Perpetual Inventory – Financial Accounting Fundamentals

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Journal Entry, Perpetual Inventory System, Balance Sheet, Revenue, Financial Accounting

The key terms in this Financial Accounting course include Catering Services, Journal Entry, Prepaid, Balance Sheet, Unearned Catering Revenue, Accounts Receivable, Cash, Sales Account, Principles, Assumptions and Constraints, Weighted-Average, Perpetual Inventory System, Cost of Goods Sold


ABC Catering received $980 cash from a customer for catering services to be provided next month. Given the choices below, determine the general journal entry that ABC Catering will make to record the cash receipt. Assume the company’s policy is to initially record prepaid and unearned items in balance sheet accounts.

Unearned Catering Revenue980 
Catering Revenue 980
Cash980 
Accounts Receivable 980
Cash980 
Unearned Catering Revenue 980
  • Correct
Cash980 
Catering Revenue 980
Accounts Receivable980 
Catering Revenue 980


A $16 credit to Sales was posted as a $160 credit. By what amount is the Sales account in error?

$160 understated.

$144 overstated.

Correct

$160 overstated.

$16 understated.

$144 understated.

Explanation

$160 – 16 = $144


Identifying principles, assumptions and constraints

Identify the following terms/phrases as either an accounting: (a) principle, (b) assumption, or (c) constraint.

1.Expense recognitionprinciple
2.Full disclosureprinciple
3.Business entityassumptions
4.Benefit exceeds costconstraint

Marquis Company uses a weighted-average perpetual inventory system and has the following purchases and sales:
  

August 216 units were purchased at $7 per unit.
August 1821 units were purchased at $9 per unit.
August 2918 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

Explanation

Average cost = [(16 * $7) + (21 * $9)]/37 units = $8.14/unit
Cost of sale = 18 units * $8.14/unit = $146.52


ABC Catering received $980 cash from a customer for catering services to be provided next month. Given the choices below, determine the general journal entry that ABC Catering will make to record the cash receipt. Assume the company’s policy is to initially record prepaid and unearned items in balance sheet accounts.

Unearned Catering Revenue980 
Catering Revenue 980
Cash980 
Accounts Receivable 980
Cash980 
Unearned Catering Revenue 980
  • Correct
Cash980 
Catering Revenue 980
Accounts Receivable980 
Catering Revenue 980


A $16 credit to Sales was posted as a $160 credit. By what amount is the Sales account in error?

$160 understated.

$144 overstated.

Correct

$160 overstated.

$16 understated.

$144 understated.

Explanation

$160 – 16 = $144


Identifying principles, assumptions and constraints

Identify the following terms/phrases as either an accounting: (a) principle, (b) assumption, or (c) constraint.

1.Expense recognitionprinciple
2.Full disclosureprinciple
3.Business entityassumptions
4.Benefit exceeds costconstraint

Marquis Company uses a weighted-average perpetual inventory system and has the following purchases and sales:
  

August 216 units were purchased at $7 per unit.
August 1821 units were purchased at $9 per unit.
August 2918 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

Explanation

Average cost = [(16 * $7) + (21 * $9)]/37 units = $8.14/unit
Cost of sale = 18 units * $8.14/unit = $146.52


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