Question

1.

Bombay Co. uses a periodic inventory system. Beginning inventory on January 1 was overstated by $32,000, and its ending inventory on December 31 was understated by $62,000. These errors were not discovered until the next year. As a result, Bombay's cost of goods sold for this year was:

A. Overstated by $30,000.

B. Understated by $30,000.

C. Understated by $94,000.

D. Overstated by $94,000.

2.

Which of the following best demonstrates the full disclosure principle?

A. The company's tax return.

B. The multi-step income statement.

C. Disclosure notes to financial statements.

D. The auditors' report.

3.

Chess Top uses the periodic inventory system. For the current month, the beginning inventory consisted of 200 units that cost $65 each. During the month, the company made two purchases: 300 units at $68 each and 150 units at $70 each. Chess Top also sold 500 units during the month. Using the average cost method, what is the amount of ending inventory?

A. $10,131.00

B. $33,770.00

C. $10,500.00

D. $33,400.00

4.

Monroe Construction Company uses the cost recovery method of accounting. In 2018, Monroe began work on a contract it had received which provided for a contract price of $25,000,000. Other details follow:

		2018
Costs incurred during the year		$12,000,000
Estimated costs to complete as of December 31		8,000,000
Billings during the year		11,000,000
Collections during the year		6,500,000

What should be the gross profit recognized in 2018?

A. $3,000,000.00

B. $0.00

C. $13,000,000.00

D. $5,000,000.00

5.

Yummy Foods purchased a two-year fire and extended coverage insurance policy on August 1, 2013, and charged the $4,200 premium to Insurance expense. At its December 31, 2013, year-end, Yummy Foods would record which of the following adjusting entries?

A. Prepaid insurance : Dr ($) 875
Insurance expense : Cr ($) 875

B. Insurance expense : Dr ($) 875
Prepaid insurance : Cr ($) 875

C. Prepaid insurance : Dr ($) 3325
Insurance expense : Cr ($) 3325

D. Insurance expense : Dr ($) 875
Prepaid insurance : Dr ($) 3325
Insurance payable : Cr ($) 4200

Answer 1

Answer to question

1	Bombay Co. uses a periodic inventory system. Beginning inventory on January 1 was overstated by $32,000, and its ending inventory on December 31 was understated by $62,000. These errors were not discovered until the next year. As a result, Bombay's cost of goods sold for this year was:
	Beginning inventory on January 1 was overstated by	$32,000
	ending inventory on December 31 was understated by	$62,000
	Bombay's cost of goods sold for this year over stated by	$    94,000.00
	D. Overstated by $94,000.
2	Which of the following best demonstrates the full disclosure principle?
	D. The auditors' report.
3	Chess Top uses the periodic inventory system. For the current month, the beginning inventory consisted of 200 units that cost $65 each. During the month, the company made two purchases: 300 units at $68 each and 150 units at $70 each. Chess Top also sold 500 units during the month. Using the average cost method, what is the amount of ending inventory?
		Units	Rate	Cost
	eginning inventory	200	65	13000
	Purchase	300	68	20400
		150	70	10500
		650		43900
	Average Cost		67.53846
	Sales	500
	ending inventory	150	67.53846	10130.77
	A. $10,131.00
4	gross profit recognized in 2018
	contract price	2,50,00,000
	Costs incurred during the year	1,20,00,000
	Estimated costs to complete as of December 31	80,00,000
	Estimated Total costs	2,00,00,000
	Degree Completion	60%
	Revenue to be Recognised	15000000
	gross profit recognized in 2018	30,00,000
	A. $3,000,000.00
5	At its December 31, 2013, year-end, Yummy Foods would record which of the following adjusting entries
	B. Insurance expense : Dr ($) 875 Prepaid insurance : Cr ($) 875