Accounting questions needed answered: 1: The cost of goods sold (COGS) in a peri
ID: 2543821 • Letter: A
Question
Accounting questions needed answered:
1: The cost of goods sold (COGS) in a periodic inventory system is found by
A. adding the net cost of purchases to the ending inventory
B.deducting the cost of beginning inventory from the cost of goods available for sale
C. deducting the cost of ending inventory from the cost of goods available for sale
D. None of the others alternatives are correct
E. deducting the cost of the ending inventory from the net cost of purchases
2.
The 20X5 records of Western Company showed beginning inventory, $100,000; cost of goods sold, $400,000; and ending inventory, $200,000. The amount of inventory to be reported in the Balance Sheet of 20X4 is:
A. $500,000
B. $100,000
C. $300,000
D. $400,000
E. $200,000
3.
On January 15, Frazier Company received merchandise for resale from its normal supplier. The invoice price was $3,600 with terms of 4/10, n/30 for 100 units of Part #345. The invoice was paid on January 19. Freight costs were $120 and the company paid $108 of interest on a loan to buy the inventory. What is the unit cost that should be recorded for each of the 100 units of Part # 345?
A. $35.76
B. $36.00
C. None of the others alternatives are correct
D. $37.20
E. $34.56
4.
A firm's gross profit on net sales is 30%. The firm had net sales of $420,000 and net cost of purchases of $280,000. If the beginning inventory was $40,000, how much was the ending inventory?
A. $40,000
B. $126,000
C. None of the others alternatives are correct
D. $60,000
E. $26,000
Explanation / Answer
Answer to Question 1.
Option C i.e. Deducting the Cost of Ending Inventory from the Cost of Goods Available for Sale.
In Periodic Inventory System, the Cost of Goods sold is calculated by subtracting Cost of Ending Inventory from Cost of Goods available for Sale.
Cost of Goods sold = Cost of Goods available for Sale – Ending Inventory
Where, Cost of Goods available for Sale = Cost of Beginning Inventory + Cost of Purchases
Answer to Question 2.
Option B i.e. $100,000
The Inventory reported in Balance Sheet for Year 20X4 will be the Cost of Beginning Inventory for Year 20X5.
Amount to be reported as Inventory, 20X4 = Cost of Beginning Inventory, 20X5
Therefore, Amount to be reported as Inventory in Balance Sheet, 20X4 = $100,000
Answer to Question 3.
Option A i.e. $35.76
Unit Cost = Cost of Goods Purchases / Unit purchased
Cost of Goods Purchases = [$3,600 – ($3,600 * 4%)] + $120
Cost of Goods Purchases = [$3,600 - $144] + $120
Cost of Goods Purchases = $3,456 + $120
Cost of Goods Purchases = $3,576
Unit Cost = 3,576 / 100
Unit Cost = $35.76
Answer to Question 4.
Option E i.e. $26,000
Gross Profit = Net Sales * Cost of Goods Sold
Gross Profit = $420,000 * 30% = $126,000
$126,000 = $420,000 - Cost of Goods Sold
Cost of Goods Sold = $294,000
Cost of Goods Sold = Beginning Inventory + Cost of Purchases – Ending Inventory
$294,000 = $40,000 + $280,000 - Ending Inventory
Ending Inventory = $26,000
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