Question

1. Under the periodic method, the year-end adjusting entry for inventory affects: a. only the income statement. b. only the balance sheet. c. both the income statement and the balance sheet. d. none of the above.

2. Which account balance is missing in this computation of cost of goods sold? Beginning Inventory xx,xxx Purchases x,xxx Goods Available for Sale xx,xxx ?????(xx,xxx) Cost of Goods Sold xx,xxx a. Purchase Returns and Allowances b. Freight c. Ending Inventory d. Sales Returns and Allowances

3. The following account balances appear on a year-end trial balance: Merchandise Inventory, $65,000; Purchases, $250,000; Sales, $600,000; Freight-in, $8,500; Sales Returns and Allowances, $7,000; and Purchase Returns and Allowances, $4,000. Ending inventory is $45,000. What is the cost of goods sold? a. $278,500 b. $274,500 c. $270,000 d. $318,500

4. BendCo, which uses the periodic method, purchases inventory for $2,500 cash. What is the journal entry to book the return of goods for $600 cash? a. Cash 600 Purchase Returns and Allowances 600 b. Cash 600 Sales 600 c. Cash 600 Merchandise Inventory 600 d. Cash 600 Cost of Goods Sold 600

5. A seller that pays delivery costs for merchandise sold: a. includes the delivery costs in cost of goods sold. b. allocates the delivery costs between cost of goods sold and ending inventory. c. adds the delivery costs to ending inventory. d. records the delivery costs as a selling expense.

6. If your company uses the periodic method, you record a sale by: a. crediting Sales, but do not make an entry in Inventory. b. crediting Sales and debiting COGS. c. debiting Sales and crediting COGS. d. crediting Sales and debiting Inventory.

7. AcmeCo, which uses the periodic method, purchases inventory for $10,000, 2/10, n/30, debiting Purchases for $9,800 and crediting Accounts Payable for $9,800. If AcmeCo pays for the merchandise after the discount period has lapsed, you will: a. debit Accounts Payable for $10,000. b. debit Purchase Discounts Lost for $200. c. credit Cash for $9,800. d. credit Merchandise Inventory for $200.

8. MobilCo, which uses the periodic method, has beginning inventory of $100,000. During the fiscal year, it purchases $200,000 of inventory, FOB shipping point with the seller paying the $8,000 shipping costs. What is the balance in MobilCo's Purchases account at year end? a. $308,000 b. $300,000 c. $208,000 d. $200,000

9. If a company uses the periodic method, which of the following accounts should have a zero balance after the end-of-period adjusting entry is made? a. Freight-in b. Beginning Inventory c. Purchase Returns d. All of the above

Answer 1

Solution:

1)

The correct option is c. both the income statement and the balance sheet

Under the periodic method, the year-end adjusting entry for inventory affects both the income statement and the balance sheet.

Since Inventories are reported under both Income Statement and balance sheet. Any increase or decrease in inventories will affect cost of goods sold (which is a part of income statement) and balance sheet (ending balance of inventories).

Hence the correct option is C.

2)

The correct option is c. Ending Inventory

Cost of Goods Sold is calculated in the following manner:

Beginning Inventory	xx
Plus: Purchases	Xx
Goods Available for Sale	Xx
Less: Ending Inventory	Xx
Cost of Goods sold	Xx

3)

Cost of Goods Sold

	$$
Beginning Inventory	$65,000
Plus: Purchases	$250,000
Less: Purchases Return and Allowance	-$4,000
Plus: Freight in	$8,500
Goods Available for Sale	$319,500
Less: Ending Inventory	-$45,000
Cost of Goods Sold	$274,500

The correct option is b. $274,500

4)

The correct option is a. Cash 600 Purchase Returns and Allowances 600

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