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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.

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Keith Leannon
Keith LeannonLv2
28 Sep 2019

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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

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
# 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
# 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
# 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 sold Cost per unit Cost of Goods Sold # of units sold Cost per unit Cost of Goods Sold # of unitssold Cost perunit Cost ofGoods Sold # of units in ending inventory Cost per unit Ending Inventory
Beg. Inventory
Purchases:
January 10
January 18
Total
Perpetual Average Inventory on hand Cost of Goods Sold
# 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
Lobster Company had a beginning inventory on January 1 of 150 unitsof Product BU-54 at a cost of $20 per unit. During the year, thefollowing purchases were made. Mar. 15, 400 units at $23 Sept. 4,350 units at $26 July 20, 250 units at $24 Dec. 2, 100 units at$29
1,000 units were sold. Lobster Company uses a periodic inventorysystem.


Instructions
(a) Determine the cost of goods available for sale.


(b) Determine (1) the ending inventory, and (2) the cost of goodssold under each of the assumed cost flow methods (FIFO, LIFO, andaverage-cost). Prove the accuracy of the cost of goods sold underthe FIFO and LIFO methods.

(c) Which cost flow method results in (1) the highest inventoryamount for the balance sheet,
and (2) the highest cost of goods sold for the incomestatement?

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