Reference no: EM132316679

Questions

Please answer the following questions with an explanation to the correct response.

Question 1

Merchandise inventory at the end of the year was inadvertently understated. Which of the following statements correctly states the effect of the error on cost of goods sold and net income?

cost of goods sold no change, net income is no change

cost of goods sold understated, net income is overstated

cost of goods sold overstated, net income is understated

none of the above

Question 2

The following items of a particular commodity were available for sale during the year

Beginning inventory 10 units at $50

First purchase 25 units at $53

Second purchase 30 units at $54

Third purchase 15 units at $60

The firm uses the PERIODIC system and there are 20 units of the commodity on hand at the end of the year. What is the amount of inventory at the end of the year according to the first-in, first-out method(FIFO)?

$1,170

$1,140

$1,060

$1,030

Question 3

The following items of a particular commodity were available for sale during the year:

Beginning inventory 10 units at $60

First purchase 25 units at $63

Second purchase 30 units at $64

Third purchase 10 units at $70

The firm uses the PERIODIC system and there are 18 units of the commodity on hand at the end of the year. What is the amount of inventory at the end of the year according to the last-in, first-out method(LIFO)?

$1,154

$1,104

$1,100

$1,124

Question 4

The following items of a particular commodity were available for sale during the year:

Beginning inventory 10 units at $61

First purchase 25 units at $63

Second purchase 30 units at $64

Third purchase 15 units at $73

The firm uses the periodic system and there are 22 units of the commodity on hand at the end of the year. What is the amount of the inventory at the end of the year according to the AVERAGE COST method?

$1,305

$1,430

$1,300

$1,480

Question 5

If the estimated rate of gross profit is 40%, what is the estimated cost of the merchandise inventory on June 30, based on the following data?

June 1 Merchandise inventory $ 75,000

June 1-30 Purchases (net) 150,000

June 1-30 Sales (net) 100,000

$125,000

$ 81,500

$144,000

$ 165,000

Question 6

Allowance for Bad Debts has a credit balance of $500 at the end of the year (before adjustment), and an "aging of receivables" indicates we have accounts that are uncollectible of $10,000. Which of the following entries would correctly record the adjustment to allowance for Bad Debts?

debit Allowance for Bad Debts, $500; credit Bad Debts Expense, $500

debit Bad Debts Expense, $10,500; credit Allowance for Bad Debts, $10,500--INCORRECT

debit Bad Debts Expense, $9,500; credit Allowance for Bad Debts, $9,500

debit Allowance for Bad Debts, $10,500; credit Bad Debts Expense, $10,500

Question 7

Allowance for Bad Debts has a credit balance of $3,000 at the end of the year (before adjustment), and a "percent of sales" estimate indicates we have accounts that are uncollectible of $21,000. Which of the following entries would correctly record the adjustment to allowance for Bad Debts?

debit Bad Debts Expense, $18,000; credit Allowance for Bad Debts, $18,000>INCORRECT

debit Allowance for Bad Debts, $3,000; credit Bad Debts Expense, $3,000

none of these

debit Bad Debts Expense, $21,000; credit Allowance for Bad Debts, $21,000

Question 8

If the direct write-off method of accounting for uncollectible receivables is used, what general ledger account is debited to write off a customer's account as uncollectible?

Bad Debts Expense

Allowance for Bad Debts

Accounts Receivable

Accounts Payable