120) Gross profit ratio
62
Listed below are 5 terms followed by a list of phrases that describe or characterize each of the
terms. Match each phrase with the correct term.
A) Method not feasible for most inventories.
B) Most recent purchases will be included in cost of goods sold.
C) The cost of components purchased from other manufacturers.
D) Used to convert ending inventory at year-end cost to base year cost.
E) Could be used instead of an internally generated index in dollar-value LIFO computations.
121) Cost index
122) Consumer Price Index
123) Specific identification
124) Raw materials
63
125) LIFO
64
Listed below are 10 terms, followed by a list of phrases that describe or characterize the terms.
Match each phrase with the correct term.
A) Goods are transferred to another company but title remains with transferor.
B) Items sold are those acquired first.
C) Items sold are those acquired last.
D) Inventory is viewed as a quantity of value.
E) Legal title passes when goods arrive at customer location.
F) Items sold come from a mixture of goods acquired during the period.
G) Continuously records changes in inventory.
H) Legal title passes when goods are delivered to common carrier.
I) Adjusts inventory at the end of the period.
J) If LIFO is used for income tax purposes, it must be used for financial reporting.
126) FIFO
127) Average cost
128) Consignment
65
129) F.o.b. shipping point
130) Dollar-value LIFO
131) Perpetual inventory system
132) LIFO
66
133) Periodic inventory system
134) F.o.b. destination
135) LIFO conformity rule
67
136) Bascomb Company purchased $420,000 in merchandise on account during the month of
April, and merchandise costing $350,000 was sold on account for $425,000.
Required:
1. Prepare journal entries to record the purchases and sales assuming Bascomb uses a
perpetual inventory system.
2. Prepare journal entries to record the purchases and sales assuming Bascomb uses a
periodic inventory system.
68
137) Meteor Co. purchased merchandise on March 4, 2018, at a price of $30,000, subject to
credit terms of 2/10, n/30. Meteor uses the net method for recording purchases and uses a
periodic inventory system.
Required:
1. Prepare the journal entry to record the purchase.
2. Prepare the journal entry to record the appropriate payment if the entire invoice is paid on
March 11, 2018.
3. Prepare the journal entry to record the appropriate payment if the entire invoice is paid on
April 2, 2018.
69
138) Slinky Company purchased merchandise on June 10, 2018, at a price of $20,000, subject to
credit terms of 2/10, n/30. Slinky uses the net method for recording purchases and uses a
perpetual inventory system.
Required:
1. Prepare the journal entry to record the purchase.
2. Prepare the journal entry to record the appropriate payment if the entire invoice is paid on
June 18, 2018.
3. Prepare the journal entry to record the appropriate payment if the entire invoice is paid on
July 8, 2018.
70
139) Bunker Auto Supply purchased merchandise on January 4, 2018, at a price of $70,000,
subject to credit terms of 2/10, n/30. Bunker uses the gross method for recording purchases and
uses a periodic inventory system.
Required:
1. Prepare the journal entry to record the purchase.
2. Prepare the journal entry to record the payment of one-half the invoice amount on January
11, 2018.
3. Prepare the journal entry to record the balance of the amount due on February 2, 2018.
71
140) Patty’s Pet Store purchased merchandise on October 10, 2018, at a price of $35,000, subject
to credit terms of 2/10, n/30. Patty’s uses the gross method for recording purchases and uses
perpetual inventory system.
Required:
1. Prepare the journal entry to record the purchase.
2. Prepare the journal entry to record the payment of one-half the invoice amount on October
18, 2018.
3. Prepare the journal entry to record the payment of the balance of the amount due on
November 8, 2018.
141) Boston Dollar Store uses the gross method to record purchase discounts and uses a
perpetual inventory system. Boston engaged in the following transactions during April:
4/12 Purchased $15,000 in merchandise subject to terms of 2/10, n/30. The goods were
shipped f.o.b. shipping point.
4/13 Received a billing from Orange Freight Lines for $300 for the 4/12 purchase.
4/15 Returned $1,000 of merchandise from the 4/12 purchase.
4/20 Paid balances due from 4/12 purchase.
Required:
Prepare journal entries to record the above transactions.
73
142) Hazelton Corporation uses a periodic inventory system and the LIFO method to value its
inventory. The company began 2018 with $59,000 in inventory of its only product. The
beginning inventory consisted of the following layers:
4,000 units at $6 per unit = $24,000
5,000 units at $7 per unit = 35,000
Total $59,000
During 2018, 6,000 units were purchased at $8 per unit and during 2019, 7,000 units were
purchased at $9 per unit. Sales, in units, were 7,000 and 12,000 during 2018 and 2019,
respectively.
Required:
1. Calculate cost of goods sold for 2018 and 2019.
2. Disregarding income tax, determine the LIFO liquidation profit or loss, if any, for 2018 and
2019.
74
143) The Tucson Corporation’s fiscal year ends on December 31. Tucson determines inventory
quantity by a physical count of inventory on hand at the close of business on December 31. The
company’s controller has asked for your help in deciding if the following items should be
included in the year-end inventory count.
1. Goods purchased from a vendor shipped f.o.b. shipping point on December 24 that arrived on
January 4.
2. Goods shipped f.o.b. shipping point on December 27 arrived at the customer’s location on
January 4.
3. Goods purchased from a vendor shipped f.o.b. destination on December 27 that arrived on
January 5.
4. Freight charges on goods purchased in 1.
5. Merchandise held on consignment for Masterwear, Inc.
6. Goods shipped f.o.b. destination on December 29 that arrived at the customer’s location on
January 2.
Required:
Determine if each of the six items above should be included or excluded from the company’s
year-end inventory.
Use the following to answer the question(s) below:
The following information is taken from the accounting records of Rapid Runner Inc. for the
year 2018. Missing information has been left blank.
Required: Compute the missing amounts.
144)
Cost of
goods
sold
Freight-
in
Ending
inventory
Gross
Purchases
Sales
Purchase
discounts
Beginning
inventory
Gross
profit
Purchase
returns
95
5
30
6
20
8
12
76
145)
Cost of
goods
sold
Freight-
in
Ending
inventory
Gross
Purchases
Sales
Purchase
discounts
Beginning
inventory
Gross
profit
Purchase
returns
10
206
200
15
60
54
27
146)
Cost of
goods
sold
Freight-
in
Ending
inventory
Gross
Purchases
Sales
Purchase
discounts
Beginning
inventory
Gross
profit
Purchase
returns
14
83
270
304
20
90
30
77
147)
Cost of
goods
sold
Freight-
in
Ending
inventory
Gross
Purchases
Sales
Purchase
discounts
Beginning
inventory
Gross
profit
Purchase
returns
237
22
147
300
400
150
163
50
148)
Cost of
goods
sold
Freight-
in
Ending
inventory
Gross
Purchases
Sales
Purchase
discounts
Beginning
inventory
Gross
profit
Purchase
returns
33
239
350
511
36
220
213
Use the following to answer the question(s) below:
The following information is taken from the accounting records of Madeline Inc. for the year
2018. Missing information has been left blank. Inventory is the only supply that Madeline
purchases on credit.
Required: Compute the missing amounts.
149)
Jan. 1
accounts
payable
Jan. 1
inventory
Dec. 31
accounts
payable
Dec. 31
inventory
Cash paid to
inventory
suppliers
Cost of
goods sold
Net purchases
100
62
85
324
365
350
36
100
62
85
324
365
350
79
150)
Jan. 1
accounts
payable
Jan. 1
inventory
Dec. 31
accounts
payable
Dec. 31
inventory
Cash paid to
inventory
suppliers
Cost of
goods sold
Net purchases
99
222
179
595
636
675
suppliers
99
222
179
261
595
636
675
151)
Jan. 1
accounts
payable
Jan. 1
inventory
Dec. 31
accounts
payable
Dec. 31
inventory
Cash paid to
inventory
suppliers
Cost of
goods sold
Net purchases
107
324
29
279
928
883
Jan. 1
accounts
payable
Jan. 1
inventory
Dec. 31
accounts
payable
Dec. 31
inventory
Cash paid to
inventory
suppliers
Cost of
goods sold
Net purchases
80
152)
Jan. 1
accounts
payable
Jan. 1
inventory
Dec. 31
accounts
payable
Dec. 31
inventory
Cash paid to
inventory
suppliers
Cost of
goods sold
Net purchases
55
184
78
99
700
suppliers
55
184
78
99
700