QUESTION 21 Williams Company had the following balances and transactions during

Question

QUESTION 21

Williams Company had the following balances and transactions during 2013.

December 30

What would the company's inventory amount be on the December 31, 2013 balance sheet if the perpetual LIFO method is used?
(Answers are rounded to the nearest dollar.)

$350

$400

$700

$375

3.33 points   

QUESTION 22

Which of the following is subtracted from Net sales revenue to arrive at Gross profit?

Operating expenses

Cost of goods available for sale

Sales discounts and Sales returns and allowances

Cost of goods sold

3.33 points   

QUESTION 23

Ending inventory for the current period is understated. What effect will this error have on equity?

Equity will be understated at the end of the current period, but it will be correct at the end of the next period.

Equity will be overstated at the end of the current period and overstated at the end of the next period.

Equity will be overstated at the end of the current period, but it will be correct at the end of the next period.

Equity will be overstated at the end of the current period and understated at the end of the next period.

3.33 points   

QUESTION 24

Which of the following are clues that a company may have been "cooking the books" by fraudulently increasing their level of net sales?

There was a very high level of returned goods shortly after year-end.

Several shipping clerks checked into hospitals from lifting heavy boxes.

Several company warehouses reported burglaries.

There was a high level of inventory purchases in the following period.

3.33 points   

QUESTION 25

Which of the following is used for market when valuing inventory at lower-of-cost-or-market?

Sales price less the company's normal mark-up percentage

Current replacement price

Cost plus the company's normal mark-up percentage

Sales price

3.33 points   

QUESTION 26

Martin Sales had a Beginning inventory balance of $120 made up of 10 units purchased for $12.00 per unit.
Early in the month, they purchased 16 units at $10.00 per unit. Later that month, they sold 15 units.
Martin uses a perpetual inventory system, and applies FIFO. How much is the Ending inventory balance?

$130

$110

$132

$116

3.33 points   

QUESTION 27

When a company uses the perpetual inventory method, which of the following would be the entry to adjust inventory to lower-of-cost-or-market?

Debit Purchases and credit Inventory

Debit Cost of goods sold and credit Inventory

Debit Inventory and credit Purchases

Debit Inventory and credit Cost of goods sold

3.33 points   

QUESTION 28

Which of the following means that the shipment is free on board at the point of shipment and the buyer pays all shipping costs?

FOB shipping point

COD

FOB destination

4/10, eom

3.33 points   

QUESTION 29

Ending inventory for the current accounting period is overstated by $2,700. What effect will this error have on Cost of goods sold and Net income?

Cost of goods sold Understated
Net income Overstated

Cost of goods sold Overstated
Net income Overstated

Cost of goods sold Understated
Net income Understated

Cost of goods sold Overstated
Net income Understated

3.33 points   

QUESTION 30

Michelin Jewelers completed the following transactions. Michelin Jewelers uses the perpetual inventory system. On April 2, Michelin sold $9,000 of merchandise to a customer on account with terms of 3/15, n/30. Michelin's cost of the merchandise sold was $5,500. On April 4, the customer reported damaged goods and Michelin granted a $1,000 sales allowance. On April 10, Michelin received payment from the customer. Which of the following entries correctly records the cash receipt on Michelin's books?

Cash 8,000
              Accounts receivable 8,000

Accounts receivable 8,000
                               Sales discount 240
                               Cash 7,760

Cash 7,760
              Accounts receivable 7,760

Cash               7,760
Sales discount 240
                        Accounts receivable 8,000

Beginning inventory 10 units at $70 June 10 Purchased 20 units at $80

December 30

Sold 15 units December 31 Sold 10 units

Explanation / Answer

Answer 21 (a) $350 (IN LIFO LAST IN GOODS IS SOLD FIRST THEN REAMING INVENTORY = 5*70) 22 (a) Operating expenses 23 (a)Equity will be understated at the end of the current period, but it will be correct at the end of the next period. 24 (a)There was a very high level of returned goods shortly after year-end 25 (b)Current replacement price 26 (a) $130 27 (b)Debit Cost of goods sold and credit Inventory 28 (c)FOB destination 29 (d)Cost of goods sold Overstated Net income Understated 30 Cash               7,760 Sales discount 240                         Accounts receivable 8,00

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