ACCT105 Week 4 Homework Template SCORE 100 PERCENT

Matching
Referring to the items listed below, place the appropriate letter next to the corresponding description.
a.	FOB shipping point		f.	Freight collect		k.	Debit
b.	Freight prepaid		g.	Purchase discounts		l.	Cost of goods sold
c.	Chain discount		h.	Operating revenues		m.	Gross margin
d.	Sales discounts		i.	Nonoperating revenues		n.	Selling expenses
e.	FOB destination		j.	Credit		o.	Adminstrative
1.			The term used when the buyer incurs all transportation costs after the merchandise is loaded at the point of shipment.
2.			This term is used when the buyer pays the freight bill upon arrival of the goods.
3.			This term is applied when a list price is subject to several trade discounts.
4.			Cash discounts as recorded on the books of the buyer.
5.			The term used when goods are shipped to their destination without charge to the buyer.
6.			This term is used when the seller pays the freight at the time of shipment.
7.			Revenues generated by the major activities of the business.
8.			The term used when the seller bears all the transportation charges.
9.			The normal balance of the Purchase Discounts account.
10.			Net Sales - Cost of Goods Sold
11.			Expenses incurred in performing and facilitating the marketing effort.
12.			Beginning inventory + Net purchases - Ending inventory
13.			Operating expenses incurred in the overall management of a business.
14.			Advertising Expense, Warehousing and Handling Expense, and Salaries Expense - Marketing Managers are grouped into this category.
15.			Are deducted along with purchase returns and allowances from gross purchases to arrive at net purchases.

Completion and Exercises

Fill in the blanks using the dropdown list.

1.

When the perpetual inventory method is being used, the accountant debits __________ __________ and credits Accounts Payable (or Cash) when goods are purchased and debits Cost of Goods Sold and credits __________ __________ when gods are sold, along with the proper sales entry.

2.

When prices are rising, LIFO inventory is __________ (higher or lower) than FIFO inventory at the end of the year. This will cause the cost of goods sold under LIFO to be __________ (higher or lower) than under FIFO, and accordingly the net income will be __________ (higher or lower) under LIFO.

3.

Name two recognized methods of estimating the cost of ending inventory.

4.

Assuming periodic inventory procedure, what effect would an understatement of ending inventory have on the different items on the financial statements?

Balance Sheet

Income Statement

Current Assets

Cost of Goods Sold

Total Assets

Gross Margin

Retained Earnings

Net Income

Total Liabilities and Retained Earnings

5.

Both __________-__________, __________-__________ and __________-__________, __________-__________ methods of inventory valuation are assumptions as to the flow of costs.

6.

Following is a summary of beginning inventory, purchases, and sales. At what amount would the inventory be priced assuming, the first-in, first-out method is used under perpetual invventory procedure?

Beg. Inv., Jan. 1

2,400 units @ $8.80

Purchases:

Jan. 8

5,600 units @ $9.00

Mar. 15

2,000 units @ $9.10

Jul. 28

2,800 units @ $9.50

Nov. 30

400 units @ $9.70

Sales:

Feb. 13

3,000 units

Jun. 9

2,800 units

Sep. 22

1,400 units

7.

At what amount would the inventory in the preceding question be priced if the last-in, first-out method were used under perpetual inventory procedure?

8.

Under FIFO, net income exists if revenues are sufficient to cover the __________ cost of the units of inventory sold.

9.

Under LIFO, net income exists if revenues are sufficient to cover the __________ cost of the units of inventory sold, provided new units are acquired before the end of the accounting period.

10.

The principle argument for __________ is that this method more precisely matches costs and revenues in current terms.

11.

During a period of rising prices, __________ will give a higher net income figure.

12.

Below is a record of beginning inventory and purchases. Compute the ending inventory under the weighted-average method assuming periodic inventory procedure is a physical count showed 150 units on hand at the end of the month.

Inventory on May 1

75

units @ $10.00

=

$750.00

Purchases:

May 10

50

units @ $10.50

=

525.00

May 15

25

units @ $10.30

=

257.50

May 25

100

units @ $10.10

=

1,010.00

250

$2,542.50

13.

What is the cost of goods sold in the example in the preceding question?

14.

The lower-of-cost-or-market method uses market values only to the extent that these values are __________ than historical cost.

15.

The Mia Company has three different products in its inventory at December 31, 2007 which have costs and current market value as follows:

Item

Cost

Market

A

$5,000

$5,500

B

15,000

14,750

C

12,500

12,875

If each product is priced at the lower-of-cost-or-market, the inventory is $__________.

If the total is priced at the lower-of-cost-or-market, the inventory is $__________.

16.

To apply the gross margin method, the rate of gross margin on sales is multiplied by __________ __________ to arrive at gross margin. The gross margin is then subtracted from net sales to arrive at __________ __________ __________ __________ __________. This figure is then subtracted from __________ __________ __________ __________ __________ __________ to arrive at ending inventory.

17.

Use the following information and the retail inventory method to estimate the ending inventory at cost:

Cost

Retail

Beginning inventory

$44,000

$70,000

Purchases, net

550,000

920,000

Sales

900,000

18.

The Computational Error Company reported net income of $240,000 and $270,000 for 2006 and 2007. It was discovered later that the ending inventory for 2006 was understated by $28,000. The net income for 2006 was __________, and the net income for 2007 was __________.

19.

A company began an accounting period with 100 units of an item that cost $7.50 each. During the period it purchased 400 units of the item at $9 each and it sold 390 units. In the spaces below give the costs assigned to the ending inventory and to goods sold under each of the three assumptions using periodic inventory procedures.

Ending Inventory

Cost of Goods Sold

1.

The costs were assigned on a LIFO basis

2.

The costs were assigned on a weighted-average cost basis

3.

Costs were assigned on a FIFO basis

20.

Company A has the following financial information for 2007:

Beginning inventory

$230,000

Ending inventory

$300,000

Cost of goods sold

$175,000

The inventory turnover ratio is equal to __________.