🏷️ LIMITED TIME OFFER: GET 20% OFF GRADE+ YEARLY SUBSCRIPTION →
Log in
HomeClass Notes1,200,000US530,000

ACCT1021 Lecture 13: Chapter Seven Lecture Notes (13&14)

31 views6 pages
School
Boston College
Department
Accounting
Course
ACCT1021
Professor
Andrea Galimberti

For unlimited access to Class Notes, a Class+ subscription is required.

Document Summary

7: reporting & interpreting cost of goods sold & inventory. Introduction: inventory consists of any tangible good owned by the company that (1) is held for sale to customers in the ordinary course of business or (2) is used to produce goods or services for sale. For merchandising companies (retail or wholesale companies), only one inventory classification, merchandise inventories, is needed to describe the many different items that make up the total inventory: in a manufacturing company, inventories may take many forms. In some cases, goods may not yet be ready for sale. As a result, inventory is usually classified into three categories: finished goods, work in process and raw materials: the accounting principles and concepts discussed in this chapter are applicable to each of the above-mentioned inventory classifications. Inventory errors: the accounting treatment of inventories is very important because it affects two major elements: the amount of inventories reported on the.

Get access

Grade+20% off
$8 USD/m$10 USD/m
Billed $96 USD annually
Grade+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
40 Verified Answers
Class+
$8 USD/m
Billed $96 USD annually
Class+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
30 Verified Answers

Related Documents

ACCT1021 Chapter Notes - Chapter 7: Inventory Turnover, Net Income, Retained Earnings
greywildebeest867
ACCT1021 Chapter Notes - Chapter 2: Accounts Payable, Current Liability, Deferral
lilaclion859
ACCT1021 Lecture 13: Chapter 8 Lecture Notes (Lecture 13&14)
greywildebeest867

Related Questions

3.Lean Accounting Com-Tel Inc. manufactures and assembles twomodels of smartphones-the Tiger Model and the Lion Model. Theprocess consists of a lean cell for each product. The data thatfollow concern only the Lion Model lean cell. For the year, Com-TelInc. budgeted these costs for the Lion Model production cell:Conversion Cost Categories Budget Labor $114,000 Supplies 43,200Utilities 15,600 Total $172,800 Com-Tel plans 2,400 hours ofproduction for the Lion Model cell for the year. The materials costis $61 per unit. Each assembly requires 20 minutes of cell assemblytime. There was no May 1 inventory for either Raw and In ProcessInventory or Finished Goods Inventory. The following summary eventstook place in the Lion Model cell during May: a.Electronic partswere purchased to produce 8,150 Lion Model assemblies in May.b.Conversion costs were applied for 7,750 units of production inMay. c.7,600 units were completed and transferred to finished goodsin May. d.7,370 units were shipped to customers at a price of $288per unit. If required, round your answers to the nearest cent.Required: 1. Determine the budgeted cell conversion cost per hour.$ per hour 2. Determine the budgeted cell conversion cost per unit.$ per unit 3. Journalize the summary transactions (a) through (d).a. Raw and In Process Inventory Accounts Payable b. Raw and InProcess Inventory Conversion Costs c. Finished Goods Inventory Rawand In Process Inventory d. Sale Accounts Receivable Sales d. CostCost of Goods Sold Finished Goods Inventory 4. Determine the endingbalance in Raw and In Process Inventory and Finished GoodsInventory. Raw and In Process Inventory $ Finished Goods Inventory$ 5. Lean accounting is different from traditional accountingbecause it is more simplified and uses minimal control. As aresult, the number of transactions are reduced . In many leanoperations, purchased materials are charged to a “raw and inprocess inventory” account . Direct labor is frequently included asa conversion cost of the cell . Often, nonfinancial performancemeasures, such as lead time or quality measures , are used tomonitor performance. 4. 5. Previous Next

12 ACCOUNTING QUESTIONS

4. Using a perpetual inventory system, the buyer'sjournal entry to record the return of merchandise purchased onaccount includes a:

Select one:

A. Credit to Cost of Goods Sold

B. Credit to Accounts Payable

C. Credit to Purchase Returns

D. Credit to Inventory

6.Using a perpetual inventory system, the buyer’sjournal entry to record the payment for merchandise within thediscount period includes a:

Select one:

A. Debit to Accounts Payable

B. Debit to Cost of Goods Sold

C. Debit to Purchases

D. Debit to Inventory

7.Which of the following statements regarding cost flows istrue?

Select one:

Cost of goods available for sale is equal to beginning inventoryminus cost of goods purchased.

CGAS = beginning inventory minus ending inventory.

Cost of goods available for sale is equal to beginning inventoryplus cost of goods purchased.

CGAS = cost of goods sold minus cost of goods purchased.

10. Using a perpetual inventory system, the buyer’sjournal entry to record the purchase of merchandise on creditincludes a:

Select one:

A. Debit to Inventory

B. Debit to Freight In

C. Debit to Cost of Goods Sold

D. Debit to Purchases

11. Which of the following is not shown in thestatement of stockholder's equity?

Select one:

A. Unearned revenue

B. Common stock

C. Retained earnings

D. Dividends

13. Using a perpetual inventory system, the seller’sjournal entry to record the sale of merchandise on account includesa:

Select one:

A. Debit to Accounts Receivable

B. Credit to Cost of Goods Sold

C. Credit to Purchases

D. Debit to Inventory

14. A merchandising company's multi-step income statementdiffers from that of a service company in what way?

Select one:

A service company does not include a line for cost of goodssold.

A service company has a line for selling expenses whereas amerchandising company does not.

There is no difference.

A merchandising company will have a line for income fromoperations whereas a service company will not.

16.Using a perpetual inventory system, the seller’s journalentry to record the return, by the buyer, of merchandise purchasedon account includes a:

Select one:

A. Credit to Purchase Returns

B. Debit to Cost of Goods Sold

C. Debit to Accounts Receivable

D. Debit to Sales and Allowances

20. For a firm that uses the perpetual inventory system, theSales Returns and Allowances account:

Select one:

A. Is not a contra account

B. Is not used

C. Is debited by the firm receiving returned goods from acustomer

D. Has a normal credit balance

21. Current assets are cash and other assets that will beconverted into cash or used up within:

Select one:

A. One year

B. The normal operating cycle of the business

C. The normal operating cycle of the business or one year,whichever is longer

D. The normal operating cycle of the business or one year,whichever is shorter

22. The balance sheet format that reports assets first and then,beneath the assets, reports the liabilities and stockholders'equity is called the:

Select one:

A. Account form

B. Report form

C. Stack form

D. Classified form

23. Safari Monkey Company sold $2,400,000 worth of merchandise,had $200,000 returned, and then the balance was received during the2% discount period.

What were the company’s net sales?

Select one:

A. $1,800,000

B. $1,760,000

C. $2,156,000

D. $2,040,000

Use the following information forquestions 1–3.

At May 1, 2008, Treeline Company had beginning inventoryconsisting of 200 units with a unit cost of $7. During May, thecompany purchased inventory as follows:

200 units at $7

300 units at $8

The company sold 500 units during the month for $12 per unit.Treeline uses the average cost method.

1. The average cost per unit for May is

2. The value ofTreeline’s inventory at May 31, 2008 is

3. Treeline’s gross profit for the month ofMay is

4.

Pembrook Company had beginning inventory on May 1 of $12,000.During the month, the company made purchases of $30,000 butreturned $2,000 of goods because they were defective. At the end ofthe month, the inventory on hand was valued at $9,500.

Calculate cost of goods available for sale and cost of goodssold for the month.

5. Principles of an efficient and effectiveaccounting information system include all of the followingexcept

a. cost effectiveness.

b. flexibility.

c. useful output.

d. All of these options are principles.

6. Which of the following statements isincorrect?

a. A major consideration in developing an accountingsystem is cost effectiveness.

b. When an accounting system is designed, noconsideration needs to be given to the needs and knowledge of thevarious users.

c. The accounting system should be able toaccommodate a variety of users and changing information needs.

d. To be useful, information must be understandable,relevant, reliable, timely, and accurate.

7. All of the following are advantages ofusing subsidiary ledgers except they

a. eliminate errors in individual accounts.

b. free the general ledger of excessive details.

c. show, in a single account, transactions affectingone customer or one creditor.

d. make possible a division of labor.

8. Which of the following is notan advantage of a subsidiary ledger?

a. Shows transactions affecting one customer or onecreditor in a single account.

b. Helps locate errors in individual accounts.

c. Puts greater detail in the general ledger.

d. Makes possible a division of labor.

9. Credit sales of assets other thanmerchandise are recorded in the

a. cash payments journal.

b. cash receipts journal.

c. general journal.

d. sales journal.

10. When the totals of the sales journal are posted at the end of themonth, there will be credits to

a. Sales and Merchandise Inventory and debits toAccounts Receivable and Cost of Goods Sold.

b. Accounts Receivable and Cost of Goods Sold anddebits to Sales and Merchandise Inventory.

c. Sales and debits to each individual customeraccount.

d. the Sales account only, and no debits.

11. TheOther Accounts column of a multi-column journal is often referredto as the

a. Sundry Accounts column.

b. Controlling Account column.

c. Credit Account column.

d. Debit Account column.

12. Companies record credit purchases of equipment or supplies inthe

a. cash payments journal.

b. cash receipts journal.

c. general journal.

d. one-column purchases journal.

13. Inthe expanded purchases journal, debits are made in whichcolumns?

a. Accounts Payable, Merchandise Inventory, andOffice Supplies

b. Merchandise Inventory, Office Supplies, and StoreSupplies

c. Cash, Office Supplies, and Store Supplies

d. Accounts Payable, Cash, and MerchandiseInventory

14. Ifa customer takes a sales discount, an entry is made in the

a. cash receipts journal.

b. sales journal.

c. cash payments journal.

d. general journal.

15. Claimsfor which formal instruments of credit are issued as proof of thedebt are

a. accounts receivable.

b. interest receivable.

c. notes receivable.

d. other receivables.

16. Interestis usually associated with

a. accounts receivable.

b. notes receivable.

c. doubtful accounts.

d. bad debts.

17. Thereceivable that is usually evidenced by a formal instrument ofcredit is a(n)

a. trade receivable.

b. note receivable.

c. accounts receivable.

d. income tax receivable.

18. Which ofthe following receivables would not be classified as an"other receivable"?

a. Advance to an employee

b. Refundable income tax

c. Notes receivable

d. Interest receivable

19. Notes oraccounts receivables that result from sales transactions are oftencalled

a. sales receivables.

b. non-trade receivables.

c. trade receivables.

d. merchandise receivables.

20. LarsonCompany on July 15 sells merchandise on account to Stuart Co. for$1,000, terms 2/10, n/30. On July 20 Stuart Co. returns merchandiseworth $400 to Larson Company. On July 24 payment is received fromStuart Co. for the balance due. What is the amount of cashreceived?

a. $600

b. $588

c. $580

d. $1,000