ADAMSON UNIVERSITY ACI27- Intermediate Accounting 1 Prof. Judith Francisco- Luna Name: Section Date Midterms Quiz +1 te Rif statement is true or correet and W ifthe statement is false or incorrect. 1. Under a periodic inventory system, the inventory listing is used to determine the cost of merchandise sold for the period as well as the cost of inventory on hand atthe end of the period. 2. Under the periodic inventory system, the merchandise inventory account continuously discloses the amount of inventory on hand, 3. Under the periodic inventory system, a physical inventory is taken to determine the cost of the inventory on hhand and the cost of the merchandise sol. 4. Merchandise inventory is presented on the balance sheet in the current liabilities s Purchases discounts reduce the purchase price of items in inventory 6 A perpetual inventory system is an effective means of control over inventory. 7. Ifthe perpetual inventory system is used, the account entitled Merchandise Inventory is debited for purchases of merchandise 8 Unsold consigned merchandise should be included in the consignee's inventory. 9, Merchandise is sold for $2,500, terms FOB destination, 2/10, /30, with prepaid transportation costs of $150, | $500 of the merchandise is returned prior to payment and the invoice is paid within the discount period, the amount ofthe sales discount is $40. 10. Ifa fire destroys the merchandise inventory, the gross profit method can be used to estimate the cost of merchandise destroyed 11. Under the periodie inventory syst method, ‘cost method is sometimes called the weighted average 12, The lower of cost or market is a method of inventory valuation. 13, ending i xy for the year is understated (no other errors), net income forthe year is understated. 14, IF the perpetual inventory system is used, an account entitled Cost of Merchandise Sold is included in the neral ledger. 15, The document issued by the seller that informs the buyer ofthe details of sales returns is called a credit ‘memorandum. 16, IF merchandise costing $2,500, terms FOB destination, 2/10, 030, with prepaid transportation costs of $100, is paid within 10 days, the amount of the purchases discount is $52, 17, Title to merchandise shipped FOB destination passes to the buyer upon delivery ofthe merchandise t0 the buyer's place of business. 18, Of the thre widely used inventory costing methods (fifo, lifo, and average) the lifo method of costing. inventory is based on the assumption that costs are charged against revenues inthe order in which they were incurred, 19, Available discounts taken by the customer for early payment ofan invoice are termed purchases discounts by the buyer. 20, Ifthe buyer is to absorb the transportation costs related to a purchase, the terms are said to be FOB. destination Multiple Choice Identify the CAPITAL LETTER of the choice that best answers the question. 1. Merchandise is ordered on November 12; the merchandise is shipped by the seller and the invoice is prepared, dated, and mailed by the seller on November 15; the merchandise is received by the buyer on November 17; the entry is made in the buyer's accounts on November 18. The credit period begins with what date? ‘A. November15 &. November 18. November17—D._ November 12 Scanned with CamScanner2 In recording the cost of merchandise sold for cash, based on data available from perpetual the journal entry is: A. "debit Cost of Merchandise Sold; eredit Sales B, debit Cost of Merchandise Sold; credit Merchandise Inventory . debit Merchandise Inventory; credit Cost of Merchandise Sold D. debit Accounts Receivable; credit Sales ‘The primary difference between a periodic and perpetual inventory system is that a: ‘A. periodie system determines the inventory on hand only a the end of the accounting, period B._ periodic system keeps a record showing the inventory on hand at all times ©. periodic system records the cost ofthe sale on the date the sale is made D. periodic system provides an easy means to determine inventory shrinkage What isthe term applied to the excess of net revenue from sales over the cost of merchandise sold? ‘A. income from operations gross profit B. gross sales D. net income The term inventory" indicates: ‘A. merchandise held forsale in the normal course of business BB, materials in the process of production or held for production ©. both a and b D. neithera nor b The inventory data for an item for the month of May are as follows: May 1 Inventory.......-. 20 units at $50 5 Sold. 15 units 10 Purchased.......-. 30 units at $55 20 Sold.......ss.., 30 unite 29 Purchased. 20 units at $60 What is the cost of the merchandise inventory of 25 units on May 31 by the last-in, first-out method if the periodic systs A. $1,275) B. $1,480 c. $1,700 ‘Too much inventory on hand: A. reduces solvency B._ increases the losses due to price declines CC. increases the cost to safeguard the asset D. all ofthe above The inventory data for an item for November are: Nov. 1 Inventory....--.+. 20 unite at $20 4 Sold... ss 10 units 10 Purchased......... 30 units at $21 27, Sold IIIT 20 andes: 30. Purchased. [10 unite at $22 Using the perpetual system, costing by the first-in, first-out method, what is the cost of the merchandise inventory of 30 units on Novenber 30? A. $630 B. $640 $620 D. $610 ‘The inventory data for an item for the month of May are as Follows: May 1 Inventory. + 20 units at $50 5 Sold....0...c.0. 18 units 10 Purchased. [30 units at $55 20 sold... TINT 30 unites 29 Purchased.......,. 20 units at $60 What is the cost of the mezchandise inventory of 25 units on May 31 by the First-in, first-out asthod if the periodic system is used? A. $1,500 BL $1,275 C. $1,250 D. $2,475, ‘The difference between sales and cost of merchandise sold for a merchandising business is: A. Gross Sales -B. Gross Profit, —C, Net Sales. D.. Sales Under a periodic inventory system: ‘accounting records continuously disclose the amount of inventory ‘a separate account for each type of merchandise is maintained in a subsidiary ledger ‘a physical inventory is taken atthe end of the period merchandise inventory is debited when goods are returned to vendors pope Scanned with CamScanner24, 2s. The followi ‘a part 'ng lots of a particular commodity were available for sale during the year: Beginning invento: First purchase. Second purchase Third purchase. sess 10 unite at $61 s+ 25 unite at $63 30 units at $64 15 units at $73 are 20 units of the consodity on hand ‘The firm uses the periodic systen and there fe inventory at the end of the at the end of the year. What is the asount of t year scconting'to the average cost method? A. 81,415 B. $1,305 © $1,236 D. $1,300 The inventory method that consis he inventory wo be composed ofthe units of mechani seared earliest is A CC. average cost D. retail method ‘The two most widely used methods for determining the cost of inventory are A. lifo and average , fifoand average B. gross profit and average D. fiand lito The inventory method that is useful for estimating the cost of inventory destroyed by fire is: A. average cost C._ lastin, first-out BL first, first-out D. gross profit method The arrangements between buyer and seller as to when payments for merchandise are to be made are calle A. creditterms —B. cash on demand —C. gross cash D. net cash advertently overstated. Which of the following Merchandise inventory at the end of the year was ing statements correctly states the effect of the err? |. cost of merchandise sold is overstated C._net income is understated B, _gross profit is understated D. net income is overstated A sales invoice included the following information: merchandise price. $5,000: transportation, $300: terms 1/10. m/eom, FOB shipping point, Assuming that a credit for merchandise returned of $600 is granted prior to payment, thatthe transportation is prepaid by the seller, and that the invoice is paid within the discount period, what is the amount of eash received by the seller? A. $4,656 B. $4950) ca: Merchandise with an invoice price of $5,000 is purchased subject to terms of 2/10, 2/30, FOB shipping poi “Transportation costs paid by the seller totaled $150. What is the eost of the merchandise purchased? A. $5,025 a. $4,900 cc. $5,050 D. $5,150 Merchandise Inventory is reported on the balance sheet inthe section entitled ‘A. owner's equity fixed assets ies D. current assets b. $4400 1B. current fiabil Under which method of cost flows isthe inventory assumed to be composed of th CC weighted average D. average cost + on consignment, the unsold merchandise should be included snost recent costs? A. firstin, frstout Blast, first-out I'a manufacturer ships merchandise to a retailer in the inventory of the: A. consignee shipper B. manufacturer D. ret “The following los of @ particular commodity were available for sale during the year: | 10 units at $50 25 units at $53 30 unite at 954 [is units ae $60 Beginning inventory First purchase... Second purcha: ‘Third purchase. the fire uses the periodic systes and there are 20 units of the conmodity on hand it the end of the year. What ie the amount of inventory at the end of the year according to the firet-in, first-out method? A. $1,140 B. $1,030 ©. $1,060 D. $2,170 Ifitle to merchandise purchases passes to the buyer when the goods are delivered to the buyer, the terms are: ‘A. FOB destination CC. FOB shipping point B 030 D. consigned Under a perpetual inventory system: ‘accounting records continuously disclose the amount of inventory increases in inventory resulting from purchases are debited to Purchases C. there is no need for a year-end ptysical count D. the purchase returns and allowances account is eredited when ‘goods are returned to vendors Scanned with CamScanner