9. A company just starting business made the following four inventory purchases
ID: 2565671 • Letter: 9
Question
9. A company just starting business made the following four inventory purchases in June: 150 units 200 units 200 units 150 units 520 780 840 June 10 une 28 A physical count of merchandise inventory on June 30 reveals that there are 200 units on hand. Using the average-cost method, the amount allocated to the ending inventory on June 30 is A) S800. B) $2,800. C) $2,000. D) $767 10. If beginning inventory is understated by $10,000, the effect of this error in the current period is Overstated Overstated Understated Understated Overstated Understated Understated Overstatecd B) 11. Sales revenues are usually considered earned when A) an order is received. B) adjusting entries are made. C) cash is received from credit sales. D) goods have been transferred from the seller to the buyer. 12. Under a consignment arrangement, the A) B) C) D) consignee has ownership when the goods are in the consignee's possession. consignor has ownership until goods are shipped to the consignee. consignor has ownership until goods are sold to a customer. consigned goods are included in the inventory of the consignee. 13. The operating cycle of a merchandiser is A) B) C) D) generally shorter than it is for a service company. generally longer than it is for a service company. about the same as for a service company. always one year in length. 14. Internal control is most effective when several people are responsible for a given task. A) True B) False 15. Merchandise inventory is reported as a long-term asset on the balance sheet. A) True B) False 16. At April 30, Mareska Company has the following bank information: cash balance per bank $4,600; outstanding checks $280; deposits in transit $550; credit memo for interest $10; bank service charge S20. What is Mareska's adjusted cash balance on April 30? A) $4,870 B) $4,860 C) $4,880 D) $4,330Explanation / Answer
9. Total cost = 2,800
No of units = 150 + 200 + 200 +150 + 150 = 700
Weighted average unit cost = 2,800 / 700 = 4
Cost of ending inventory = 200 units * 4 = 800
The answer is A.
10. Cost of goods sold = Opening stock + Purchses - Closing stock
If the Opening stock is understated then the Cost of goods sold will be understated. If the Cost of goods sold is understated then the Net income will be Overstated.
The answer is D.
11. Generally sales revenue is recognized when the goods have been transferred from the seller to the buyer under the terms of either FOB shipping point or FOB destiantion.
The answer is D.
12. In the consignment sales the consignee holds consignor's inventory to sell for a commission and the ownership of goods never transfers to the consignee. The ownership of goods transfers directly from the consignor to the customer.
The answer is C.
13. Operating cycle = Inventory conversion period + Accounts receivables collection period - Accounts payables deferral period
The Inventory conversion period and the Accounts receivables collection period are comapritively higher for a merchandiser than for a service company which results in the longer operating cycle for a merchandisor than a service company.
The answer is B.
14. TRUE
The segretation of duties which are Authorization, Recording, Custody, Comparisons makes the Internal controls more effective.
15. FALSE
Merchandise inventory is reported as a Current Asset
16.
The answer is B.
Balance per bank 4,600 Less : Outstanding checks (280) Add : Deposits in transit 550 Adjusted cash balance 4,870 Less : Bank saevice charges (20) Add : Credit memo for interst 10 Adjusted cash balance 4,860Related Questions
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