2. The term "FIFO" relates to the merchandise in inventory at the end of the accounting period, not to the merchandise sold during the period.
a. True
b. False
25. Under the periodic system of accounting for inventory, the purchases account is debited for the cost of all merchandise purchased.
a. True
b. False
38. When merchandise is acquired on account and the perpetual system of inventory is used, the journal entry for the purchase would include
a. debiting Purchases and crediting Accounts Payable.
b. debiting Accounts Payable and crediting Merchandise Inventory.
c. debiting Merchandise Inventory and crediting Accounts Payable.
d. debiting Accounts Payable and crediting Purchases.
40. Costs of goods sold may include all of the following EXCEPT
a. insurance.
b. shipping costs.
c. manufacturing costs.
d. management salaries.
45. When merchandise is sold and the perpetual system of inventory is used, the journal entry for a sale would include
a. debiting Accounts Receivable and crediting Sales.
b. debiting Accounts Receivable and crediting Merchandise Inventory.
c. debiting Accounts Receivable and crediting Cost of Goods Sold.
d. debiting Cost of Goods Sold and crediting Sales.
47. A method of allocating merchandise cost that assigns the most recent purchased costs to the ending inventory shown
on the balance sheet is called the
a. last-in, first-out method.
b. first-in, first-out method.
c. specific identification method.
d. weighted-average method.
48. A method of allocating merchandise cost that assumes the sales in the period were made from the recently purchased merchandise and its earliest merchandise bought remains in the inventory is called the
a. last-in, first-out method.
b. first-in, first-out method.
c. specific identification method.
d. weighted-average method
In: Accounting
|
Westex Products is a wholesale distributor of industrial cleaning products. When the treasurer of Westex Products approached the company’s bank in late 2019 seeking short-term financing, he was told that money was very tight and that any borrowing over the next year would have to be supported by a detailed statement of cash receipts and disbursements. He was also told that it would be very helpful to the bank if borrowers would indicate the quarters in which they would be needing funds, as well as the amounts that would be needed, and the quarters in which repayments could be made. |
|
Since the treasurer is unsure as to the particular quarters in which the bank financing will be needed, he has assembled the following information to assist in preparing a detailed cash budget: |
| a. |
Budgeted sales and merchandise purchases for the year 2020, as well as actual sales and purchases for the last quarter of 2019, are as follows: |
| Sales | Merchandise Purchases |
|
| 2019: | ||
| Fourth-quarter actual | $ 500,000 | $ 315,000 |
| 2020: | ||
| First-quarter estimated | 750,000 | 465,000 |
| Second-quarter estimated | 1,000,000 | 620,000 |
| Third-quarter estimated | 1,250,000 | 762,500 |
| Fourth-quarter estimated | 500,000 | 315,000 |
| b. |
The company normally collects 65% of a quarter’s sales before the quarter ends and another 33% in the following quarter. The remainder are uncollectible. This pattern of collections is now being experienced in the 2019 fourth-quarter actual data. |
| c. |
80% of a quarter’s merchandise purchases are paid for within the quarter. The remainder are paid in the following quarter. |
| d. |
Operating expenses for the year 2020 are budgeted quarterly at $125,000 plus 15% of sales. Of the fixed amount, $50,000 each quarter is depreciation. |
| e. | The company will pay $25,000 in dividends each quarter. |
| f. |
Equipment purchases of $187,500 will be made in the second quarter, and purchases of $120,000 will be made in the third quarter. These purchases will be for cash. |
| g. |
The cash account contained $25,000 at the end of 2019. The treasurer feels that this represents a minimum balance that must be maintained. |
| h. |
Any borrowing will take place at the beginning of a quarter, and any repayments will be made at the end of a quarter at an annual interest rate of 10%. Interest is paid only when the principal is repaid. All borrowings and all repayments of the principal must be in round $1,000 amounts. Interest payments can be in any amount. (Compute interest on whole months, e.g., 1/12, 2/12.) |
| i. | At present, the company has no loans outstanding. |
| Required: |
| 1. | Prepare the following by quarter and in total for the year 2020: |
| a. | A schedule of expected cash collections. |
| b. | A schedule of budgeted cash disbursements for merchandise purchases. |
| 2. |
Compute the expected cash payments for operating expenses, by quarter and in total, for the year 2020. |
| 3. |
Prepare a cash budget, by quarter and in total, for the year 2020. In your budget, clearly show the quarter(s) in which borrowing will be necessary and the quarter(s) in which repayments can be made, as requested by the company’s bank. (Roundup "Borrowing" and "Repayments" answers to the nearest whole dollar amount. Any "Repayments" and "Interest" should be indicated by a minus sign.) |
In: Accounting
Computing Cost of Sales and Ending Inventory
Stocken Company has the following financial records for the current
period.
| Units | Unit Cost | |
|---|---|---|
| Beginning Inventory | 100 | $ 26 |
| Purchases: #1 | 650 | 22 |
| #2 | 550 | 18 |
| #3 | 200 | 16 |
Ending inventory is 350 units. Compute the ending inventory and the
cost of goods sold for the current period using (a) first-in, first
out, (b) average cost, and (c) last-in, first out.
| (a) First-in, first-out | |
| Ending inventory | $Answer |
| Cost of goods sold | $Answer |
| (b) Average cost | |
| Ending inventory | $Answer |
| Cost of goods sold | $Answer |
| (c) Last-in, first-out | |
| Ending inventory | $Answer |
| Cost of goods sold | $Answer |
In: Accounting
Computing Cost of Sales and Ending Inventory
Stocken Company has the following financial records for the current
period.
| Units | Unit Cost | |
|---|---|---|
| Beginning Inventory | 100 | $ 46 |
| Purchases: #1 | 650 | 42 |
| #2 | 550 | 38 |
| #3 | 200 | 36 |
Ending inventory is 350 units. Compute the ending inventory and the
cost of goods sold for the current period using (a) first-in, first
out, (b) average cost, and (c) last-in, first out.
| (a) First-in, first-out | |
| Ending inventory | $Answer |
| Cost of goods sold | $Answer |
| (b) Average cost | |
| Ending inventory | $Answer |
| Cost of goods sold | $Answer |
| (c) Last-in, first-out | |
| Ending inventory | $Answer |
| Cost of goods sold | $Answer |
In: Accounting
Computing Cost of Sales and Ending Inventory
Stocken Company has the following financial records for the current
period.
| Units | Unit Cost | |
|---|---|---|
| Beginning Inventory | 100 | $ 46 |
| Purchases: #1 | 650 | 42 |
| #2 | 550 | 38 |
| #3 | 200 | 36 |
Ending inventory is 350 units. Compute the ending inventory and the
cost of goods sold for the current period using (a) first-in, first
out, (b) average cost, and (c) last-in, first out.
| (a) First-in, first-out | |
| Ending inventory | $Answer |
| Cost of goods sold | $Answer |
| (b) Average cost | |
| Ending inventory | $Answer |
| Cost of goods sold | $Answer |
| (c) Last-in, first-out | |
| Ending inventory | $Answer |
| Cost of goods sold | $Answer |
In: Accounting
10) If MUx/Px < MUy/Py, then
A) spending a dollar less on Y and a dollar more on X increases utility.
B) spending a dollar less on X and a dollar more on Y increases utility.
C) X is more expensive than Y.
D) Y is more expensive than X.
11) Ellie is spending her entire income on goods X and Y. Her marginal utility from the last unit of X is 100 and the marginal utility from the last unit of Y that she consumes is 50. Ellie's utility is only maximized if
A) the prices of X and Y are the same.
B) the price of good X is twice that of good Y.
C) the price of good Y is twice that of good X.
D) We cannot determine whether Ellie is maximizing her utility.
12) For normal goods
A) the substitution and income effects of a price decrease will both decrease the quantity of the good demanded.
B) the substitution and income effects of a price decrease will both increase the quantity of the good demanded.
C) the substitution effect of a price decrease will increase the quantity of the good demanded while the income effect of a price decrease will decrease the quantity of the good demanded.
D) the substitution effect of a price decrease will decrease the quantity of the good demanded while the income effect of a price decrease will increase the quantity of the good demanded.
13) For inferior goods
A) the substitution and income effects of a price increase will both decrease the quantity of the good demanded.
B) the substitution and income effects of a price increase will both increase the quantity of the good demanded.
C) the substitution effect of a price increase will increase the quantity of the good demanded while the income effect of a price increase will decrease the quantity of the good demanded.
D) the substitution effect of a price increase will decrease the quantity of the good demanded while the income effect of a price increase will increase the quantity of the good demanded.
In: Economics
1)Background: Morris Saldov conducted a study
in Eastern and Central Newfoundland in 1988 to examine public
attitudes towards social spending. In particular, the study tried
to determine if knowing someone on public assistance (yes, no)
affected one's views on social spending (too little, about right,
too much). The data from the study is summarized in the table
below.
| Yes | No | Total | |
| Too little | 38 | 5 | 43 |
| About right | 15 | 15 | 30 |
| Too much | 10 | 5 | 15 |
| Total | 63 | 25 | 88 |
Source: Morris Saldov, Public Attitudes to Social Spending in Newfoundland," Canadian Review of Social Policy, 26, November 1990, pages 10-14.
Directions: Conduct a chi-square test for independence to determine if the association between knowing someone on public assistance and views on social spending is statistically significant.
| Yes | No | |
| Too little | ||
| About right | ||
| Too much |
2) A financial analyst claims that 19% make all purchases with cash, 17% make most purchases with cash, 20% make half of purchases with cash, 33% make some purchases with cash and 11% make no purchases with cash. You take a random selection to see if you can conclude that the distribution is different than what the financial analyst claims. Use a 5% significance to decide and round to the fourth.
| Categories | Observed Frequency |
Expected Frequency |
|---|---|---|
| All Cash | 28 | |
| Most Cash | 84 | |
| Half Cash | 103 | |
| Some Cash | 159 | |
| No Cash | 94 |
Test Statistic:
Degrees of Freedom:
p-val:
Decision Rule: Select an answer Reject the Null Accept the Null
Fail to Reject the Null
Did something significant happen? Select an answer Nothing
Significant Happened Significance Happened
There Select an answer is not is enough evidence to
conclude Select an answer that the distribution is what the
financial analyst claims that the distribution is different than
what the financial analyst claims
select one - that the is what the financial analyst is claims or is different
In: Statistics and Probability
Blooms Enterprise Project
Blooms Enterprise is a retail company that sells household electronics. The budget for the forthcoming period January to March 2021 is to be prepared. Expectations for the forthcoming period include the following:
|
$ |
$ |
|
|
ASSETS |
||
|
Non-current Assets |
||
|
Property Plant and Equipment (NBV) |
1,344,500 |
|
|
Current Assets |
||
|
Inventory |
346,500 |
|
|
Accounts Receivable |
126,000 |
|
|
Marketable securities |
30,000 |
|
|
Cash |
353,000 |
855,500 |
|
2,200,000 |
||
|
EQUITIES AND LIABILIATIES |
||
|
Capital |
||
|
Share capital |
1,000,000 |
|
|
Accumulated profits |
216,200 |
|
|
1,216,200 |
||
|
Current Liabilities |
||
|
Accounts Payable |
396,900 |
|
|
10% Bond Payable |
586,900 |
983,800 |
|
2,200,000 |
|
Expense type |
$ |
|
Salaries |
100,000 |
|
Advertising and promotion |
25,000 |
|
Depreciation |
60,000 |
|
Sales commission |
2% of total sales |
Required:
Prepare the following budgets for Blooms Enterprise by month and the quarter in total for the period ending March 31, 2021:
In: Accounting
Blooms Enterprise is a retail company that sells household electronics. The budget for the forthcoming period January to March 2021 is to be prepared. Expectations for the forthcoming period include the following:
a. Expected Statement of Financial Position as at 31 December 2020
|
$ |
$ |
|
|
ASSETS |
||
|
Non-current Assets |
||
|
Property Plant and Equipment (NBV) |
1,344,500 |
|
|
Current Assets |
||
|
Inventory |
346,500 |
|
|
Accounts Receivable |
126,000 |
|
|
Marketable securities |
30,000 |
|
|
Cash |
353,000 |
855,500 |
|
2,200,000 |
||
|
EQUITIES AND LIABILIATIES |
||
|
Capital |
||
|
Share capital |
1,000,000 |
|
|
Accumulated profits |
216,200 |
|
|
1,216,200 |
||
|
Current Liabilities |
||
|
Accounts Payable |
396,900 |
|
|
10% Bond Payable |
586,900 |
983,800 |
|
2,200,000 |
b. Sales data – the company’s sales for December 2020 are expected to be $900,000 and it is expected that it will increase by 10% each month over the previous month for the quarter ending March 31, 2021. Sales are expected to remain constant at March 31, 2021 level for the next three months.
c. Collections – credit sales are typically 70% of total sales. Outstanding amounts from sales are normally collected as follows:
i. 80% during the month of sale
ii. 20% during the month after sale
d. Cost of goods sold – this is normally 70% of total sales. To have adequate stocks of inventory on hand, the company attempts to have inventory at the end of each month equal to half (50%) of the next month’s projected cost of goods sold. Inventory is purchased on account and usually settled as follows:
i. 40% during the month of purchase
ii. 60% during the month after purchase
e. Other monthly expenses:
|
Expense type |
$ |
|
Salaries |
100,000 |
|
Advertising and promotion |
25,000 |
|
Depreciation |
60,000 |
|
Sales commission |
2% of total sales |
f. Equipment is to be purchased on January 1, 2021 for cash in the amount of $700,000.
g. The directors have indicated an intention to declare and pay dividends of $120,000 on the last day of each quarter.
h. The executives believe that the company should maintain a minimum cash balance of $60,000. If the cash balance in any month is less than $60,000, then the company can borrow to cover the shortfall. Amounts borrowed must be in multiples of $1,000 (for example, $50,000 or $51,000 but not $51,500 or 51,566). The interest rate is 10% per annum. Repayment of principal and interest must be made on the last day of each quarter.
i. Tax payable represents 20% of Profit before Tax and will be paid April 30, 2021 (after the end of the first quarter).
Required:
Prepare the following budgets for Blooms Enterprise by month and the quarter in total for the period ending March 31, 2021:
(a) Schedule showing breakdown of sales between cash and credit (Hint: show December 2020 and April 2021 as well).
(b) Schedule of cash collected from customers.
(c) Purchases budget (Hint: show April 2021 as well).
(d) Schedule of cash disbursement to suppliers of products for resale.
(e) Cash budget for the period.
In: Accounting
| Nash Ltd, incorporated in 2019, has these transactions related to intangible assets in that year: | |||||||
| 1 January | Purchased patent (10-year life) for $408,980 | ||||||
| 1 July | Acquired an existing 6-year franchise (expiration date 1 July 2025) for $352,440 | ||||||
| All costs incurred were for cash and included GST of 10%. Amortisation is calculated on a straight line basis. | |||||||
Required
a) Prepare the journal to record the purchase of the patent.
b) Prepare the journal to record the purchase of the franchise.
c) Prepare the journal at 31 December 2019 to record the amortisation of the:
i) patent
ii) franchise
(Enter debit entries first followed by credit entries. Please include Dr and Cr as appropriate. Narrations are not required).
In: Accounting