ACCT 001 Lecture Notes - Lecture 15: Financial Statement

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taupesardine275

17 Sep 2020

School

College of The Sequoias

Department

Accounting (ACCT)

Course

ACCT 001

Professor

skaff

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Document Summary

1100 = 800 most recently bought + 300 bough on march 20. 1100 = a proportionate mixture of those on hand at the beginning and those bought 20 march and 12 september. The ups and downs during the year are not know so the 1100 = 1000 on hand at beginning + 100 bought march 20. During the year the inventory hit a minimum of 500 so that"s all of the beginning items that could still be on hand at the end therefore 1100 = 500 from beginning + 600 bought 12 september. Fifo tends to have the highest inventory asset value and lowest cogs expense. Lifo tends to have the lowest inventory asset value and highest cogs. Avge tends to be between the two. Lower of cost and net realisable value rule. Rule states that the value of inventory should be written down from the cost price to the market price in situations where market is below cost.

Related Questions

10.

Ferris Company began 2016 with 6,000 units of its principalproduct. The cost of each unit is $6. Merchandise transactions forthe month of January 2016 are as follows:

Purchases

Date ofPurchase	Units		Unit Cost*		Total Cost
Jan. 10		5,000	$	7	$	35,000
Jan. 18		6,000		8		48,000

Totals		11,000			$	83,000

*Includes purchase price andcost of freight.

Sales

Date of Sale	Units
Jan. 5		3,000
Jan. 12		2,000
Jan. 20		4,000

Total		9,000

8,000 units were on hand at theend of the month.

Required:

Calculate January's ending inventory and cost of goods sold forthe month using each of the following alternatives:

FIFO	Cost of Goods Available for Sale			Cost of Goods Sold - Periodic FIFO			Ending Inventory - Periodic FIFO
FIFO	# of units	Cost per unit	Cost of Goods Available for Sale	# of units sold	Cost perunit	Cost of Goods Sold	# of units in ending inventory	Cost per unit	Ending Inventory
BeginningInventory	6,000	$6.00	$36,000	6,000	$6.00	$36,000		$6.00	$0
Purchases:
January 10	5,000	$7.00	35,000		$7.00	0		$7.00	0
January 18	6,000	$8.00	48,000		$8.00	0		$8.00	0
Total	17,000		$119,000	6,000		$36,000			$0

LIFO	Cost of Goods Available for Sale			Cost of Goods Sold - Periodic LIFO			Ending Inventory - Periodic LIFO
LIFO	# ofunits	Cost perunit	Cost ofGoods Available for Sale	# of unitssold	Cost perunit	Cost ofGoods Sold	# of unitsin ending inventory	Cost perunit	EndingInventory
Beginning Inventory
Purchases:
January 10
January 18
Total

AverageCost	Cost ofGoods Available for Sale			Cost ofGoods Sold - Average Cost			EndingInventory - Average Cost
AverageCost	# of units	Average Cost per unit	Cost of Goods Available for Sale	# of units sold	Average Cost per Unit	Cost of Goods Sold	# of units in ending inventory	Average Cost per unit	Ending Inventory
Beginning Inventory	6,000		$36,000
Purchases:
January 10	5,000		35,000
January 18	6,000		48,000
Total	17,000		$119,000

PerpetualLIFO:

Cost of Goods Available for Sale

Cost of Goods Sold - January 5

Cost of Goods Sold - January 12

Cost ofGoods Sold - January 20

Inventory Balance

# of units

Cost per unit

Cost of Goods Available for Sale

# of units in ending inventory

Perpetual Average	Inventory on hand			Cost of Goods Sold
Perpetual Average	# of units	Cost per unit	Inventory Value	# of units sold	Avg.Cost per unit	Cost of Goods Sold
Beginning Inventory
Sale - January5
Subtotal Average Cost
Purchase - January 10
Subtotal Average Cost
Sale - January12
Subtotal Average Cost
Purchase - January18
SubtotalAverage Cost
Sale - January 20
Total

skymosquito772

1. How should the balances of Progress Billings and Constructionin Progress be shown at reporting dates prior to completion of along-term contract

a. Progress billings as income, construciton in progress asinventory

b. Net , as income from construction if credit balance, and lossfrom construction if debit balance

c. Progress Billings as deferred income, Construction inProgress as a current asset

d. Net, as a current asset if debit balance and currentliability if credit balance

3. the competed-contract method of accounting for long-termconstruction-type contracts is preferable when

a. a contractor is involved in numerous projects

b. the contracts are of a relatively long duration

c. estimates of costs to complete and extent of progress towardcompletion are reasonably dependable

d. there are inherent uncertainties in the contract beyondnormal business risks

4. C & J Construction has consistently used the percentageof completion method of recognizing income. Last year C & Jstarted work on a $4,500,000 constuction contract, which wascompleted this year, the accounting records desclosed the followingdata for the last year

Progress billings - $1,650,000

Costs incurred - 1,350,000

Collections - 1,050,000

Estimated cost to complete - 2,700,000

How much income should C & J have recognized on thiscontract last year?

a. 105,000

b. 150,000

c. 300,000

d. 350,000

6. The use of the gross profit assumes

a. the amount of gross profit is the same as in prior years

b. sales and cost of goods sold have not changed from previousyears

c. inventory values have not increased from previous years

d. the relationship between selling price and cost of goods soldis similar to prior years

7. the gross profit method of inventory valuation is not validwhen

a. there is substantial increase in the quantity of inventoryduring the year

b. there is substantial increase in the cost of inventory duringthe year

c. the gross margin percentage changes significantly during theyear

d. all ending inventory is destroyed by dire before it can becounted

8. When the current year's ending inventory amount isoverstated,

a. the current year's cost of goods sold is overstated

b. the current year's total assets are understated

c. the current year's net income is overstated

d. the next year's income is overstated

9. If the ending inventory balance is understated, net income ofthe same period

a. will be overstated

b. will be understated

c. will be unaffected

d. cannot be determined from the above information

10. An overstatement of ending inventory in Period 1 wouldresult in income of Period 2 being

a. overstated

b. understated

c. correctly stated

d. the answer cannot be determined from the informationgiven

11. what is the maximum amount at which inventory can be valuedwhen the goods have experienced a permanent decline in value

a. historical cost

b. sales price

c. net realizable value

d. net realizable value reduced by a normal profit margin

12. Net realizable value can be defined as

a. selling price

b. selling price less costs to complete and sell

c. selling price plus costs to complete and sell

d. acquisition cost plus costs to complete and sell

13. Miller company needs an estimate of its ending inventorybalance. The following information is available

Cost Retail

sales revenue - 180,000

beginning inventory - 35,000 62,000

net purchases - 100,000 135,000

gross margin percentage - 30%

Given this information, when using the gross margin estimationmethod, ending inventory is approx

a. 1,000

b. 9,000

c. 19,000

d. 11,650

14. Which of the following would not be reported asinventory?

a. land acquired for resale by a real estate firm

b. stocks and bonds held for resale by a brokerage firm

c. partially completed goods held by a manufacturing company

d. machinery acquired by a manufacturing company for use in theproduction process

15. Cost of goods sold is equal to

a. the cost of inventory on hand at the end of a period plus netpurchases minus the cost of inventory on hand at the beginning

b. the cost of inventory on hand at the beginning of a periodminus net purchases plus the cost of inventory on hand at the endof a period

c. the cost of inventory on hand at the beginning of a periodplus net sales minus the cost of inventory on hand at the end of aperiod

d. the cost of inventory on hand at the beginning of a periodplus net purchases minus the cost of inventory on hand at the endof a period

17. In a period of falling prices, the use of which of thefolliwng inventory cost flow methods would typically result inhighest cost of goods sold?

a. FIFO

b. LIFO

c. Weighted average cost

d. Specific identification

18. In a period of rising prices, the inventory cost allocationmethod that tends to result in the lowest reported net incomeis

a. LIFO

b. FIFO

c. Moving average

d. Weighted average

19. The LIFO inventory cost flow method may be applied to whichof the following inventory systems?

Periodic Perpetual

a. no no

b. no yes

c. yes yes

d. yes no

tanrabbit20

Question 31

Corresponds to CLO 7(c) Rupert Hobby's accounting records showthe following for the year ending December 31, 2014: PurchaseDiscountsâ¦$13,400; Freight-inâ¦$12,000; Purchasesâ¦$450,500;Beginning Inventoryâ¦$35,600; Ending Inventoryâ¦$24,200; PurchaseReturnsâ¦$15,000. Using the periodic inventory system, what is thecost of goods sold?

		$445,500
		$469,700
		$433,500
		$461,900

3 points

Question 32

Corresponds to CLO 7(d) Bay Company sold $100,000 of merchandisein the month of April, 2013. Returns that month totaled $5,000. BayCompany uses the periodic method to determine ending inventory eachDecember 31. For interim financial statements, cost of goods soldis estimated based on the previous year's gross profit rate. If BayCompany's gross profit rate for 2012 was 60%, what is the cost ofgoods sold for the month of April?

		$57,000
		$60,000
		$38,000
		$40,000

3 points

Question 33

Corresponds to CLO 8(a) We Love Pets, Inc. has the followinginventory data: January 1, beginning inventory of 50 units at $25;January 10, purchases of 70 units at $27; January 25, purchases of40 units at $28. A physical count of inventory on January 31reveals that there are 45 units on hand. Using the FIFO inventorymethod, cost of goods sold for January is

		$3,135
		$3,005
		$2,875
		$1,255

3 points

Question 34

Corresponds to CLO 8(b) Party Retailers has the followinginventory data: May 1, beginning inventory of 200 units at $10; May14, purchases of 300 units at $12; May 23, purchases of 250 unitsat $15. A physical count of inventory on May 31 reveals that thereare 300 units on hand. Using the LIFO inventory method, endinginventory for May is

		$3,000
		$6,150
		$4,350
		$3,200

3 points

Question 35

Corresponds to CLO 8(c) Halting Corporation has the followinginventory data: September 1, beginning inventory of 430 units at$11; September 8, purchases of 350 units at $12; September 21,purchases of 460 units at $14. A physical count of inventory onSeptember 30 reveals that there are 400 units on hand. Using theweighted average inventory method, rounding the unit cost to thenearest penny, what is cost of goods sold for September?

		$10,357
		$4,960
		$10,416
		$4,932

3 points

Question 36

Corresponds to CLO 8(d) Unleash Corporation is a retaileroperating in an industry currently experiencing high inflation.Unleash wants to show the lowest cost of goods sold on its incomestatement in order to show higher profits. Which inventory costingmethod should Unleash use?

		FIFO because cost of goods sold represents the earliestcosts.
		Average because cost of goods sold will represent an averageamount.
		Specific identification because it involves the actualcosts.
		LIFO because cost of goods sold represents the latest costs.

3 points

Question 37

Corresponds to CLO 9(a) The following balance sheet and incomestatement data is available for Gold River Corporation: Currentassetsâ¦$125,000; Total assetsâ¦$520,000; Net incomeâ¦$345,000;Current liabilitiesâ¦$80,000; Total liabilitiesâ¦$150,000;Stockholders' equityâ¦$370,000; Average common shares outstandingâ¦10,000. What is Gold River's current ratio?

		3.47
		1.64
		1.56
		0.83

3 points

Question 38

Corresponds to CLO 9(b) The following balance sheet data isavailable for Pinpoint Products: Current assetsâ¦$50,000; Property,plant, and equipment,â¦$70,000â¦Other assetsâ¦$10,000; Currentliabilitiesâ¦$30,000; Long-term liabilitiesâ¦$22,000; Stockholders'equityâ¦$78,000; Average common shares outstandingâ¦ 10,000. What isPinpoint's debt to total assets, shown as a percentage?

		60%
		45%
		67%
		40%

3 points

Question 39

Corresponds to CLO 9(c) The following balance sheet and incomestatement data is available for Frame Manufacturing: Totalassetsâ¦$520,000; Total liabilitiesâ¦$250,000; Stockholders'equityâ¦$270,000; Gross profitâ¦$55,000; Net incomeâ¦$40,000; Averagecommon shares outstandingâ¦ 25,000. What is Frame Manufacturing'searnings per share?

		$10.80
		$3.50
		$1.60
		$2.20

3 points

Question 40

Corresponds to CLO 9(d) The following financial information isavailable for Maroon Corporation: Sales revenueâ¦$200,000; Cost ofgoods soldâ¦$120,000; Operating expensesâ¦$40,000. What is Maroon'sgross profit rate, shown as a percentage?

		20%
		80%
		60%
		40%

silverrhinoceros496

ACCT 001 Lecture Notes - Lecture 15: Financial Statement

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