2.

(LO 2)
Under a perpetual inventory system, when goods are purchased for resale by
a company:

(a)
purchases on account are debited to Inventory.

(b)
purchases on account are debited to Purchases.

(c)
purchase returns are debited to Purchase Returns and Allowances.

(d)
freight costs are debited to Freight-Out.

(a)
purchases on account are debited to Inventory.

Under a perpetual inventory system, when a company purchases goods
for resale, purchases on account are debited to the Inventory account, not
(b) Purchases or (c) Purchase Returns and Allowances. Choice (d) is
incorrect because freight costs are also debited to the Inventory account,
not the Freight-Out account.
10.
(LO 5)
Bufford Corporation had reported the following amounts at December 31,
2017: sales revenue $184,000, ending inventory $11,600, beginning
inventory $17,200, purchases $60,400, purchase discounts $3,000, purchase
returns and allowances $1,100, freight-in $600, and freight-out $900.
Calculate the cost of goods available for sale.

(a)
$69,400.

(b)
$74,100.

(c)
$56,900.

(d)
$197,700.

(b)
$74,100.

Beginning inventory ($17,200)+Purchases ($60,400)−Purchases
discounts ($3,000)−Purchase returns and

)  (a) An increase in advertising expense. any changes in sale revenue.  (d) freight costs are debited to Purchases. or (d) insurance expense will not affect the computation of the gross profit rate. sales returns and allowances. Therefore.  (d) A decrease in insurance expense.allowances ($1.  (c) purchase returns are debited to Purchase Returns and Allowances. Purchases for resale are debited to the Purchases account. (LO 6) Which of the following would affect the gross profit rate? (Assume sales remains constant. or cost of goods sold will affect the ratio. (LO 7) When goods are purchased for resale by a company using a periodic inventory system:  (a) purchases on account are debited to Inventory.  (c) An increase in cost of goods sold.100)+Freight-in ($600)=Cost of goods available for sale ($74. (b) depreciation expense. The other choices are incorrect because (a) purchases on account are debited to .The other choices are therefore incorrect. Changes in (a) advertising expense.  (b) A decrease in depreciation expense.  (b) purchases on account are debited to Purchases. sales discounts.  (b) purchases on account are debited to Purchases.100).  (c) An increase in cost of goods sold. Gross profit rate=Gross profit÷Net sales. 11. 15.

Purchases. amount of inventory. not Inventory. LIFO therefore charges the highest inventory cost against revenues in a period of rising prices. but (d) is the better answer. LIFO will produce lower net income than average-cost.  (d) Both (b) and (c).  (d) higher net income than average-cost. (c) Purchase Returns and Allowances are always credited.  (c) lower net income than FIFO. LIFO will produce lower net income than FIFO. (LO 2) In periods of rising prices.  (b) the same net income as FIFO. Choice (d) is incorrect because in periods of rising prices. not Purchases.  (c) lower net income than FIFO. Choices (b) and (c) are correct. and (d) freight costs are debited to Freight-In. In periods of rising prices. A physical inventory is usually taken when a limited number of goods are being sold or received. . LIFO will produce:  (a) higher net income than FIFO. Choice (a) is incorrect because a physical inventory count is usually taken when the company has the least. 7. and at the end of the company's fiscal year.  (d) Both (b) and (c).  (c) At the end of the company's fiscal year. (LO 1) When is a physical inventory usually taken?  (a) When the company has its greatest amount of inventory.  (b) When a limited number of goods are being sold or received. not (a) higher than FIFO or (b) the same as FIFO. not greatest.

000. not (a) $91. .  (c) Keeping the amount of inventory on hand constant but decreasing sales. 15.200.000.200. or (c) $18. Therefore.000.000. Under the LCM basis. The ending inventory under lower-of-cost-or-market is:  (a) $91. (b) $80. ending inventory would be valued at 200 widgets×$80 each=$16.000. (LO 4) In a perpetual inventory system:  (a) LIFO cost of goods sold will be the same as in a periodic inventory system. (LO 3) Which of these would cause inventory turnover to increase the most?  (a) Increasing the amount of inventory on hand.  (d) Decreasing the amount of inventory on hand and increasing sales.  (d) $16.  (d) Decreasing the amount of inventory on hand and increasing sales.  (d) $16. “market” is defined as the current replacement cost.000.  (b) Keeping the amount of inventory on hand constant but increasing sales.  (b) $80. 13.000.000 widgets and has 200 widgets in its ending inventory at a cost of $91 each and a current replacement cost of $80 each.11.  (c) $18. (LO 3) Norton Company purchased 1.

 (c) independent internal verification. (c) independent internal verification. or (d) human resource controls.  (d) human resource controls. (b) average costs are based entirely on unit-cost simple averages. 15. (LO 4) Which of the following is not one of the sections of a cash budget?  (a) Cash receipts section. (LO 2) Permitting only designated personnel such as cashiers to handle cash receipts is an application of the principle of:  (a) segregation of duties.  (b) establishment of responsibility.  (b) establishment of responsibility.  (c) Financing section. not (a) segregation of duties.  (c) a new average is computed under the average-cost method after each sale. 7. . Permitting only designated personnel to handle cash receipts is an application of the principle of establishment of responsibility.  (d) FIFO cost of goods sold will be the same as in a periodic inventory system.  (b) Cash disbursements section.  (d) FIFO cost of goods sold will be the same as in a periodic inventory system.

000 What is the cash realizable value of the accounts receivable at December 31.  (d) Cash from operations section.  (c) $800. (LO 1) A receivable that is evidenced by a formal instrument and that normally requires the payment of interest is:  (a) an account receivable.000.  (d) .  (c) a note receivable.  (b) a trade receivable.  (c) a note receivable. (LO 2) An analysis and aging of the accounts receivable of Raja Company at December 31 reveal these data: Accounts receivable $800.000. 1.000 Amounts expected to become uncollectible 65.  (b) $750.00 0 Allowance for doubtful accounts per books before adjustment (credit) 50. after adjustment?  (a) $685. 7.  (d) a classified receivable. (d) Cash from operations section.000.

(b) $750.000 and credits Allowance for Doubtful Accounts for $55.000.000.000.$735. or (c) $800. 12. (c) $60.000.  (d) $735.000. the new balance will be the required balance of $60. By crediting Allowance for Doubtful Accounts for $55.  (c) $60. not (a) $685. Hughes estimates that $60.000 of its receivables are uncollectible. or (d) $65. the amount of bad debt expense that should be reported for the year is:  (a) $5.000.000.000)=$735.  (b) $55.  (d) $65. except that Hughes has a debit balance of $5.000.  (b) $55. The cash realizable value of the accounts receivable is Accounts Receivable ($800.000. Based on review and aging of its accounts receivable at the end of the year.000.000 in its Allowance for Doubtful Accounts before any adjustments are made at the end of the year.000.000. 11. (LO 2) Use the same information as in Question 11.000 in its Allowance for Doubtful Accounts before any adjustments are made at the end of the year. The amount of bad debt expense which should be reported for the year is:  (a) $5.000) less the expected ending balance in Allowance for Doubtful Accounts after adjustments ($65.000. (LO 2) Hughes Company has a credit balance of $5.000. not (a) $5.  (b) $55.000.000.000.000. . This adjusting entry debits Bad Debt Expense for $55.000. In this situation.

 (d) $65.000. (c) $60.  (d) $65. .000.000.