88.
On March 15, 2016, Ryan Company purchased $10,000 of merchandise on credit subject to
terms of 2/10, n/30. Ryan Company records its purchases using the gross amount. The
periodic inventory system is used.
Which of the following journal entries is correct when Ryan Company pays for these goods on
March 20, 2016?
89.
Which of the following journal entries is not consistent with the use of a perpetual inventory
system?
90.
Which of the following journal entries is not consistent with the use of a periodic inventory
system?
91.
Which of the following statements is correct regarding either the perpetual or periodic
inventory systems?
92.
When a company uses the periodic inventory system, which of the following is true?
93.
Carrie Company sold merchandise with an invoice price of $1,000 to Underwood, Inc., with
terms of 2/10, n/30. Which of the following is the correct entry to record the payment by
Underwood Inc., within the 10 days if the company uses the periodic inventory system and the
gross method to record purchases?
94.
Iris Company has provided the following information regarding two of its items of inventory at
year-end:
• There are 100 units of Item A, having a cost of $20 per unit, a selling price of $24 and a cost
to sell of $6 per unit.
• There are 50 units of Item B, having a cost of $50 per unit, a selling price of $56 and a cost
to sell of $4 per unit.
How much is the ending inventory using lower of cost or net realizable value on an item–by–
item basis?
95.
Carr Corporation has provided the following information for its most recent month of
operation: sales $8,000; beginning inventory $1,000; ending inventory $2,000 and gross profit
$5,000. How much were Carr’s inventory purchases during the period?
96.
Carp Corporation has provided the following information for its most recent month of
operation: sales $16,000; ending inventory $4,000, purchases $8,000 and gross profit $10,000.
How much was Carp’s beginning inventory?
97.
Cassie Corporation has provided the following information for its most recent month of
operation: sales $32,000, beginning inventory $8,000, purchases $16,000 and gross profit
$20,000. How much was Cassie’s ending inventory?
98.
Atomic Company did not record a December 2016 purchase of inventory on credit until
January 2017. Assume that the December 31, 2016 ending inventory was correctly determined.
What is the effect of this error on the financial statements for the year ended December 31,
2016?
99.
Atomic Company did not record a December 2016 purchase of inventory on credit until
January 2017. Assume that the December 31, 2016 ending inventory was correctly determined.
What is the effect of this error on the financial statements for the year ended December 31,
2017?
100.
Which of the following costs does not become a part of inventory of a manufacturer?
101.
Which of the following statements is correct?
102.
Which of the following businesses would not be as likely to use the specific identification
method of inventory valuation?
103.
Which of the following statements is incorrect?
104.
Which of the following statements is incorrect when inventory unit costs are increasing?
105.
Which of the following statements is correct when inventory unit costs are decreasing?
106.
Which of the following statements is correct when inventory unit costs are increasing?
107.
Which of the following statements is correct when inventory unit costs are decreasing?
108.
Which of the following statements is correct with respect to the determination of cash flows
from operating activities?
109.
What is the net adjustment to net income with respect to the determination of cash flows
from operating activities when inventory increases $100,000 and accounts payable increases
$20,000?
110.
Of the following, which is not a reason for having controls to safeguard inventories?
111.
Of the following, which is not a control for safeguarding inventories?
Essay Questions
112.
McMillan Company uses the periodic inventory system. It has compiled the following
information in order to prepare the financial statements at December 31, 2016:
Gross sales during 2016
$2,000,000
Sales returns and allowances during
2016
50,000
Beginning inventory, January 1, 2016
100,000
Ending inventory, December 31, 2016
120,000
Purchases during 2016
750,000
Required:
Calculate each of the following:
A. Cost of goods available for sale
B. Cost of goods sold
C. Gross profit
113.
The records of Jimmy Company show 2016 purchases of $90,000. An actual count revealed a
2016 ending inventory of $8,000. The 2016 beginning inventory was $5,000. What was cost of
goods sold for 2016?
114.
The following income statement is complete except for a few missing titles (bold lines on the
left), and amounts (dotted lines on the right).
Required:
Prepare a complete income statement using the format and amounts provided. Fill in all
items that are missing titles and amounts (ignore income taxes).
Karl Company
Income Statement
For the Year Ended December 31, 2016
Gross sales revenue
$——-—
Less: _____________
$3,000
Less: Sales discounts
——–
$5,000
_________________
101,000
Cost of goods sold:
_________________
12,000
_________________
——–
_________________
77,000
Less: Ending inventory
——–
_________________
——–
_________________
38,000
Operating expenses
———
Net income
$16,000
+ $5,000)