Question

Question 2

a.) Allowance for Doubtful Accounts has an unadjusted balance of $500 at the end of the year, and uncollectible accounts expense is estimated at 1% of net sales. If net sales are $900,000, the amount of the adjustment to record the provision for doubtful accounts is:

Select one:

$9,500

$500

$8,500

$9,000

b.)Allowance for Doubtful Accounts has an unadjusted balance of $400 at the end of the year, and uncollectible accounts expense is estimated at 1% of net sales. If net sales are $300,000, the amount of the adjustment to record the provision for doubtful accounts is:

Select one:

$3,000

$3,400

$400

$2,600

Question 3

a.) Which of the following inventories would appear on the balance sheet of a manufacturing business?

Select one:

Work in process

Merchandise inventory

Direct labor

Factory overhead

b.) The inventory method that considers the inventory to be composed of the units of merchandise acquired earliest is called:

Select one:

first-in, first-out

last-in, first-out

average cost

retail method

c.) Which inventory cost flow assumption allows management to identify which costs are included in cost of merchandise sold?

Select one:

LIFO

FIFO

Average

Specific Identification

d.) The inventory data for an item for November are:

Nov. 1	Inventory	20 units at $20
10	Purchased	30 units at $21
30	Purchased	10 units at $22
	Sold	30 units

Using the first-in, first-out method, what is the cost of the merchandise inventory of 30 units on November 30?

Select one:

$640

$610

$620

$630

Question 4

a.) Use the following data to calculate cost of merchandise sold under FIFO method.

September 1	Beginning Inventory	15 units @ $20
September 10	Purchases	20 units @ $25
September 20	Purchases	25 units @ $28
September 30	Ending Inventory	30 units

Select one:

$825

$750

$675

$600

b.)Use the following data to calculate the cost of ending inventory under LIFO using the method.

September 1	Beginning Inventory	15 units @ $20
September 10	Purchases	20 units @ $25
September 20	Purchases	25 units @ $28
September 30	Ending Inventory	30 units

Select one:

$825

$750

$675

$600

c.)Use the following data to calculate the cost of ending inventory under Average Cost method.

September 1	Beginning Inventory	15 units @ $20
September 10	Purchases	20 units @ $25
September 20	Purchases	25 units @ $28
September 30	Ending Inventory	30 units

Select one:

$825

$750

$675

$600

d.)Calculate the cost of ending inventory using FIFO inventory cost method.

1/1	Beginning inventory	10 units @ $10 per unit
2/28	Purchases	40 units @ $12 per unit
5/10	Purchases	50 units @ $14 per unit
9/20	Purchases	30 units @ $16 per unit
12/31	Ending inventory	50 units

Select one:

$800

$760

$580

$500

Question 5

During a period of consistently rising prices, the method of inventory that will result in reporting the greatest cost of merchandise sold is:

Select one:

FIFO

LIFO

average cost

all methods will generate the same cost of merchandise sold

Question 6

a.) If merchandise inventory is being valued at cost and the price level is steadily rising, the method of costing that will yield the highest net income is:

Select one:

average

LIFO

FIFO

all methods will generate the same net income

b.) If merchandise inventory is being valued at cost and the price level is consistently rising, which method of costing will yield the largest gross profit?

Select one:

average cost

LIFO

FIFO

all methods will generate the same gross profit

c.) “LIFO Reserve" is calculated as __________.

Select one:

LIFO end of year minus LIFO beginning of the year

FIFO inventory plus LIFO inventory

FIFO inventory minus LIFO inventory

None of the above

d.) If the cost of an item of inventory is $60 and the current replacement cost is $65, the amount included in inventory according to the lower of cost or market is:

Select one:

$5

$60

$65

$125

e.)If the cost of an item of inventory is $70, the current replacement cost is $65, and the sales price is $85, the amount included in inventory according to the lower of cost or market is:

Select one:

$85

$70

$65

$160

Answer 1

2) a) The amount of the adjustment to record the provision for doubtful accounts will be equal to 1% of net sales which is calculated as follows:-

Provision for doubtful accounts = $900,000*1% = $9,000

Therefore the correct answer is d) $9,000.

b) The amount of the adjustment to record the provision for doubtful accounts will be equal to 1% of net sales which is calculated as follows:-

Provision for doubtful accounts = $300,000*1% = $3,000

Therefore the correct answer is a) $3,000.

3) a) Under manufacturing business, the units which are started in the current accounting period but not completed (i.e. incomplete or in process) in the current period are known as work in process inventory. Therefore the correct answer is a) Work in process.

b) Under last-in, first-out method, the units purchased last are sold first and inventory under this method will be composed of the units of merchandise acquired earliest. Therefore the correct answer is b) Last in, first out.

c) Under specific identification method, the goods sold are specifically identified and allows management to identify which costs are included in cost of merchandise sold. Hence the correct answer is d) Specific Identification.

d) Under FIFO method, the merchandise inventory of 30 units on Nov. 30 will compose of 20 units purchased on November 10 at $21 per unit and 10 units purchased on Nov 30 at $22 per unit. The cost of merchanise inventory is calculated as follows:-

Cost of merchandise inventory = (20 units*$21)+(10 units*$22)

= $420+$220 = $640

Therefore the correct answer is a) $640.