Question

Bonds payable in two years would be classified as.

   a. noncurrent assets

   b. equity

   c. current liability

   d. noncurrent liability

III. Using the following information to answer items 11 thru 15.

      Sales 500,000,    Sales Returns 10,000,   

      Sales Discounts 10,000, Purchases 130,000

      Purchase returns 10,000, Purchase discounts 20,000

      Freight In 20,000, Selling expenses 50,000

      General expenses 170,000, inventory-beg 27,000

      Inventory-end 20,000

11. Net sales for the period are

      a. $500,000

      b. $480,000

      c. $490,000

      d. $520,000

                                             -3-

12. Net purchases for the period are

     a. $100,000

     b. $120,000

     c. $150,000

     d. $160,000

13. Cost of goods sold for the period is

    a. $147,000

    b. $107,000

    c. $127,000

    d. none of the above

14. Gross Margin for the period is

   a. $353,000

   b. $333,000

   c. $303,000

   d. none of the above

15. Net income for the period is

a. $113,000

b. $133,000

c. $126,000

  d. none of the above

Answer 1

A) A current liabilities are those liabilities which are of short term basis and are Payable within 1 accounting year, whereas non current liabilities are those liabilities which are payable after 1 year.

In the given case, the bonds payable are the liabilities are this ate payable which involves cash outflow in near future, since this bonds will be payable in 2 years time so this bonds are classified as Non current liabilities.

The Option of non current assets and equity is not correct as bonds paayble are liabilities.

Thus the correct option is -------- D i.e Non Current Liabilities .

III ] Now with regards to problem 11 to 15 :

11. Net sales is the amount of actual sales after reducing the sales return, allowances and discounts from gross sales.

Here gross sales= 500000 , sales return = 10000 and sales discount = 10000

Thus Net sales = Gross sales - sales return - sales discount

Net sales = $ 500000 - 10000 - 10000

Net sales = $ 480,000

Thus the correct option is -------------B i.e $ 480,000

12 )

Net Purchase is the amount of actual purchase after reducing the purchasing return, allowances and discounts from gross Purchses.

Here gross Purchases=  130000 ,Purchase return = 10000 and Purchase discount = 20000

Thus Net Purchase = Gross Purchase - Purchase return - Purchase Discount

Net Purchase = $ 130000 - $10000 - $20000  

Net Purchase = $ 100,000

Thus the correct option is ------------------A i.e $100,000

13)

Cost of goods sold = Opening Inventory + Purchases - Closing Inventory

Here, opening Inventory = $ 27000 , Net Purchase = $100000 and closing inventory = $ 20000

Thus Cost of goods sold = $ 27000 + 100000 -20000

Cost of goods sold = $ 107000

Thus the correct option is ---------B i,e $ 107000

14)

Gross Margin = Net Sales - Cost of goods sold.

Here net sales = $ 480000 , Cost of goods sold = $ 107000

Thus Gross Margin = $ 480000 - 107000

Gross Margin = $ 373,000

Thus the correct option is ------D i,e None of the above.

15 ) Net Income = Gross Margin - Other expenses.

here other expenses are : freight = $ 20000 and general expesnes =$170,000

Thus Net income = Gross Margin - Freight expenses - General expenses

Net income = 373000 - 20000 - 170000

Net income = $ 183,000

Thus the correct option is ----------- D i.e None of the above