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Exam 15: Accounting for Merchandise Inventory

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Question 21

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Inventory purchases are entered in the Merchandise Inventory account at the expected sales price amount.

A) True
B) False

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Question 22

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St.Paul Corporation has a normal gross profit of 45%.The current year's beginning inventory was $2,500,purchases were $9,000,and retail sales were $15,000.The estimated ending inventory under the gross profit method is:

A) $4,750.
B) $3,250.
C) $8,220.
D) $4,050.

E) B) and C)
F) A) and D)

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Question 23

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Tracking individual inventory items is tracked in the:

Journalize the following assuming periodic inventory. $\text {July 20 }$ $\quad$$\text {Made purchases of inventory for \$ 3,500 on account}$ $\text { July 21 }$ $\quad$$\text {Made sales of \$ 2,300 cash and \( \$ 1,200 \) credit.}$ $\text {July 22}$ $\quad$$\text {Returned \$ 1,400 of purchases for defects.}$

The journal entry to record a purchase of inventory on credit under the perpetual system includes:

The inventory method where the ending inventory consists of current costs is:

Hawkeye Tack uses a periodic inventory system.Hawkeye Tack sold 80 sweaters during September.Other data for September includes: $\begin{array} { | r | l | l | } \hline \text { Sep. 1 } & \text { Balance } & 40 @ \$ 25 \\\hline 8 & \text { Purchased } & 12 @ 28 \\\hline 17 & \text { Purrchased } & 25 @ 30 \\\hline 25 & \text { Purrchased } & 35 @ 32 \\\hline\end{array}$ Cost of goods sold under the FIFO method is:

Given the following accounts: [1] Cash [2] Accounts receivable [3] Merchandise inventory [4] Supplies [5] Accounts payable [6] Sales [7] Sales returns and allowances [8] Sales discounts [9] Cost of goods sold [10] Purchases [11] Purchase returns and allowances [12] Purchase discounts [13] Freight-in Indicate the account(s) to be debited and credited to record the following transactions. -Paid for merchandise within the discount period.- Perpetual Debit ________ & ________ Credit ________ & ________

This inventory method produces the lowest income tax during a period of inflation.

The freight paid on goods purchased F.O.B.shipping point was debited to the Purchases account.This error would cause:

In a perpetual inventory system,Cost of Goods Sold is an account in the general ledger.

Sterling Supply uses a periodic inventory system.Magnum sold 25 globes during March.Other data for March includes: $\begin{array} { | r | l | l | } \hline \text { Mar. 1 } & \text { Balance } & 20 @ \$ 12 \\\hline 11 & \text { Purchased } & 10 @ 11 \\\hline 25 & \text { Purchased } & 10 @ 10 \\\hline\end{array}$ Ending inventory under the weighted-average method is:

The advantage of the weighted-average method is:

Joe owns an auto parts store called Joe's Auto Care.The following transactions took place during November of the current year. $\text {November 7}$ $\quad$$\text { Purchased merchandise on account from Wheeler Auto for \$ 4,300.}$ $\text {November 9}$ $\quad$$\text {Paid freight charges of \$ 230 on merchandise purchased on the 7 th.}$ $\text {November 11}$ $\quad$$\text { Sold merchandise on account to Lancaster Auto Sales for \$ 3,500. The cost of the merchandise was \(\$ 2,500\).}$ $\text {November 13}$ $\quad$$\text {Received a credit memo from Wheeler for merchandise returned, \$ 670.}$ $\text {November 20}$ $\quad$$\text { Issued a credit memo to Lancaster Auto Sales for merchandise returned, \$ 820. The cost of the merchandise is \(\$ 550\).}$ Journalize the above transactions using the periodic inventory system.

Chewy Candy has a beginning inventory of $1,000.June purchases were $3,000,and retail sales were $5,000.The store has a normal gross profit of 50%.What is the June 30 estimated ending inventory at cost under the gross profit method?

Office Supplies bought on account were returned for credit and recorded with a debit to Accounts Payable and a credit to Merchandise Inventory.This error would cause:

When a perpetual inventory system is used,a physical inventory should be taken at least annually.

A beginning inventory and purchases of computer parts follow: $\begin{array}{llcc} \text { Beginning inventory } &6 @ \$ 12 \\ \text { First purchase} &15 @ 11\\ \text { Second purchase } &10 @ 14\\\end{array}$ Required: Determine the cost of an ending inventory of 6 computer parts remaining in the periodic inventory under each of the assumptions listed. a)________ FIFO b)________ LIFO c)________ Weighted-average

Barry's Books uses a periodic inventory system.Barry's Books sold 45 copies of Helpful Hints during September.Other data for September include: $\begin{array} { | r | l | l | } \hline \text { Sep. 1 } & \text { Balance } & 12 \text { books } @ \$ 20 \\\hline 8 & \text { Purchased } & 10 \text { books } @ \$ 21 \\\hline 17 & \text { Purrchased } & 30 \text { books } @ \$ 22 \\\hline 25 & \text { Purrchased } & 15 \text { books } @ \$ 24 \\\hline\end{array}$ Ending inventory under the FIFO method is:

FIFO provides an up-to-date ending inventory on the balance sheet because it uses the latest purchases to calculate ending inventory.