43. Rowland Company reported the following balances at June 30, 2011 Sales Sales
ID: 2566973 • Letter: 4
Question
43. Rowland Company reported the following balances at June 30, 2011 Sales Sales Returns and Allowances Sales Discounts Cost of Goods Sold $16,200 600 300 7,500 Net sales for the month is A) $7,800 B) $15,600. -C) $15,300. D) $16,200 44. A company purchased land for $70,000 cash. Real estate brokers' commission was $5,000 and $7,000 was spent for demolishing an old building on the land before construction of a new building could start. Under the cost principle, the cost of land would be recorded at A) $82,000 B) $70,000. C) $75,000. D) $77,000. 45. On January 15, 2011, Raymond Company received a two-month, 9%,$5,000 note from william Pentel for the settlement of his open account. The entry by Raymond Company on January 15, 2011 would include a: A) credit of $5,000 to Notes Receivable. B) credit of $5,075 to Accounts Receivable. C) debit of $5,075 to Notes Receivable D) debit of $5,000 to Notes Receivable 46. Land improvements are generally charged to the Land account. A) True B) False 47. Goods that have been purchased FOB destination but are in transit, should be excluded from a physical count of goods. A) True B) False 48. Inventory is reported in the financial statements at A) cost. B) market. C) the lower-of-cost-or-market. D) the higher-of-cost-or-market.Explanation / Answer
Answer 43
Net sale = Sales - Sales return & allowance - Sales discount
Note : COGS is seperate line item expense in statement of profit loss & is not adjusted with sales
Net Sales = $16,200 - $600 - $300 = $15,300(ie option c)
Answer 44
The cost of land as per cost principle :
Cost paid to acquire the land (Purchase price , commision etc) + Intial Cost incure to put the land into use*
*In the question cost of demolisation of old building to construte new one is example of such cost
Cost of the land to company = $70,000 + $5,000 + $7,000 = $82,000 (option A)
Answer 45
Answer will be D) debit of $5,000 to Notes Receivable
Explanation : Notes receivable is an asset for Raymond company , thus Note receivable is debited & Accounts receivable will be credited.
Answer 46
The statement is False
Explanation : Land improvements are considered as seperate assets & recorded on balance sheet as "Land improvements". Such costs are depreciated over the lives of improvements
Answer 47
The statement is True
Explanation : Goods in transit means , the goods left the seller dock but yet to receive by the buyer . Since the goods are still not in the possession of buyer, he shall exclude them from the physical count of goods
Answer 48 Inventory is reported in the financial statement at C) Lower of cost or market
Explanation : Under the conservatism approch of accounting in order to avoide over valuation of inventory it is recoded as lower of cost or market price
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