Question

1. Alison's dress shop buys dresses from McGuire Manufacturing. Alison purchased dresses from McGuire on July 17 and received an invoice with a list price amount of $6,200 and payment terms of 2/10, n/30. Alison uses the net method to record purchases. Alison should record the purchase at:

Multiple Choice

a. $3,038.

b. $6,200.

c. $6,076.

d. $6,324.

2.

Northwest Fur Co. started 2018 with $100,000 of merchandise inventory on hand. During 2018, $510,000 in merchandise was purchased on account with credit terms of 4/15, n/45. All discounts were taken. Purchases were all made f.o.b. shipping point. Northwest paid freight charges of $9,500. Merchandise with an invoice amount of $3,900 was returned for credit. Cost of goods sold for the year was $376,000. Northwest uses a perpetual inventory system.

What is ending inventory assuming Northwest uses the gross method to record purchases?

Multiple Choice

a. $243,500.

b. $219,296.

c. $219,356.

d. $239,600.

3.

Northwest Fur Co. started 2018 with $98,000 of merchandise inventory on hand. During 2018, $550,000 in merchandise was purchased on account with credit terms of 3/15, n/45. All discounts were taken. Purchases were all made f.o.b. shipping point. Northwest paid freight charges of $9,400. Merchandise with an invoice amount of $3,100 was returned for credit. Cost of goods sold for the year was $371,000. Northwest uses a perpetual inventory system.

Assuming Northwest uses the gross method to record purchases, what is the cost of goods available for sale?

Multiple Choice

a. $637,893.

b. $637,800.

c. $654,300.

d. $655,100.

4.

Cinnamon Buns Co. (CBC) started 2018 with $53,100 of merchandise on hand. During 2018, $290,000 in merchandise was purchased on account with credit terms of 2/10 n/30. All discounts were taken. Purchases were all made f.o.b. shipping point. CBC paid freight charges of $10,200. Merchandise with an invoice amount of $2,500 was returned for credit. Cost of goods sold for the year was $302,000. CBC uses a perpetual inventory system.

Assuming CBC uses the gross method to record purchases, ending inventory would be:

Multiple Choice

a. $48,800.

b. $43,000.

c. $32,850.

d. $43,050.

5.

Cinnamon Buns Co. (CBC) started 2018 with $52,400 of merchandise on hand. During 2018, $282,000 in merchandise was purchased on account with credit terms of 2/10 n/30. All discounts were taken. Purchases were all made f.o.b. shipping point. CBC paid freight charges of $9,200. Merchandise with an invoice amount of $2,500 was returned for credit. Cost of goods sold for the year was $313,000. CBC uses a perpetual inventory system.

What is cost of goods available for sale, assuming CBC uses the gross method?

Multiple Choice

a. $341,100.

b. $335,510.

c. $343,600.

d. $317,110.

6.

Fulbright Corp. uses the periodic inventory system. During its first year of operations, Fulbright made the following purchases (listed in chronological order of acquisition):

43 units at $105

75 units at $83

174 units at $56

Sales for the year totaled 267 units, leaving 25 units on hand at the end of the year.

Ending inventory using the average cost method is: (Do not round unit cost calculation. Round your final answer to the nearest whole dollar amount.)

Multiple Choice

a. $2,625.

b. $1,450.

c. $1,400.

d. $1,754.

7.

Fulbright Corp. uses the periodic inventory system. During its first year of operations, Fulbright made the following purchases (listed in chronological order of acquisition):

40 units at $104

70 units at $87

170 units at $57

Sales for the year totaled 267 units, leaving 13 units on hand at the end of the year.

Ending inventory using the FIFO method is:

Multiple Choice

a. $926.

b. $741.

c. $1,352.

d. $791.

Answer 1

1. Option-C $6,076

Working note

6200* 98% = 6076

2.Option-C $ 219,356

Working note

Opening inventory - $100,000

Add: purchase -$510,000

Less: Discount@4% -$20400 (510000*4%)

Add: Freight -$9500

Less: Merchandise returned

at 96% of invoice price -3744 (3900*96%)

Less: Cost of good sold -376,000

3.Option A- $637893

Working note

Opening inventory - $98,000

Add: Purchase -$550,000

Less: Discount@ 3% -$16,500 (550,000*3%)

Add: Freight -$9400

Less:

Merchandise returned

at 97% of invoice price - $3007

4. Option D - $ 43,050

Working note

Opening inventory - $53,100

Add: purchase -$290,000

Less: Discount@2% -$5800 (290,000*2%)

Add: Freight -$10,200

Less: Merchandise returned

at 96% of invoice price -$ 2,450 (2500*98%)

Less: Cost of good sold -$302,000

5. Option B - $ 335,510

Working note

Opening inventory - $52,400

Add: Purchase -$282,000

Less: Discount@ 3% -$5,640 (282,000*2%)

Add: Freight -$9,200

Less:

Merchandise returned

at 98% of invoice price - $2,450

6. Option D - $ 1,754

working notes.

[(43*105)+(75*83)+(174*56)] = $ 20484/ 292 units = $ 70.15 per unit

hence 25 units * $ 70.15 = 1,754

7. Option B - $741

Explanation: As the company follows FIFO method, 267 units of total sales includes 40 units @ $104, 70 units @ $87 and 157 units @ $57.

hence the ending inventory is 13 units @ $57