ACC 371 Week 7 Quiz 9

ACC 371 Week 7 Quiz 9 | Mercer University

Question 1

Kalen Co. had the following consignment transactions during March 2020. 

Transaction         Amount

Inventory on consignment to Rad Co.     $18,000

Freight paid by Kalen Co.              900

Inventory held on consignment from Star Co.     12,000

Freight paid by Star Co. 500 

No sales of consigned goods were made through March 2020. Kalen’s March 31, 2020, balance sheet should include consigned inventory for the following amount.  

$18,900  

$18,000  

$12,500  

$12,000

Question 2

Madison Corp. begins the month with an inventory balance of $1,500 and completed the following transactions for the month, listed in chronological order.  Madison uses the gross method to record purchase discounts.

Transaction         Cost Amount

Purchased inventory from vendor, terms 2/10, n30         $1,200

Paid for shipping on the inventory purchase        60

Returned inventory to vendor   150

Paid an account balance within discount period 1,029

Sold inventory collecting $580 in cash      400

Paid for shipping on inventory sold          20

What is Madison’s gross margin for the month under a perpetual inventory system?  

$180  

$160  

$420  

$69  

$400

Question 3

On June 30, 2020, Chesterton Inc. purchased merchandise for $3,500 on credit terms 1/10, n/30. Chesterton accounts for purchase discounts using the gross method and follows a perpetual inventory system. If Chesterton paid the balance in full on July 8, 2020, Chesterton’s entry would include a:  

Credit to Purchase Discount for $35. 

Debit to Accounts Payable for $3,465.  

Credit to Cash for $3,500.  

Credit to Inventory for $35.  

None of the above. 

Inventory would be reduced by the discount of 1% x $3,500 = $35.

The entry would be as follows:

Accounts Payable             3,500

                Inventory                                 35

                Cash                                     3,465

Question 4

SeaGull Inc. uses FIFO for internal purposes and LIFO for income tax and external reporting purposes. At the end of the year, the inventory records of SeaGull Inc. include the following items.

                                                               2020                        2021

Ending inventory at FIFO               $120,000              $160,000

Ending inventory at LIFO               $75,000                 $100,000

The entry to adjust the inventory allowance to reduce FIFO inventory to LIFO inventory at the end of 2021 would include what amount?  

A debit to cost of goods sold for $60,000.  

A credit to cost of goods sold for $60,000.  

A debit to cost of goods sold for $15,000.  

A credit to cost of goods sold for $15,000.

Question 5

Which of the following items should be included in determining unit cost for inventory purposes?  

Abnormal shipping costs  

Freight-in  

Freight-out  

Selling expenses  

Both B and C

Question 6

The following steps in the computation of dollar-value LIFO are listed below in no particular order.

1.            Step__ Restate Layers of Inventory into Current Year Dollars

2.            Step__ Arrange Restated Inventory Balance into Layers

3.            Step__ Restate Ending Inventory at Base Year Dollars

4.            Step__ Match Layers to the Appropriate Price Indices

A) a, b, c, d 

B) a, b, d, c 

C) c, b, d, a 

D)  a, c, b, d

Question 7

The records of Colatta Inc. at the end of the year included the following.

Item      Amount

Merchandise sold, in transit, shipped f.o.b. destination $320,000

Merchandise sold, in transit, shipped f.o.b. shipping point            240,000

Merchandise purchased, in transit, shipped f.o.b. destination    190,000

Merchandise purchased, in transit, shipped f.o.b. shipping point               100,000 

What amount would Colatta Inc. include on its year-end balance sheet for inventory?  

$340,000 

$510,000  

$430,000  

$420,000

Question 8

Which of the following statements describes a LIFO inventory reserve?  

Identifies the difference between inventory valued under FIFO (or another method) for internal purposes and under LIFO for external reporting.  

Is always recorded using an inventory allowance account.  

Is seldom used because a company would normally use LIFO for internal accounting and reporting purposes.  

Is adjusted continually throughout the accounting period. 

Question 9

Northwest Inc. accounts for inventory using the dollar-value LIFO method. The following information is available for the years 2020 through 2022.

Year       Ending Inventory at FIFO              Price Index

2020       $10,000 1.00

2021       16,000   1.12

2022       22,000   1.15 

What is ending inventory for year 2022 using the dollar-value LIFO method?  

$11,917  

$12,000  

$13,417  

$11,667

Question 10

On June 30, 2020, Chesterton Inc. purchased merchandise for $2,500 on credit terms 2/10, n/30. Chesterton accounts for purchase discounts using the gross method and follows a periodic inventory system. If Chesterton paid the balance in full on July 8, 2020, Chesterton’s entry would include a:  

Debit to Purchase Discount for $50.  

Debit to Accounts Payable for $2,450.  

Credit to Cash for $2,450.  

Credit to Inventory for $50.  

None of the above.

The cash payment would be made net of the 2% discount which is equal to $2,500 x 98%.