Reference no: EM131316017
MASTERING INVENTORY
1. BaCo opens its business in 20X2 and purchases merchandise on account for $88,000. In 20X2, BaCo pays $67,000 cash on the $88,000 due, sales are $145,000, and ending inventory is $24,000. BaCo's gross profit for 20X2 is . . .
a. $102,000 b. $81,000 c. $78,000 d. $57,000
2. GeCo begins 20X4 with merchandise costing $69,000. 20X4 sales are $233,000, purchases are $198,000, and ending inventory is $81,000. GeCo's 20X4 cost of goods sold is .. .
a. $245,000 b. $221,000 c. $210,000 d. $186,000
3. On December 3, HuCo purchases merchandise for $47,000 on account, F.O.B. destination. Freight charges are $800. On December 26, HuCo pays the vendor $14,000. On HuCo's December 31 balance sheet the accounts payable balance will be .. .
a. $33,800 b. $47,000 c. $47,800 d. $33,000
4. RiCo uses the perpetual method for inventory and records purchases at gross. In 20X4, it has total merchandise purchases of $324,000. It returns $19,000 of the merchandise for full credit and receives $7,000 in allowances from its vendors for defective merchandise and takes cash discounts of $1,000. The net cost of RiCo's 20X4 merchandise purchases is . . .
a. $297,000 b. $305,000 c. $324,000 d. $298,000
5. LoCo, which uses the periodic method, purchases merchandise on account for $56,000, F.O.B. shipping point. Freight charges are $900 C.O.D. LoCo should record these purchases as.
|
a.
|
Purchases
|
56,000
|
|
|
|
Accounts Payable
|
|
55,100
|
|
|
Cash
|
|
900
|
|
b.
|
Purchases
|
56,900
|
|
|
|
Accounts Payable
|
|
56,000
|
|
|
Cash
|
|
900
|
|
c.
|
Purchases
|
56,000
|
|
|
|
Freight-In
|
900
|
|
|
|
Accounts Payable
|
|
56,000
|
|
|
Cash
|
|
900
|
|
d.
|
Purchases
|
55,100
|
|
|
|
Freight-In
|
900
|
|
|
|
Accounts Payable
|
|
55,100
|
|
|
Cash
|
|
900
|
6. PiCo uses the perpetual method. On February 17, PiCo sells $30,000 in merchandise on account that cost $10,000. On February 23, 10% of these goods are returned. Prepare the entry that PiCo makes on February 23 to record the sales return.
|
a.
|
Sales Returns
3,000
|
|
|
|
|
Accounts Receivable
|
|
3,000
|
|
b.
|
Sales Returns
|
1,000
|
|
|
|
Gross Profit
|
|
2,000
|
|
|
Accounts Receivable
|
|
3,000
|
|
c.
|
Sales Returns
|
3,000
|
|
|
|
Accounts Receivable
|
|
3,000
|
|
|
Inventory
|
1,000
|
|
|
|
Cost of Goods Sold
|
|
1,000
|
|
d.
|
Sales Returns
|
3,000
|
|
|
|
Accounts Receivable
|
|
3,000
|
|
|
Inventory
|
1,000
|
|
|
|
Purchase Returns
|
|
1,000
|
7. VeCo, which uses the perpetual method, records merchandise purchases at gross. On October 3, VeCo buys $42,000 of merchandise on account. Terms are 2/10, n/40. On October 9, VeCo returns goods that cost $10,000. On October 11, VeCo pays $31,360. What entry does VeCo record on October 11?
|
a. Accounts Payable
|
31,360
|
|
|
Cash
|
|
31,360
|
|
b. Accounts Payable
|
32,000
|
|
|
Cash
|
|
31,360
|
|
Purchase Discounts
|
|
640
|
|
c. Accounts Payable
|
32,000
|
|
|
Cash
|
|
31,360
|
|
Inventory
|
|
640
|
|
d. Accounts Payable
|
31,360
|
|
|
Purchase Discounts
|
640
|
|
|
Cash
|
|
31,360
|
|
Inventory
|
|
640
|
8. MoCo begins operations in April, uses the perpetual method, and records merchandise purchases at net. MoCo makes two purchases on account. Terms are 1/15, n/45. On April 4, MoCo purchases merchandise for $3,000, which it pays for on April 16. On April 11, it makes a $9,000 purchase that it pays for on April 29, but there are no sales in April. On April 30, the balance in MoCo's inventory ledger account is .. .
a. $12,000 b. $11,970 c. $11,880 d. $11,910
9. XaCo begins business in June and uses the periodic method. Its June merchandise purchases are $195,000 on account, F.O.B. shipping point. Merchandise that cost $3,000 is returned for credit. Goods that XaCo sells for $11,000 and that cost $7,000 are returned to XaCo for cash refunds. On July 6, XaCo pays a $6,000 freight bill for its June purchases. The net cost of XaCo's June purchases is .. .
a. $205,000 b. $198,000 c. $192,000 d. $209,000
10. YiCo buys 800 cases of tennis balls listed at $130 per case and for which YiCo is given a 15% volume discount. YiCo sells 70% of the cases for cash. The cost of the unsold merchandise is .. .
a. $15,600 b. $31,200 c. $26,520 d. $77,350
11. JaCo uses the periodic method and records merchandise purchases at net. Its 20X4 ending inventory is $69,000. During 20X5, JaCo purchases merchandise for $878,000, with freight-in of $11,000. Purchase returns are $17,000, purchase discounts lost are $4,000, and the cost of merchandise on hand at year end is $91,000. At year end, JaCo records the following entry:
|
a.
|
Ending Inventory Purchase Returns Cost of Goods Sold
|
91,000 17,000 850,000
|
|
|
|
Purchases
|
|
878,000
|
|
|
Freight-In
|
|
11,000
|
|
|
Beginning Inventory
|
|
69,000
|
|
b.
|
Ending Inventory
|
91,000
|
|
|
|
Purchase Returns
|
17,000
|
|
|
|
Cost of Goods Sold
|
846,000
|
|
|
|
Purchase Discounts Lost
|
4,000
|
|
|
|
Purchases
|
|
878,000
|
|
|
Freight-In
|
|
11,000
|
|
|
Beginning Inventory
|
|
69,000
|
|
c.
|
Ending Inventory
|
91,000
|
|
|
|
Purchase Returns
|
17,000
|
|
|
|
Cost of Goods Sold
|
854,000
|
|
|
|
Purchases
|
|
878,000
|
|
|
Freight-In
|
|
11,000
|
|
|
Beginning Inventory
|
|
69,000
|
|
|
Purchase Discounts Lost
|
|
4,000
|
|
d.
|
Beginning Inventory
|
69,000
|
|
|
|
Purchase Returns
|
17,000
|
|
|
|
Cost of Goods Sold
|
894,000
|
|
|
|
Purchases
|
|
878,000
|
|
|
Freight-In
|
|
11,000
|
|
|
Ending Inventory
|
|
91,000
|
12. NuCo uses the periodic method and has the following account balances: Purchase Returns, $17,000; Beginning Inventory, $4,000; Purchases, $193,000; Freight-In, $11,000; and Accounts Payable, $23,000. What are NuCo's net purchases?
a. $187,000 b. $191,000 c. $183,000 d. $210,000
13. WeCo has the following account balances: Purchase Returns, $19,000; Purchases, $812,000; Purchase Discounts, $8,000; Beginning Inventory, $21,000; Freight-In, $30,000; and Ending Inventory, $37,000. WeCo's cost of goods sold is .. .
a. $769,000 b. $783,000 c. $815,000 d. $799,000
14. JiCo uses the periodic method. Its beginning inventory is $43,000, purchases are $321,000, F.O.B. destination, purchase returns are $17,000, and freight is $9,000. The balance in JiCo's ledger Purchases account is .. .
a. $330,000 b. $317,000 c. $321,000 d. $304,000
15. VaCo, which uses the periodic method, is preparing its year-end journal entry to record cost of goods sold. It debits all of the following accounts except .. .
a. Cost of Goods Sold
b. Beginning Inventory
c. Purchase Discounts
d. None of the above
16. SeCo begins operations in 20X6 and uses the periodic method and weighted-average costing. SeCo has the following merchandise purchases during 20X6: 700 units in March @ $4; 1,100 units in July @ $6; and 2,200 units in October @ $7. A physical count of ending inventory finds 1,000 units. Calculate the cost of goods sold.
a. 6,200 b. $7,000 c. $18,600 d. $24,000
17. FoCo uses the periodic method and weighted-average costing. The cost of the 2,500 units in FoCo's 20X3 ending inventory is $32,500. FoCo has the following merchandise purchases during 20X4: 1,700 units in May @ $14; 3,500 units in June @ $19; and 2,300 in October @ $21. Calculate the cost of the 1,200 units in ending inventory.
a. $20,532 b. $16,632 c. $22,176 d. $25,200
18. LiCo uses the periodic method and weighted-average costing. On December 31, 20X7, LiCo's inventory consists of 1,800 units costing $5 each. In January, 20X8, LiCo purchases 4,000 units @ $9, of which it returns 700 units in March. It purchases 4,400 units in October @ $7, of which it returns 500 units in December. The weighted-average cost per unit of goods available for sale during 20X8 is . . .
a. $7.92 b. $7.33 c. $6.47 d. $6.79
19. TuCo begins operations in 20X1 and uses the perpetual method and moving average costing. On January 4, TuCo buys 1,200 units of merchandise @ $3. On January 8, it sells 300 units. On January 11, it buys 1,100 units @ $4, and on January 30, it sells 600 units. On January 30, what does TuCo record as the cost of goods sold?
a. $2,430 b. $2,130 c. $2,400 d. $1,800
20. XoCo, which begins business in May and uses the perpetual method and moving average costing, shows the following data:
|
May 4
|
Purchases
1,000 @ $ 7
|
Sales
|
|
|
May 11
|
|
|
|
400
|
@
|
$11
|
|
May 14
|
1,400
|
@
|
$ 8
|
|
|
|
|
May 19
|
2,000
|
@
|
$10
|
|
|
|
|
May 21
|
|
|
|
1,500
|
@
|
$15
|
The balance in XoCo's inventory account on May 31 is . . .
a. $22,125 b. $20,833 c. $21,705 d. $23,875
21. MaCo begins operations in 20X1 and uses the periodic method and FIFO costing. In March, 20X1, MaCo buys 700 units @ $4; in July, it buys 2,700 units @ $6, and in November, it buys 1,600 units @ $8. The cost of the 1,900 units in MaCo's December 31 ending inventory is
a. $10,000 b. 15,200 c. $14,600 d. 7,600
22. JoCo uses the periodic method and FIFO costing. JoCo's December 31, 20X2 inventory consists of 400 units bought in November, 20X2 @ $11. During 20X3, JoCo made the following purchases: 1,800 units @ $14 in January; 2,200 units @ $17 in July; and 2,300 units @ $13 in October. The December 31, 20X3 inventory consists of 1,300 units. JoCo's 20X3 cost of goods sold is .. .
a. $80,000 b. $79,900 c. 80,800 d. $78,700
23. NiCo begins operations in 20X4, makes all sales on account, uses the perpetual method and FIFO costing, and shows the following data:
|
February 4
|
Purchases
700 @ $ 7
|
Sales
|
|
|
May 11
|
|
|
|
400
|
@
|
$15
|
|
July 14
|
1,100
|
@
|
$ 8
|
|
|
|
|
September 19
|
3,000
|
@
|
$10
|
|
|
|
|
December 21
|
|
|
|
1,500
|
@
|
$18
|
On December 21, what entries does NiCo record?
|
a.
|
Accounts Receivable
|
27,000
|
|
|
|
Sales
|
|
27,000
|
|
|
Cost of Goods Sold
|
15,000
|
|
|
|
Inventory
|
|
15,000
|
|
b. Accounts Receivable
|
27,000
|
|
|
Sales
|
|
27,000
|
|
|
Cost of Goods Sold
|
9,200
|
|
|
|
Inventory
|
|
9,200
|
|
c.
|
Accounts Receivable
|
27,000
|
|
|
|
Sales
|
|
27,000
|
|
|
Cost of Goods Sold
|
11,900
|
|
|
|
Inventory
|
|
11,900
|
|
d.
|
Accounts Receivable
|
27,000
|
|
|
|
Sales
|
|
27,000
|
|
|
Cost of Goods Sold
|
12,000
|
|
|
|
Inventory
|
|
12,000
|
24. TeCo uses the perpetual method and FIFO costing. TeCo's December 31, 20X5 inventory consists of 800 units @ $7. In 20X6, TeCo's merchandise purchases and sales are as follows:
|
February 24
|
Purchases
1,700 @ $ 9
|
Sales
|
|
|
June 11
|
|
|
|
2,000
|
@
|
$25
|
|
August 17
|
2,100
|
@
|
$11
|
|
|
|
|
September 1
|
|
|
|
1,600
|
@
|
28
|
|
October 19
|
3,000
|
@
|
$14
|
|
|
|
|
November 29
|
|
|
|
2,700
|
@
|
30
|
TeCo's December 31, 20X6 ending inventory is . . .
a. $18,200 b. $12,600 c. $11,700 d. $10,100
25. PaCo begins business in 20X3, uses the periodic method and LIFO costing and makes the following merchandise purchases:
|
January 14
|
1,300
|
@
|
$50
|
|
March 11
|
2,800
|
@
|
$55
|
|
August 23
|
1,700
|
@
|
$58
|
|
November 1
|
1,200
|
@
|
$60
|
If PaCo's December 31, 20X3 inventory contains 1,500 units, its ending inventory is . . .
a. $89,400 b. 576,000 c. $90,000 d. 575,000
26. MiCo opens for business in 20X3 and uses the periodic method and LIFO costing. On December 31, 20X3, there are 900 units of merchandise in MiCo's inventory @ $11. MiCo's 20X4 merchandise purchases are as follows:
|
February 4
|
1,200
|
@
|
$14
|
|
March 10
|
2,000
|
@
|
$15
|
|
July 7
|
3,300
|
@
|
$18
|
|
October 21
|
4,200
|
@
|
$20
|
If MiCo's December 31, 20X4 physical count shows 1,500 units in ending inventory, then ending inventory on MiCo's balance sheet will be . . .
a. $21,300 b. $30,000 c. $18,300 d. $21,900
27. CuCo, which begins business in 20X8, uses the periodic method and LIFO costing. CuCo's 20X8 merchandise purchases are as follows:
|
January 3
|
2,200
|
@
|
$5
|
|
April 16
|
1,800
|
@
|
$8
|
|
September 25
|
3,000
|
@
|
$6
|
|
December 4
|
1,100
|
@
|
$9
|
If CuCo's December 31, 20X8 ending inventory is 300 units, its 20X8 cost of goods sold is .. .
a. $51,800 b. $50,600 c. $49,900 d. $52,100
28. KoCo begins operations in 20X1 and uses the periodic method. In March, 20X1, KoCo buys 700 units @ $4; in July, it buys 2,700 units @ $6; and in November, it buys 1,600 units @ $8. Using LIFO, what is the cost of the 1,900 units in ending inventory?
a. $10,000 b. $15,200 c. $14,600 d. $7,600
29. SiCo begins operations in 20X2 and uses the periodic method. SiCo's December 31, 20X2 ending inventory consists of 400 units bought in January, 20X2 @ $11. Its December 31, 20X3 ending inventory consists of 1,300 units. During January, 20X3, SiCo buys 1,800 units @ $14; in July, it buys 2,200 units @ $17; and in October, it buys 2,300 units @ $13. If SiCo uses LIFO, its 20X3 costs of goods sold is .. .
a. $80,000 b. $79,900 c. 80,800 d. $78,700
Use the following information for problems #30-33.
LuCo begins operations in 20X4 and uses the periodic method and LIFO costing. Its merchandise purchases are as follows:
|
|
20X4
|
20X5
|
20X6
|
|
March
|
300
|
@ $4
|
600
|
@
|
$ 8
|
900
|
@
|
$11
|
|
July
|
500 @ S5
|
900
|
@
|
$12
|
600
|
@
|
$14
|
|
September
|
200
|
@ $7
|
100
|
@
|
$ 9
|
700
|
@
|
$13
|
|
November
|
400
|
@ $6
|
700
|
@
|
$10
|
100
|
@
|
$16
|
30. If LuCo sells 900 units in 20X4, its December 31, 20X4 ending inventory of 500 units is .. .
a. $2,000 b. $3,000 c. $2,200 d. $3,100
31. If, instead, LuCo's has 200 units in its December 31, 20X4 ending inventory and 500 units in its December 31, 20X5 ending inventory, then its December 31, 20X5 inventory is .. .
a. $3,200 b. $4,000 c. $5,000 d. $2,200
32. Assume, instead, that LuCo's December 31, 20X4 ending inventory is 300 units; its December 31, 20X5 ending inventory is 200 units (which is lower than it 20X5 beginning inventory); and its December 31, 20X6 ending inventory is 700 units. What is LuCo's December 31, 20X6 inventory?
a. $7,700 b. 4,400 c. $5,600 d. $6,300
33. Assume, instead, that LuCo's December 31, 20X4 ending inventory is 300 units; its December 31, 20X5 ending inventory is 800 units; and its December 31, 20X6 ending inventory is 600 units (which is lower than its 20X6 beginning inventory). What is LuCo's December 31, 20X6 ending inventory?
a. $6,600 b. $4,800 c. $4,400 d. $3,600
34. When WeCo begins operations in 20X4, it chooses the periodic method and LIFO costing. Within a given year's LIFO layer, it uses weighted average costing. During 20X4, WeCo makes the following merchandise purchases:
|
May 30
|
400
|
@
|
$4
|
|
June 24
|
800
|
@
|
$5
|
|
October 11
|
900
|
@
|
$7
|
|
December 4
|
1,400
|
@
|
$6
|
If the December 31, 20X4 ending inventory is 1,000 units, and the De¬cember 31, 20X5 ending inventory is 300 units, what is the 20X5 ending inventory?
a. $1,200 b. $1,380 c. $1,740 d. $1,800
Use the following information for problems #35-40.
HuCo begins operations in 20X4, uses the periodic method and makes the following merchandise purchases:
|
20X4
|
Total units
|
Unit cost
|
Total cost
|
|
April
|
900
|
$ 6
|
$5,400
|
|
September
|
1,300
|
7
|
9,100
|
|
20X5
|
|
|
|
|
March
|
1,100
|
$ 8
|
$8,800
|
|
November
|
500
|
10
|
5,000
|
35. If HuCo uses FIFO costing and its December 31, 20X5 ending inventory is 800 units, then ending inventory on its balance sheet will be .. .
a. $8,800 b. $5,600 c. $9,400 d. $7,400
36. If HuCo uses LIFO costing and sold 2,000 units in 20X4, what is its cost of goods sold?
a. $14,000 b. $13,300 c. $13,100 d. $13,000
37. If HuCo uses LIFO costing and sold 1,700 units each year, what is its 20X5 cost of goods sold?
a. $14,300 b. $12,700 c. $14,400 d. $12,800
38. Assume that HuCo uses LIFO costing. It sold 1,500 units in 20X4 and has 1,000 units in its December 31, 20X5 ending inventory. What is ending inventory on its December 31, 20X5 balance sheet?
a. $6,600 b. $8,000 c. $6,200 d. $7,000
39. If HuCo uses FIFO costing and sold 1,800 units each year, what is its 20X5 cost of goods sold?
a. $14,200 b. $10,700 c. $14,600 d. $10,300
40. HuCo, which uses weighted average costing, has 700 units in 20X4 ending inventory. If HuCo sells 1,600 units in 20X5, what is its 20X5 cost of goods sold (round unit costs in the computation to the nearest penny)?
a. $13,800 b. $11,040 c. $11,760 d. $12,816
Use the following information for problems #41-43.
TiCo has 1,000 units of merchandise on hand at year end. Each unit cost $32, has a replacement cost of $29, has an estimated selling price of $42, has a disposal cost of $4, and has an estimated normal mark-up of $7.
41. If TiCo applies the lower of cost or market (LCM) rule, what is the ceiling or upper limit?
a. $29 b. $25 c. $28 d. $38
42. Applying LCM, what floor or lower limit must TiCo use?
a. $31 b. $35 c. $32 d. $29
43. Assume that the ceiling for each unit is $33 and the floor is $27. What per unit amount will TiCo use for ending inventory on its balance sheet?
a. $32 b. $29 c. $33 d. $27
Use the following information for problems #44-46.
JaCo has the following inventory at year end:
|
Plastic
|
Cases on hand
|
Cost
per case
|
Market
per case
|
|
Cars and trucks
|
12
|
$80
|
$75
|
|
Action figures
|
18
|
22
|
28
|
|
Rubber
|
|
|
|
|
Pool toys
|
20
|
$56
|
$62
|
|
Sports novelties
|
80
|
32
|
29
|
|
Zoo animals
|
110
|
17
|
15
|
|
Cardboard
|
|
|
|
|
Board games
|
30
|
$34
|
$24
|
|
Jigsaw puzzles
|
50
|
21
|
23
|
44. What is JaCo's ending inventory applying LCM by item?
a. $8,156 b. $8,484 c. $8,358 d. $8,436
45. What is JaCo's ending inventory applying LCM by group?
a. $8,156 b. $8,484 c. $8,358 d. $8,436
46. What is JaCo's ending inventory applying LCM to total inventory? a. $8,156 b. $8,484 c. $8,358 d. $8,436
Use the following information for problems #47-48.
Applying LCM, NeCo determines that as of December 31, 20X3, mer-chandise that originally cost $46,300 is now $43,500 at market.
47. NeCo determines that the loss is not material enough to warrant disclosure as a line item on its income statement. Therefore it should .. .
a. make no entry but disclose the loss in a note on the financial statements.
b. make no entry and make no disclosure.
c. make an entry to reduce retained earnings.
d. make an entry to increase cost of goods sold.
48. Early in 20X4, the market value of NeCo's inventory unexpectedly increases to $47,500. If the original credit to write-down inventory was to the Inventory account, NeCo should .. .
a. recognize a $4,000 gain.
b. recognize a $2,800 gain.
c. make no entry but disclose the loss in a note accompanying the fi-nancial statements.
d. make no entry and make no disclosure.
Use the following information for problems #49-50.
On December 4, 20X8, DoCo enters into a contractual agreement to take delivery on January 25, 20X9 of 10,000 pounds of nuts at a cost of $2.20 per pound. On December 31, 20X8, DoCo finds that the market price of the nuts has declined to $1.90 per pound, and management decides that the decline is permanent.
49. DoCo should show these developments on its 20X8 financial statements as . . .
a. a $22,000 liability
b. a $19,000 liability
c. a $3,000 liability
d. no liability
50. When DoCo takes delivery on January 25, 20X9, the market price of nuts is $1.75 per pound. As a result, DoCo should .. .
a. debit Inventory $17,500
b. debit Inventory $22,000
c. debit Loss $4,500
d. debit Retained Earnings $3,000