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Exam 5: Inventories and Cost of Goods Sold

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Question 31

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Givens Corp. Givens Corp. is a merchandising company that uses the periodic inventory system. Selected account balances are listed below: -Refer to information for Givens Corp. Calculate the cost of goods sold for Givens Corp.

A) $275,000
B) $259,000
C) $241,000
D) $211,000

E) B) and D)
F) B) and C)

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Question 32

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Park, Inc. purchased merchandise from Jay Zee Music Company on June 5, 2015. The goods were shipped the same day. The merchandise's selling price was $15,000. The credit terms were 1/10, n/30. The shipping terms were FOB shipping point. Park received the merchandise on June 10, 2015. Park paid the amount due on June 13, 2015. If Park uses the periodic inventory system, the effect of recording the payment on June 13, 2015, will include

A) A decrease to Purchases for $15,000.
B) An increase to Inventory for $14,850.
C) A decrease to Cash for $15,000.
D) A decrease to Accounts Payable for $15,000.

E) A) and B)
F) B) and D)

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Question 33

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Sales Discounts is classified as what type of account?

Floors, Inc. offers terms of 2/10, n/30 to credit customers. Tile Magic Corp. purchased 100 tile cutters with a list price of $20 each on August 5, 2015, on account. Tile Magic Corp. paid the invoice on August 31, 2015. How much sales discount will Floors recognize?

If a company overstates its ending inventory for the current year, what are the effects on cost of goods sold and net income for the current year?

Refer to the data for Learning Tree, Inc. If the moving average method is used, what is the amount assigned to cost of goods sold for the 2,500 units sold on May 10?

Eversoll Inc. uses the periodic inventory system. If Eversoll uses the FIFO inventory method, the amount assigned to the June 30 inventory would be

The gross profit ratio is computed by dividing net sales by gross profit.

For the buyer, a is an amount deducted by customers for payment within the discount period.

During the current period, Audix Corp. sold products to customers for a total of $76,000. Due to defective products, customers were given $2,800 in refunds for products that were returned and another $3,500 in reductions to their account balances. Discounts in the amount of $5,500 were given for early payment of account balances. REQUIRED: Prepare the Net Sales section of Audix's income statement.

The cost of goods sold is

When the market value of inventory items has declined below its cost, which method would be the most appropriate in complying with GAAP?

A LIFO reserve represents the amount by which cost of goods sold on a FIFO basis exceeds the cost of goods sold on a LIFO basis for the current year.

Whether LIFO costing is applied at the time each sale is made or only at the end of the period, both the periodic and perpetual systems will yield the same ending inventory under LIFO.

The gross profit ratio is calculated as gross profit divided by net income.

Bower Corp.'s cost of sales has remained steady over the last two years. During this same time period, however, its inventory has increased considerably. What does this information tell you about the company's inventory turnover? Explain your answer.

If the amount assigned to ending inventory is incorrect,

Caruso, Inc. has an inventory turnover rate of 8 times. If its cost of goods sold is $150,000, then

The ratio of a company's cost of goods sold to its average inventory is called its ________________________________________.

The lower of cost or market LCM rule violates the historical cost principle.