
$784 – $748 = $36 too much deducted from the company’s cash account balance that must be added back to cash.
During the month of July, Clanton Industries issued a check in the amount of $856 to a supplier on account. The check did not clear the bank during July. In preparing the July 31 bank reconciliation, the company should:
Deduct the check amount from the book balance of cash.
Add the check amount to the book balance of cash.
Deduct the check amount from the bank balance. – Correct
Add the check amount to the bank balance.
Make a journal entry in the company records for an error.
In the process of reconciling its bank statement for April, Donahue Enterprises’ accountant compiles the following information:
| Cash balance per company books on April 30 | $ | 6,255 |
| Deposits in transit at month-end | $ | 1,340 |
| Outstanding checks at month-end | $ | 660 |
| Bank charge for printing new checks | $ | 65 |
| Note receivable and interest collected by bank on Donahue’s behalf | $ | 730 |
| A check paid to Donahue during the month by a customer is returned by the bank as NSF | $ | 520 |
The adjusted cash balance per the books on April 30 is:
$6,920
$5,800
$4,400
$8,120
$6,400 – Correct
Explanation
| Book balance | $ | 6,255 |
| + note collection & interest revenue | + 730 | |
| – bank charge for printing new checks | – 65 | |
| – NSF check returned by bank | – 520 | |
| Adjusted book balance | $ | 6,400 |