# Question: Multiple Choice Questions 1 When inventory is purchased it is recorded

Multiple-Choice Questions

1. When inventory is purchased, it is recorded as a(n) _________ and when sold it becomes a(n) ________.

a. Liability; withdrawal

b. Asset; expense

c. Liability; asset

d. Asset; contra-asset

Use the following information to answer questions 2–5:

Inventory data for Newman & Frith Merchandisers, Inc., is provided here. Sales for the period were 2,800 units. Each sold for $8. The company maintains a periodic inventory system.

2. Determine the ending inventory assuming the company uses the FIFO cost flow method.

a. $3,400

b. $2,400

c. $9,200

d. $10,000

3. Determine the cost of goods sold assuming the company uses the FIFO cost flow method.

a. $3,400

b. $10,000

c. $10,200

d. $2,400

4. Determine the ending inventory assuming the company uses the weighted average cost flow method. (Round average cost to

two decimal places.)

a. $2,300

b. $3,300

c. $9,800

d. $2,976

5. Determine the gross profit assuming the company uses the LIFO cost flow method.

a. $11,400

b. $14,400

c. $22,400

d. $19,700

6. Using LIFO will produce a lower net income than using FIFO under which of the following conditions?

a. Inventory costs are decreasing.

b. Inventory costs are increasing.

c. Inventory costs are not changing.

d. Sales prices are decreasing.

Use the following information to answer questions 7–10:

Sales revenue .... $480,000

Cost of goods sold ... 300,000

Sales discounts .... 20,000

Sales returns and allowances 15,000

Operating expenses ..... 85,000

Interest revenue ...... 5,000

7. What is the net sales revenue?

a. $400,00

b. $445,000

c. $415,000

d. $455,000

8. What is the gross profit?

a. $145,000

b. $105,000

c. $140,000

d. $90,000

9. What is the net income?

a. $60,000

b. $65,000

c. $55,000

d. $180,000

10. What is the gross profit percentage?

a. 13.54%

b. 14.61%

c. 32.58%

d.21.67%

1. When inventory is purchased, it is recorded as a(n) _________ and when sold it becomes a(n) ________.

a. Liability; withdrawal

b. Asset; expense

c. Liability; asset

d. Asset; contra-asset

Use the following information to answer questions 2–5:

Inventory data for Newman & Frith Merchandisers, Inc., is provided here. Sales for the period were 2,800 units. Each sold for $8. The company maintains a periodic inventory system.

2. Determine the ending inventory assuming the company uses the FIFO cost flow method.

a. $3,400

b. $2,400

c. $9,200

d. $10,000

3. Determine the cost of goods sold assuming the company uses the FIFO cost flow method.

a. $3,400

b. $10,000

c. $10,200

d. $2,400

4. Determine the ending inventory assuming the company uses the weighted average cost flow method. (Round average cost to

two decimal places.)

a. $2,300

b. $3,300

c. $9,800

d. $2,976

5. Determine the gross profit assuming the company uses the LIFO cost flow method.

a. $11,400

b. $14,400

c. $22,400

d. $19,700

6. Using LIFO will produce a lower net income than using FIFO under which of the following conditions?

a. Inventory costs are decreasing.

b. Inventory costs are increasing.

c. Inventory costs are not changing.

d. Sales prices are decreasing.

Use the following information to answer questions 7–10:

Sales revenue .... $480,000

Cost of goods sold ... 300,000

Sales discounts .... 20,000

Sales returns and allowances 15,000

Operating expenses ..... 85,000

Interest revenue ...... 5,000

7. What is the net sales revenue?

a. $400,00

b. $445,000

c. $415,000

d. $455,000

8. What is the gross profit?

a. $145,000

b. $105,000

c. $140,000

d. $90,000

9. What is the net income?

a. $60,000

b. $65,000

c. $55,000

d. $180,000

10. What is the gross profit percentage?

a. 13.54%

b. 14.61%

c. 32.58%

d.21.67%

**View Solution:**## Answer to relevant Questions

Invoice price of goods is $5,000. Purchase terms are 2/10, n/30 and the invoice is paid in the week of receipt. The shipping terms are FOB shipping point, and the shipping costs amount to $200. What is the total cost of the ...Using the data from SE5-4A, calculate the cost of goods sold and the cost of the ending inventory using the LIFO periodic cost flow assumption.In SE5-4A, Calculate the cost of goods sold and the cost of the ending inventory ...Using the information in SE5-12B, calculate the gross profit from the sale and the gross profit ratio. Assume the customer does not pay within the discount period.In SE5-12B, Sam’s Supply, Inc., uses a perpetual inventory ...The Fedora Company had a beginning inventory balance of $25,750 and engaged in the following transactions during the month of June:June 2 Purchased $4,000 of merchandise inventory on account from Plumes, Inc., with terms ...Discount Wines, Inc., had a beginning inventory balance of $85,450 and engaged in the following transactions during the month of October:October 2 Purchased $15,000 of merchandise inventory on account from Joe’s Winery ...Post your question