ACC 240 Study Guide - Final Guide: Net Income, Income Statement, Perpetual Inventory
Bates Hardware purchased merchandise inventory for cash. Which of the following choices accurately
reflects how this event would affect the company's financial statements?
Assets = Lia. + Euit Re. − Ep. = Net I. Cash Flo
a. + − /a /a /a /a n/a - OA
. + − /a /a /a /a /a /a
. − /a − /a + − - OA
d. − /a − /a + − /a
A
On August 1, Argon Company purchased merchandise inventory on account with a list price of $50,000
and credit terms of 2/10, n/30. Which of the following is the correct journal entry to record the August 1
purchase?
Debit Credit
Merchandise Inventory 50,000
Accounts Payable 50,000
On March 1, Monterrey Company purchased merchandise inventory on account with a list price of
$20,000 and credit terms of 2/10, n/30. On August 4 (before the invoice was paid), Monterrey Company
returned some of the inventory. The list price of the returned merchandise was $2,500. Which of the
following is the correct general journal entry to record the payment of the invoice assuming that
Monterrey Company pays the amount due within the discount period?
Accounts Payable 350
Merchandise Inventory 350
Accounts Payable 17,150
Cash 17,150
Markham Company incurred $200 of freight costs on inventory sold and shipped to customers FOB
destination. Which of the following is an effect on Markham Company's financial statements?
Net income decreased by $200.
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Yowell Company had the following transactions during March 2016:
• Puhased ehadise ieto of $, fo Roheste Copa ith feight terms FOB
destination.
• Feight osts o the Roheste Copa puhase ee $.
• Puhased ehadise ieto of $, fo Teto Copa ith feight tes FOB shippig
point.
• Feight osts o the Teto Copa puhase ee $.
What is the total amount Yowell Company recorded to the Merchandise Inventory account as a result of
these transactions?
$34,600
The total amount debited to the Merchandise Inventory account is $34,600 ($12,500 + $21,500 + $600).
Eller Company sold inventory that cost $22,500 for $48,000 cash. Which of the following is the correct
journal entry to record this sale?
Cash 48,000
Sales Revenue 48,000
Cost of Goods Sold 22,500
Merchandise Inventory 22,500
In 2016, Merritt Company purchased land for $60,000 to use as a future site for its new office building.
At the end of 2016, the land was worth $67,500. The company decided not to build the new office and
sold the land for $66,000 cash in 2017. How does Merritt Company's sale of the land affect its 2017
income statement?
Gain on the sale of land $6,000.
In 2016, Chavez Company purchased land for $120,000 to use as a future site for its new office building.
At the end of 2016, the land was worth $135,000. The company decided not to build the new office and
sold the land for $132,000 cash in 2017. How does Chavez Company's sale of land affect its 2017
statement of cash flows?
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$132,000 cash inflow from investing activities.
Powell Company had following account balances for 2016:
Debit Credit
Sales Revenue $ 47,500
Cost of Goods Sold $ 26,000
Transportation-out 750
Selling Expenses 4,400
Interest Expense 900
What is Powell Company's operating income for 2016?
$15,450
$21,500
$20,750
None of the above
None of the above
Operating income = Sales Revenue − Cost of Goods Sold − Taspotatio-out − Sellig Epeses
$, − $, − $ − $, = $,. Iteest Epese is sho as a oopeatig ite.
Dayton Company maintains perpetual inventory records. Dayton determined through a physical count
that it had $20,600 of merchandise inventory on hand at the end of the accounting period. The balance
in the Merchandise Inventory account was $21,400. The impact of the adjusting entry on the financial
statements is
Cost of goods sold increased $800.
Mitchum Corporation sold merchandise on account with a list price of $36,000 and a cost of $20,000.
Payment terms were 1/10, n/30. Mitchum shipped the goods FOB destination and paid $1,200 in freight
costs. Prior to payment of the invoice, the customer returned merchandise with a list price of $3,600
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Document Summary
Cash flo(cid:449: + (cid:374)/a (cid:374)/a (cid:374)/a (cid:374)/a n/a - oa (cid:271). + (cid:374)/a (cid:374)/a (cid:374)/a (cid:374)/a (cid:374)/a (cid:374)/a (cid:272). (cid:374)/a (cid:374)/a + - oa: (cid:374)/a (cid:374)/a + (cid:374)/a. On august 1, argon company purchased merchandise inventory on account with a list price of ,000 and credit terms of 2/10, n/30. On march 1, monterrey company purchased merchandise inventory on account with a list price of. On august 4 (before the invoice was paid), monterrey company returned some of the inventory. The list price of the returned merchandise was ,500. Which of the following is the correct general journal entry to record the payment of the invoice assuming that. Markham company incurred of freight costs on inventory sold and shipped to customers fob destination. The total amount debited to the merchandise inventory account is ,600 (,500 + ,500 + ). Eller company sold inventory that cost ,500 for ,000 cash.
