Online Quiz 12

Question 1

Purchased goods costing $1,000. The purchase was made on account with terms of 3/10, n/30. The original purchase was recorded with a DEBIT to Inventory and a CREDIT to Accounts Payable for $1,000. – The account was paid in cash after six days. Which ONE of the following is included in the journal entry to record the payment of cash on account after six days?
  DEBIT to Accounts Payable for $970
 DEBIT to Cash for $970
 CREDIT to Inventory for $30
 CREDIT to Accounts Payable for $1,000
 CREDIT to Accounts Payable for $970

Answer 1

Answer: CREDIT to Inventory for $30

Question 2

Sold goods costing $1,200 for $2,000 on account. After two weeks the customer returned the goods. There is nothing wrong with the goods; the customer just changed his mind, and you have a return policy that allows customers to return their purchases at any time for any reason. – Which ONE of the following is included in the journal entries necessary to record this return? Note: You are recording the RETURN; assume that the initial sale was recorded correctly. Also, note that the initial sale was NOT a cash sale; the sale was made on account.
  CREDIT to Sales Returns for $2,000
 CREDIT to Inventory for $2,000
 CREDIT to Cost of Goods Sold for $2,000
 DEBIT to Sales Returns for $1,200
 DEBIT to Inventory for $1,200
 DEBIT to Cost of Goods Sold for $1,200

Answer 2

Answer: DEBIT to Inventory for $1,200

Question 3

Sold goods costing $1,700 for $3,000 on account. Which ONE of the following is included in the journal entries to record this sale on account?
  CREDIT to Sales Revenue for $3,000
 CREDIT to Inventory for $3,000
 CREDIT to Cost of Goods Sold for $3,000
 DEBIT to Sales Revenue for $1,700
 DEBIT to Inventory for $1,700

Answer 3

Answer: CREDIT to Sales Revenue for $3,000

Question 4

Inventory purchase and sales data are as follows. [Note: There was no inventory before the purchase made on January 1.]
Purchased on January 1 – 100 units, $6 cost per unit
Purchased on January 16 – 300 units, $8 cost per unit
Purchased on January 25 – 400 units, $7 cost per unit
Sold on January 31 – 500 units, $10 selling price per unit
The company uses FIFO. Compute COST OF GOODS SOLD for January.
$3,600
$3,700
$3,500
$2,100
$2,200

Answer 4

Answer: $3,700

Question 5

Inventory purchase and sales data are as follows. [Note: There was no inventory before the purchase made on January 1.]
Purchased on January 1 – 100 units, $6 cost per unit
Purchased on January 16 – 300 units, $8 cost per unit
Purchased on January 25 – 400 units, $7 cost per unit
Sold on January 31 – 500 units, $10 selling price per unit
The company uses LIFO. Compute COST OF GOODS SOLD for January.
$3,600
$3,700
$3,500
$2,100
$2,200

Answer 5

Answer: $3,600

Question 6

Inventory purchase and sales data are as follows. [Note: There was no inventory before the purchase made on January 1.]
Purchased on January 1 – 100 units, $6 cost per unit
Purchased on January 16 – 300 units, $8 cost per unit
Purchased on January 25 – 400 units, $7 cost per unit
Sold on January 31 – 500 units, $10 selling price per unit
The company uses FIFO. Compute ENDING INVENTORY as of the end of January.
$3,600
$3,700
$3,500
$2,100
$2,200

Answer 6

Answer: $2,100

Question 7

Inventory purchase and sales data are as follows. [Note: There was no inventory before the purchase made on January 1.]
Purchased on January 1 – 100 units, $6 cost per unit
Purchased on January 16 – 300 units, $8 cost per unit
Purchased on January 25 – 400 units, $7 cost per unit
Sold on January 31 – 500 units, $10 selling price per unit
The company uses LIFO. Compute GROSS MARGIN (or gross profit) for January.
$1,400
$1,300
$1,500
$2,900
$2,800

Answer 7

Answer: $1,400

Question 8

Inventory purchase and sales data are as follows. [Note: There was no inventory before the purchase made on January 1.]
Purchased on January 1 – 100 units, $6 cost per unit
Purchased on January 16 – 300 units, $8 cost per unit
Purchased on January 25 – 400 units, $7 cost per unit
Sold on January 31 – 500 units, $10 selling price per unit
The company uses AVERAGE COST. Compute COST OF GOODS SOLD for January.
$2,175
$2,435
$3,365
$3,555
$3,625

Answer 8

Answer: $3,625

Question 9

Which ONE of the following statements is TRUE?
In times of INFLATION, FIFO results in the highest INCOME TAXES.
In times of INFLATION, LIFO results in the highest INCOME TAXES.
In times of DEFLATION, FIFO results in the highest ending INVENTORY.
In times of DEFLATION, AVERAGE COST results in the highest ending INVENTORY.
In times of INFLATION, LIFO results in the highest ending INVENTORY.

Answer 9

Answer: In times of INFLATION, FIFO results in the highest INCOME TAXES.

Question 10

A physical inventory count has revealed that inventory costing $450 is missing. Which ONE of the following is included in the journal entry necessary to record the fact that this $450 of inventory is missing?
  CREDIT to Cost of Goods Sold for $450
 CREDIT to Inventory for $450
 CREDIT to Inventory Shrinkage for $450
 CREDIT to Sales Revenue for $450

Answer 10

Answer: CREDIT to Inventory for $450