13. At year end Kroger\'s perpetual inventory records showed an inventory balanc
ID: 2460411 • Letter: 1
Question
13. At year end Kroger's perpetual inventory records showed an inventory balance of $100. A physical count of the grocery inventory at year end determined the actual inventory balance to be $92. Given the difference between the inventory records and the physical count of inventory, what would be the appropriate adjusting journal entry at year end?
a. debit cost of goods sold $8, credit inventory $8
b. debit inventory $8, credit cost of goods sold $8
c. debit inventory $92, debit cost of goods sold $8, credit inventory $100
d. debit inventory $100, credit cost of goods sold $8, credit inventory $92
e. none of the above
14. Sears started the year with $10 of inventory. During the year the company purchased $40 of inventory, and at year end a physical count of inventory determined the ending inventory to be $12. Given these facts, what will Sears report for cost of goods sold for the year?
a. $24 b. $26 c. $28 d. $38 e. none of the above.
15. Assume that in question #14 above there was an error int he count of ending inventory. The correct value of ending inventory was $9 not $12. If not corrected, how will this $3 error in ending inventory affect the financial statements?
a. Gross Profit for the current year will be understated by $3.
b. The Ending inventory for the current year will be understated by $3.
c. The beginning inventory for the next year will be understated by $3.
d. Cost of Goods Sold is overstated by $3, and Net Income is understated by $3.
e. Cost of Goods Sold is understated by $3, and net Income is overstated by $3.
16. The most important criterion in the selection of an internal control procedure is:
a. the ability of the control to prevent errors.
b. the expected benefit of the control must exceed the cost of the control
c. the ability of the control to detect errors.
d. the ease of implementing the control
e. the ability of the control to prevent theft of assets.
Explanation / Answer
13.
Answer is “a. debit cost of goods sold $8, credit inventory $8”
14.
Cost of goods sold = Beginning inventory + Purchases – Ending inventory =$10 + $40 - $12 = $38
Answer is d.$38.
15.
If the error is not corrected, cost of goods sold shall remain to be shown as $38 instead of $42.
Hence answer is d. Cost of Goods Sold is overstated by $3, and Net Income is understated by $3.
16.
Answer is a. the ability of the control to prevent errors.
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