1. For 20X0, Big-Co, which uses the periodic method and records purchases at net
ID: 2534975 • Letter: 1
Question
1. For 20X0, Big-Co, which uses the periodic method and records purchases at net, has beginning inventory of $200,000. Big-Co’s data for 20X1 includes the following:
Purchases $150,000
Freight-in 8,000
Purchase discounts lost 7,000
Purchase returns 15,000
If Big-Co’s ending inventory is $110,000, what is the year-end adjusting journal entry?
a. Ending Inventory 110,000 Purchase Returns 15,000 Cost of Goods Sold 232,000 Purchase Discounts Lost 7,000 Purchases 150,000 Beginning Inventory 200,000 b. Ending Inventory 110,000 Purchase Returns 15,000 Cost of Goods Sold 233,000 Purchases 150,000 Freight-In 8,000 Beginning Inventory 200,000 c. Ending Inventory 110,000 Purchase Returns 15,000 Purchase Discounts Lost 7,000 Cost of Goods Sold 226,000 Purchases 150,000 Freight-In 8,000 Beginning Inventory 200,000 d. None of the above
2. When a sale is recorded under the periodic method: a. only the income statement is affected. b. only the balance sheet is affected. c. both the balance sheet and the income statement are affected. d. none of the above.
3. Your company purchases $10,000 of inventory, 2/10, n/30, debits Purchases for $10,000 and credits Accounts Payable for $10,000. If your company pays for the merchandise before the discount period lapses, you will: a. debit Purchase Discounts Lost for $200. b. credit Purchase Discounts for $200. c. debit Accounts Payable for $9,800. d. credit Purchases for $9,800.
4. Your company purchases $10,000 of inventory 2/10, n/30, debits Inventory for $10,000 and credits Accounts Payable for $10,000. If your company pays for the merchandise before the discount period lapses, you will: a. debit Accounts Payable for $9,800. b. debit Cash for $9,800. c. credit Inventory for $200. d. credit Purchase Discounts for $200.
Explanation / Answer
ans 1 Journal entry Dr Cr Cost 0f good sold (bal fig) $226,000 Ending Inevntory 110000 Purchase discount lost 7000 Purchase Return 15000 Purchases $150,000 Freight In 8000 Beginning Inventory $200,000 option C is correct ans 2 In periodic syctem sales are recorded so that affects both balance sheet and income staement as cash or accounts receivable is debited and sales are credited So cash/AR is balance sheet item and sales is income statement ans 3 The entry is Dr Cr Accounts payable $10,000 Cash 9800 Purchase discount (10000*2%) 200 b. credit Purchase Discounts for $200. ans 4 This is perpetual system so Inventory account is used to record purchase discounts/returns etc hence option c credit Inventory by $200 is correct
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