Multiple Choice Answers

CLICK HERE TO DOWNLOAD THIS TUTORIAL INSTANTLY $19.99 Only

The following is a record of Meyer Corporation’s inventory transactions for the current month:
October 1 Balance, 600 units @ $24 each October 9 Sale, 600 units @ $51
October 12 Purchase 550 units @ $26 each October 19 Sale, 500 units @ $51
October 25 Purchase 700 units @ $27 each
Meyer uses the periodic inventory system. Using the LIFO method, what is the amount of ending inventory on October 31?
$18,300
$20,200
$18,000
$29,300

The following is a record of Tiller Corporation’s inventory transactions for the current month:
January 1 Balance, 500 units @ $10 each January 5 Sale, 290 units @ $25
January 11 Purchase, 300 units @ $12 each January 13 Sale, 250 units @ $25
January 23 Purchase, 400 units @ $13 each January 27 Sale, 310 units @ $25
Tiller uses the periodic inventory system. Using the weighted-average inventory method, what is the cost of goods sold for the month of January?
$14,004
$9,775
$4,085
$4,025

The following is a record of Caulder Corporation’s inventory transactions for the current month:
March 1 Balance, 500 units @ $40 each March 12 Sale, 200 units @ $85
March 16 Purchase, 300 units @ $42 each March 22 Sale, 350 units @ $85
March 28 Purchase, 300 units @ $43 each
Caulder uses the perpetual inventory system. Using the LIFO method, what is the cost of goods sold for the month?
$22,900
$22,100
$22,600
$23,400

In the context of dollar-value LIFO, when inventory in base year dollars increases,
The LIFO reserve decreases
The LIFO price index increases
A LIFO layer is created
A LIFO layer is liquidated

Hemmer Corporation adopted the dollar-value LIFO method of inventory valuation on December 31, 2011. Its inventory at that date was 460,000 and the relevant price index was 100. Information regarding inventory for subsequent years is as follows:
Date Inventory at Current Prices Current Price Index
December 31, 2012 $513,600 107
December 31, 2013 $580,000 125
December 31, 2014 $650,000 130
What is the ending inventory at December 31, 2012 under dollar-value LIFO?
$464,000
$485,680
$481,400
$464,280

What is primary purpose of stating inventories at lower-of-cost-or-market?
To report a loss when there is a decrease in the future utility below the original cost
To be conservative
To report a loss whenever there is a decrease in the future utility
To permit future profits to be recognized

If the historical cost of product X is $55, the selling price of product X is $90, the costs to sell product X are $14, the replacement cost for product X is $50, and the normal profit margin is 30% of sales price, what is the market value that should be used in the lower-of-cost-or-market comparison?
$50
$49
$76
$55

Energy Solutions Corporation estimates the cost of its physical inventory at November 30 for use in an interim financial statement. Management uses a gross profit rate on sales of 40%. The following information is available:
Inventory, November 1 $500,000
Purchases during November $650,000
Sales during November $900,000
The estimated cost of inventory at November 30 is
$360,000
$540,000
$610,000
$650,000

Which of the following is not a basic assumption of the gross profit method of estimating inventory?
The beginning inventory plus the purchases equal total goods to be accounted for.
Goods not sold must be on hand.
The sales, reduced to cost, deducted from the sum of the opening inventory plus purchases, equal ending inventory.
The total amount of purchases and the total amount of sales remain relatively unchanged from the comparable previous period.

Arrow Corporation uses the conventional retail inventory method to value its merchandise inventory. The following information is available for the current year:
Cost Retail
Beginning Inventory $30,000 $50,000
Purchases $180,000 $250,000
Freight-In $2,500 —-
Net Markups $8,500
Net Markdowns $10,000
Employee Discounts $1,000
Sales $205,000
What is the cost to retail ratio?
68.88%
68.07%
70.35%
70.83%

Capital City Corporation uses the conventional retail inventory method to determine its ending inventory at cost. The following information is available for the current year:
Cost Retail
Beginning Inventory $350,000 $500,000
Purchases $1,600,000 $2,440,000
Net Markups $60,000
Net Markdowns $30,000
Sales $2,350,000
Capital City determines that the cost-to-retail ratio is 65%. What is the ending inventory at cost?
$620,000
$350,000
$470,000
$403,000

Swift Builders, Inc. uses the completed-contract method of accounting for a $450,000 contract that it expects will take two years to complete. At December 31, 2013, the end of the first year of the contract, additional information related to the project includes: costs incurred to date were $290,000; estimated costs to complete were $180,000; billings to date were $325,000; collections to date were $300,000. What amount should Swift recognize as gross profit or loss for 2013?
$ -0-
a $20,000 loss
a $40,000 loss
a $110,000 loss

Miller Company appropriately uses the installment method of accounting to recognize income in its financial statements. Pertinent data relating to this method of accounting includes: installment sales totaled $500,000 for 2013 and $650,000 for 2014; cost of sales were $300,000 for 2013 and $422,500 for 2014; in 2013 Miller collected $300,000 from 2013 sales; in 2014 Miller collected $150,000 from 2013 sales and $400,000 from 2014 sales. What amount should Miller report as realized gross profit on the 2014 income statement?
$60,000
$120,000
$140,000
$200,000

In consignment sales, the consignee
records the merchandise as an asset on its books.
recognizes revenue when it ships merchandise to the consignor.
upon sale of the merchandise, has a liability for the net amount due the consignor.
records a liability for the merchandise held on consignment.
If Collier Costumes, Inc. has the following items at year-end, how much should it report as cash on the balance sheet?
Cash in bank $42,600
Cash on hand $580
Post-dated checks $1,420
Certificates of deposit $90,000
$42,600
$43,180
$44,600
$133,180

At December 31, 2013, Vega Vaccum Corporation has cash in bank of 104,000, restricted cash in a separate account of $19,000, and a bank overdraft at another bank of $500. How much should it report as cash on the balance sheet?
$123,000
$122,500
$104,500
$104,000

Which of the following is not classified as cash on the balance sheet?
Postage stamps
Post-dated checks
Cash restricted for plant expansion
All of the above
The month-end bank statement for Guthrie Motors shows a balance of $152,000 and a bank service charge of $40. Outstanding checks are $35,000, a deposit of $10,000 was in transit at month end, and a check for $1,500 was erroneously charged by the bank against the account. The correct balance in the bank account at month end is
$125,000
$125,460
$128,500
$128,460

As of December 31, Gammelguard Corporation has outstanding accounts receivable of $1.5 million. Sales on credit during the year were $9 million. The allowance for doubtful accounts has a credit balance of $20,000. If the company estimates that 9% of its outstanding receivables will be uncollectible, what will be the amount of bad debt expense recognized for the year?
$115,000
$135,000
$155,000
$810,000

As of December 31, William Corporation has outstanding accounts receivable of $5.8 million. Sales on credit during the year were $18.5 million. The allowance for doubtful accounts has a credit balance of $94,000. If the company estimates that 2% of its net credit sales will be uncollectible, what will be the amount of bad debt expense recognized for the year?
$464,000
$370,000
$276,000
$116,000

Kandris Corporation had a balance in accounts receivable of $600,000 and a balance in allowance for doubtful accounts of $55,000, when management decided the account receivable from Dunn Corporation of $2,000 had become uncollectible. What journal entry should Kandris Corporation make to write-off the uncollectible account?
Debit Bad Debt Expense, credit Allowance for Doubtful Accounts, $2,000
Debit Accounts Receivable, credit Allowance for Doubtful Accounts, $2,000
Debit Allowance for Doubtful Accounts, credit Accounts Receivable, $2,000
Debit Allowance for Doubtful Accounts, credit Bad Debt Expense, $2,000
At December 31, Norman Industrial Inc. had account balances before year-end adjusting entries for accounts receivable and the related allowance for doubtful accounts of $920,000 and $79,000 respectively. An aging of accounts receivable indicated that $100,000 of the December 31, receivables are expected to be uncollectible. The net realizable value of accounts receivable after adjustment is
$820,000
$841,000
$999,000

The following is a record of Axis Corporation’s inventory transactions for the current month:
June 1 Balance, 400 units @ $65 each June 16 Sale, 500 units @ $90
June 14 Purchase 900 units @ $68 each June 20 Sale, 300 units @ $90
June 25 Purchase 250 units @ $70 each
Axis uses the periodic inventory system. Using the FIFO method, what is the amount of cost of goods sold for the month?
$51,500
$52,000
$53,200
$54,900