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Exam 5: Inventories and Cost of Goods Sold

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Question 71

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Asago Co. sold merchandise to Health Co. on account, $18,000, terms 2/15, net 45. The cost of the merchandise sold is $15,500. Asago Co. issued a credit memo for $1,750 for merchandise returned that originally cost $1,400. The Health Co. paid the invoice within the discount period. What is amount of net sales from the above transactions?

A) $16,250
B) $14,100
C) $15,925
D) $13,818

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

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Question 72

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Purchase discounts decrease the total cost of merchandise acquired.

A) True
B) False

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Question 73

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When a company using LIFO experiences a partial or complete liquidation of its older, lower-priced inventory, its gross margin will be higher, lower, or unchanged for the period.

Under the periodic inventory system, a physical inventory must be taken at the end of the period to determine cost of goods sold.

It important that the proper amount be assigned to inventory because the amount assigned to inventory will affect the amount eventually recorded as net sales.

Which one of the following is correct?

Refer to the information for Carlton, Inc. How much is net sales for 2015? What other components that Carlton did not report could be included in this computation?

Match the terms with the descriptions related to merchandise sales and purchases. -The buyer must pay the shipping costs.

The inventory turnover ratio is a measure of how many times during a period a company sells off its inventory.

The weighted average cost is calculated by adding up the units' costs from each purchase and then dividing by the number of purchases.

Maxim Company sells auto parts. The company employs a periodic inventory system. Identify all the effects on the accounting equation. -Recorded cash sales for the day.

Maxim Company sells auto parts. The company employs a periodic inventory system. Identify all the effects on the accounting equation. -Gave a customer a cash refund.

With the periodic inventory system, the inventory account is updated after each sale or purchase.

Adam Inc. uses a perpetual inventory system. If Adam uses the LIFO method, how much is cost of goods sold for the month of January?

Payment for the acquisition of inventories is shown on the statement of cash flows as

Hawk Store counted some of its inventory twice. As a result, its operating expenses will be

If a company overstates its ending inventory balance for 2015 by $10,000, and overstates its ending inventory balance for 2014 by $5,000 what are the effects on its net income for 2015 and 2014?

Givens Corp. Givens Corp. is a merchandising company that uses the periodic inventory system. Selected account balances are listed below: -Refer to the account information for Chen's Department Store. Determine Chen's gross profit.

Cost of goods sold represents an outflow of an asset, inventory, from the sale of products.

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. When did title to the merchandise transfer from Jay Zee Music Company to Park?