Question

In: Accounting

Please correct the asnwer as soon as possible 27. During a period of increasing cost prices,...

Please correct the asnwer as soon as possible

27. During a period of increasing cost prices, which inventory costing method will yield the lowest cost of goods sold?

a.

Any method in which the company uses a periodic inventory system

b.

Weighted Average Cost

c.

LIFO

d.

FIFO

29. A company fails to record one storeroom full of inventory in its year-end inventory records. As a result, this will cause:

a.

an overstatement of cost of goods sold for the current year.

b.

an overstatement of inventory on the year-end balance sheet.

c.

an overstatement of retained earnings at the end of the year.

d.

an understatement of gross profit in the following year.

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

a.

Understated

b.

Correct only if Hawk Store calculates it cost of goods sold correctly

c.

Overstated

d.

Correct since operating expenses are not affected by inventory costs

31. The set of items below was identified in preparing a bank reconciliation for Mars Corp. as of August 31, 2016.

Bank statement balance

$19,500

Mars’s book balance (before adjustments)

?

Outstanding checks

2,700

Customer's NSF checks

350

Service Charges

100

Deposits in transit

1,000

Interest earned on checking account

60

Mars Corp.’s balance per books before the reconciliation is

a.

$17,410

b.

$17,900

c.

$18,190

d.

$18,310

Solutions

Expert Solution

  • Question 27

--The correct answer is Option ‘D’ FIFO Method will give the lowest cost of goods sold in case of increasing cost prices.

--This is because, the cost of goods sold are first taken from the earliest purchases (which are at low cost prices).

  • Question 29

--The correct answer is Option ‘A’ An Overstatement of Cost of Goods Sold for the current year will result if inventory of one storeroom is not considered.

--This is because: Beginning Inventory + Purchases – Ending Inventory = Cost of Goods Sold.

--If Ending Inventory is LESS or understated, Cost of Goods will be Over stated.

  • Question 30

--Correct answer is Option ‘D’ Operating expense will be CORRECT since Operating expenses are not affected by Inventory Costs.

  • Question 31

Bank Statement Balance

$           19,500.00

Add:

Service charges

$                  100.00

Deposits in Transits

$              1,000.00

Customer's NSF Checks

$                  350.00

$             1,450.00

Less:

Outstanding checks

$              2,700.00

Interest earned on checking account

$                    60.00

$             2,760.00

Balance as per books before the reconciliation

$           18,190.00

Correct Answer

Option 'C' $ 18,190


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