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Principles Of Accounting Volume 2 Chapters 12-25 1st Edition Robert Libby, Patricia Libby, Fred Phillips, Stacey Whitecotton - Solutions
A fi rm has a high level of inventory turnover and uses the FIFO issue pricing system.In a period of rising purchase prices, the closing inventory valuation is:(A) close to current purchase prices.(B) based on the prices of the fi rst items received.(C) much lower than current purchase prices.(D)
Using the FIFO method, the value of the closing inventory was:(A) £1,680(B) £1,760(C) £1,800(D) £14,840
Using the LIFO method, what was the total value of the issues on 29 April?(A) £14,840(B) £14,880(C) £14,888(D) £15,300
Spotless Limited is an offi ce cleaning business which employs a team of part-time cleaners who are paid an hourly wage. The business provides cleaning services for a number of clients, ranging from small offi ces attached to high-street shops to large open-plan offi ces in high-rise buildings.In
The following data relates to the overhead costs of a commercial laundry for the latest two periods.Overhead costs£Number of items laundered 5,140 2,950 5,034 2,420 A formula that could be used to estimate the overhead costs for a forthcoming period is:Overhead cost £ (£ number of items
Based on the above scattergraph:● the period fi xed cost is £ .● the variable cost per unit is £ . E 500 400 x 300- 200 100 o+ 0 100 200 Level of activity, units
In a hotel, which of the following would be suitable cost units and cost centres?Suitable as cost centre Suitable as cost unit Restaurant Guest night Meal served Fitness suite Bar
The variable production cost per unit of product B is £2 and the fi xed production overhead for a period is £4,000. The total production cost of producing 3,000 units of B in a period is £ .
A company increases its activity within the relevant range. Tick the correct boxes below to indicate the effect on costs.Total variable costs will: increase decrease remain the same Total fi xed cost will: increase decrease remain the same The variable cost per unit will: increase decrease remain
Which of the following are stepped fi xed costs?Machine rental costs Direct material costs Royalties payable on units produced Depreciation on delivery vehicles
Over long-time periods of several years, factory rent costs will tend to behave as:(A) linear variable costs(B) fi xed costs(C) step fi xed costs(D) curvilinear variable costs
A step fi xed cost – when the vertical axis represents cost incurred.(A) Graph 3(B) Graph 4(C) Graph 5(D) Graph 6
A semi-variable cost – when the vertical axis represents cost incurred.(A) Graph 1(B) Graph 2(C) Graph 4(D) Graph 5
A linear variable cost – when the vertical axis represents cost per unit.(A) Graph 1(B) Graph 2(C) Graph 3(D) Graph 6
A fi xed cost – when the vertical axis represents cost incurred.(A) Graph 1(B) Graph 2(C) Graph 3(D) Graph 6
A linear variable cost – when the vertical axis represents cost incurred.(A) Graph 1(B) Graph 2(C) Graph 4(D) Graph 5
The following is a graph of cost against volume of output:Total cost Volume of output To which of the following costs does the graph correspond?(A) Electricity bills made up of a standing charge and a variable charge.(B) Bonus payments to employees when production reaches a certain level.(C) Sales
P Ltd is preparing the production budget for the next period. Based on previous experience, it has found that there is a linear relationship between production volume and production costs. The following cost information has been collected in connection with production:Volume(units)Cost(£)1,600
The following data relate to two activity levels of an out-patient department in a hospital:Number of consultations by patients 4,500 5,750 Overheads £269,750 £289,125 Fixed overheads are not affected by the number of consultations per period. The variable cost per consultation:(A) is
Cost centres are:(A) units of output or service for which costs are ascertained.(B) functions or locations for which costs are ascertained.(C) a segment of the organisation for which budgets are prepared.(D) amounts of expenditure attributable to various activities.
E7-3 Calculating Cost of Goods Sold and Ending Inventory under FIFO, LIFO, and Weighted Average (Perpetual Inventory) Given the following information, calculate the cost of ending inventory and cost of goods sold, assuming a perpetual inventory system is used in combination with (a) FIFO, (b) LIFO,
E7-2 Inferring Merchandise Purchases The Gap, Inc., is a specialty retailer that operates stores selling clothes under the trade names Gap, Forth and Towne, Banana Republic, and Old Navy. Assume you are employed as a stock analyst and your boss has just completed a review of the Gap annual report
E7-1 Inferring Missing Amounts Based on Income Statement Relationships Supply the missing dollar amounts for the 2008 income statement of Lewis Retailers for each of the following independent cases: Cost of Sales Beginning Total Ending Goods Gross Operating Income from Case Revenue Inventory
M7-14 (Supplement B) Estimating Inventory Using the Retail Inventory Method Net sales were $200,000 and goods available for sale were $250,000 at retail and $150,000 at cost. Compute ending inventory at cost.
M7-13 (Supplement B) Estimating Inventory Using the Gross Profit Method Net sales were $150,000 and the estimated gross profit percentage was 40 percent. Estimate cost of goods sold using the gross profit method.
M7-12 (Supplement A) Calculating Cost of Goods Sold and Ending Inventory under FIFO, LIFO, and Weighted Average (Periodic Inventory) Complete the requirements in M7-6, except assume that the company uses a periodic inventory system.
M7-11 (Supplement A) Calculating Cost of Goods Sold and Ending Inventory under FIFO, LIFO, and Weighted Average (Periodic Inventory) Complete the requirements in M7-5 assuming a periodic inventory system is used under FIFO, LIFO, and weighted average cost.
M7-10 Calculating the Inventory Turnover Ratio and Days to Sell Using the data in M7-1, calculate to one decimal place the inventory turnover ratio and days to sell for Dillard’s. In a recent year, Macy’s reported an inventory turnover ratio of 2.6. Which company’s inventory turnover is
M7-8 Determining the Financial Statement Effects of Inventory Errors Assume the 2007 ending inventory of Shea’s Shrimp Shack was understated by $10,000. Explain how this error would affect the amounts reported for cost of goods sold and gross profit for 2007 and 2008. M7-9 Determining the
M7-7 Reporting Inventory under Lower of Cost or Market The Jewel Fool had the following inventory items on hand at the end of the year.Determine the lower of cost or market per unit and the total amount that should be reported on the balance sheet for each item of inventory.
M7-6 Calculating Cost of Ending Inventory and Cost of Goods Sold under FIFO, LIFO, and Weighted Average (Perpetual Inventory) Assume Oahu Kiki’s uses a perpetual inventory system that shows the following for the month of January. (Round weighted average cost per unit to the nearest
M7-5 Calculating Cost of Ending Inventory and Cost of Goods Sold under FIFO, LIFO, and Weighted Average (Perpetual Inventory) Scrappers Supplies uses a perpetual inventory system. At the end of January, its inventory records showed the following:Required: 1. Calculate the cost of the 350 units sold
M7-4 Calculating Cost of Goods Sold and Ending Inventory under FIFO, LIFO, and Weighted Average (Perpetual Inventory) Given the following information, calculate sales, cost of goods sold, and gross profit, under (a) FIFO, (b) LIFO, and (c) weighted average. Assume a perpetual inventory system is
M7-3 Matching Inventory Costing Method Choices to Company Circumstances Indicate whether a company interested in minimizing its income taxes should choose the FIFO or LIFO inventory costing method under each of the following circumstances.a. Declining costsb. Rising costs
M7-2 Matching Financial Statement Effects to Inventory Costing Methods Complete the following table by indicating which inventory costing method (FIFO or LIFO) would lead to the effects noted in the rows for each of the circumstances described in the columns. a. Lowest net income b. Lowest ending
M7-1 Inferring Purchases Using the Cost of Goods Sold Equation Dillard’s, Inc., operates 330 department stores located in 29 states primarily in the Southwest, Southeast, and Midwest. In its annual report for the year ended January 28, 2006, the company reported cost of goods sold of $5,014
10. Which of the following is true regarding companies that report their inventories on a LIFO basis?a. They will always have a higher income tax expense.b. They will always have a higher inventory balance.c. Both of the above.d. None of the above.
9. An increasing inventory turnover ratioa. Indicates a longer time span between ordering and receiving inventory.b. Indicates a shorter time span between ordering and receiving inventory.c. Indicates a shorter time span between the purchase and sale of inventory.d. Indicates a longer time span
8. Assume ending inventory included the following items, and the lower of cost or market rule for inventory was applied. What amount would be reported as ending inventory? Units Cost Market i. Item A 20 $35 $25 ii. Item B 50 $40 $42a. $2,600.b. $2,700.c. $2,500.d. None of the above.
7. Which inventory method provides a better matching of current costs with sales revenue on the income statement but also results in older values being reported for inventory on the balance sheet?a. FIFO.c. LIFO.b. Weighted average.d. Specific identification.
6. If costs are rising, which of the following will be true?a. The cost of goods sold will be higher if LIFO is used rather than weighted average.b. The cost of ending inventory will be higher if FIFO is used rather than LIFO.c. The gross profit will be higher if FIFO is used rather than LIFO.d.
5. A New York bridal dress retailer purchased three units of the same dress as follows: January 4: $170, January 12: $180, January 18: $190. It sold one dress on January 21 and one on January 29. What was cost of goods sold during the month of January using FIFO, LIFO, and weighted average costing
4. In each period, the cost of goods available for sale is allocated betweena. Assets and liabilities.b. Assets and expenses.c. Assets and revenues.d. Expenses and liabilities.
3. An overstatement of ending inventory will affect reported net income in which periods?a. The period of the overstatement.b. The subsequent period.c. The period of the overstatement and the subsequent period.d. None of the above.
2. The inventory costing method selected by a company can affecta. The balance sheet.b. The income statement.c. Neither statement.d. Both statements.
1. How many of the following statements is/are true regarding cost of goods sold? • Cost of goods sold represents the cost that a company incurred to purchase or produce inventory in the current period. • Cost of goods sold is an expense on the income statement. • Cost of goods sold is
10. (Supplement A) Distinguish perpetual inventory systems from periodic inventory systems by describing when and how cost of goods sold is calculated.
9. How is the inventory turnover ratio computed?
8. Explain why an error in ending inventory in one period affects the following period.
7. Explain briefly the application of the LCM rule to ending inventory. Describe its effect on the balance sheet and income statement when market is lower than cost.
6. Contrast the income statement effect of LIFO versus FIFO (on cost of goods sold and gross profit) when (a) costs are rising and (b) costs are falling.
5. Contrast the effects of LIFO versus FIFO on ending inventory when (a) costs are rising and (b) costs are falling.
4. Where possible, the inventory costing method should mimic actual product flows. Do you agree? Explain.
3. The chapter discussed four inventory costing methods. List the four methods and briefly explain each.
2. Define beginning inventory and ending inventory.
1. Define goods available for sale. How does it differ from cost of goods sold?
CP6-5 Preparing Multistep Income Statements and Calculating Gross Profit Percentage Assume that you have been hired by Big Sky Corporation as a summer intern. The company is in the process of preparing their annual financial statements. To help in the process, you are asked to prepare an income
CP6-4 Making Ethical Decisions: A Mini Case Assume you work as an accountant in the merchandising division of a large public company that makes and sells athletic clothing. To encourage the merchandising division to earn as much profit on each individual sale as possible, the division manager’s
CP6-3 Examining an Annual Report: Internet-Based Team Research As a team, select an industry to analyze. Using your Web browser, each team member should acquire the annual report or 10-K for one publicly traded company in the industry, with each member selecting a different company. (See CP1-3 in
CP6-2 Comparing Financial Information Refer to the financial statements of The Home Depot in Appendix A and Lowe’s in Appendix B at the end of this book, or download the annual reports from the Cases section of the text’s Web site at www.mhhe.com/LLPW1e . 1. Does Lowe’s report higher or lower
CP6-1 Finding Financial Information Refer to the financial statements of The Home Depot in Appendix A at the end of this book, or download the annual report from the Cases section of the text’s Web site at www.mhhe.com/LLPW1e . Required: 1. What amount of Net Sales does the company report during
PB6-4 Preparing a Multistep Income Statement with Sales Discounts and Sales Returns and Allowances, and Computing the Gross Profit Percentage Emily’s Greenhouse Corporation is a local greenhouse organized 10 years ago as a corporation. The greenhouse is in an excellent location, and sales have
PB6-3 Recording Sales and Purchases with Discounts, Returns, and Credit Card Fees and Computing the Gross Profit Percentage Larry’s Hardware, Incorporated, is a locally owned and operated hardware store. Larry’s Hardware uses a perpetual inventory system. The following transactions (summarized)
PB6-2 Reporting Sales and Purchase Transactions between Wholesale and Retail Merchandisers with Sales/Purchase Allowances and Sales/Purchase Discounts Using Perpetual Inventory Systems Use the information presented in PB 6-1 to complete the following requirements. Required: 1. For each of the
PB6-1 Journalizing Sales and Purchase Transactions between Wholesale and Retail Merchandisers with Sales/Purchase Allowances and Sales/Purchase Discounts Using Perpetual Inventory Systems The transactions listed below are typical of those involving Southern Sporting Goods and Sports R Us. Southern
PA6-6 (Supplement B) Closing Entries for a Merchandiser R. Gupta Chemical’s preclosing trial balance included the following amounts (among others):Required: Prepare the entries necessary to close these accounts. Debit Credit Sales Revenue 615,000 Interest Expense 12,500 Sales Returns and
PA6-5 (Supplement A) Journalizing Sales and Purchase Transactions between Wholesale and Retail Merchandisers Using Periodic Inventory Systems Use the information presented in PA6-1 and transaction a (only) to complete the following requirements, except assume that both companies use periodic
PA6-4 Preparing a Multistep Income Statement with Sales Discounts and Sales Returns and Allowances and Computing the Gross Profit Percentage Big Tommy Corporation is a local grocery store organized seven years ago as a corporation. The store is in an excellent location, and sales have increased
PA6-3 Recording Sales and Purchases with Discounts, Returns, and Credit Card Fees and Computing the Gross Profit Percentage Hair World Inc. is a wholesaler of hair supplies. Hair World uses a perpetual inventory system. The following transactions (summarized) have been selected from 2010:a. Sold
PA6-2 Reporting Sales and Purchase Transactions between Wholesale and Retail Merchandisers, with Sales/Purchase Allowances and Sales/Purchase Discounts Using Perpetual Inventory Systems Use the information presented in PA6-1 to complete the following requirements. Required: 1. For each of the
PA6-1 Journalizing Sales and Purchase Transactions between Wholesale and Retail Merchandisers with Sales/Purchase Allowances and Sales/Purchase Discounts Using Perpetual Inventory Systems The transactions listed below are typical of those involving New Books and Readers’ Corner. New Books is a
E6-23 (Supplement B) Closing Entries for a Merchandiser Koala Joe’s preclosing trial balance included the following amounts (among others): Debit Credit Sales revenue 75,000 Cost of goods sold 42,000 Sales returns and allowances 1,500 Sales discounts 500 Prepare any entries necessary to close
E6-22 (Supplement A) Recording Purchases and Sales Using Perpetual and Periodic Inventory Systems Kangaroo Jim Company reported beginning inventory of 100 units at a per unit cost of $25. It had the following purchase and sales transactions during 2010: Jan. 14 Sold 25 units at a unit sales price
E6-21 Comparing Multistep Income Statements Abbreviated income statements for Circuit City and Best Buy are shown below (in millions) for the year ended February 28, 2006.Required: 1. Which company generated more net income and gross profit? 2. Which company generated a higher gross profit
E6-20 Analyzing Gross Profit Percentage on the Basis of an Income Statement Wolverine World Wide prides itself as being the “world’s leading marketer of U.S. branded nonathletic footwear.” The following data (in thousands) were taken from its annual report for the year ended 2005:Sales of
E6-19 Analyzing Gross Profit Percentage on the Basis of a Multistep Income Statement The following summarized data were provided by the records of Mystery Incorporated for the year ended December 31, 2010:Sales of merchandise for cash $240,000 Sales of merchandise on credit 42,000 Cost of goods
E6-18 Inferring Missing Amounts Based on Income Statement Relationships Supply the missing dollar amounts for the 2010 income statement of Lewis Retailers for each of the following independent cases: Beginning Cost of Goods Cost of Ending Gross Cases Sales Revenue Inventory Purchases Sold Inventory
E6-17 Inferring Missing Amounts Based on Income Statement Relationships Supply the missing dollar amounts for the 2010 income statement of Williamson Company for each of the following independent cases: Case A Case B Case C Sales revenue $8,000 $6,000 ? Sales returns and allowances 150 ? 275 Net
E6-16 Analyzing Sales and Purchases with Discounts and the Gross Profit Percentage Refer to the information in E6-15. Required: 1. Calculate the gross profit percentage for the sale to Sarah’s Cycles, assuming the account was collected in full on February 9, 2010. 2. At what cost will the
E6-15 Recording Sales and Purchases with Discounts Cycle Wholesaling sells merchandise on credit terms of 2/10, n/30. A sale for $800 (cost of goods sold of $500) was made to Sarah’s Cycles on February 1, 2010. On March 4, 2010, Cycle Wholesaling purchased bicycles from a supplier on credit,
E6-14 Determining the Effects of Credit Sales, Sales Discounts, and Sales Returns and Allowances on Income Statement Categories Rockland Shoe Company records sales returns and allowances and sales discounts as contra-revenues. Complete the following table for Rockland, indicating the amount and
E6-13 Reporting Net Sales with Credit Card Sales, Credit Sales, Sales Discounts, and Sales Returns Using the information in E6-12, compute net sales for the two months ended December 31, 2010.
E6-12 Recording Journal Entries for Net Sales with Credit Card Sales, Credit Sales, Sales Discounts, and Sales Returns The following transactions were selected from among those completed by Bear’s Retail Store in 2010: Nov. 20 Sold two items of merchandise to Cheryl Jahn, who charged the $400
E6-11 Reporting Net Sales with Credit Sales and Sales Discounts Using the information in E6-10, compute net sales for the two months ended August 31.
E6-10 Recording Journal Entries for Net Sales with Credit Sales and Sales Discounts The following transactions were selected from the records of Evergreen Company: July 12 Sold merchandise to Wally Butler, who paid for the $1,000 purchase with cash. The goods cost Evergreen Company $600. 15 Sold
E6-9 Reporting Net Sales with Credit Sales and Sales Discounts Using the information in E6-8, compute net sales for the two months ended February 28.
E6-8 Recording Journal Entries for Net Sales with Credit Sales and Sales Discounts During the months of January and February, Solitare Corporation sold goods to three customers. The sequence of events was as follows: Jan. 6 Sold goods for $100 to Wizard Inc. with terms 2/10, n/30. The goods cost
E6-7 Reporting Purchases, Purchase Discounts, and Purchase Returns Using a Perpetual Inventory System Using the information in E6-6, calculate the cost of inventory as of June 30.
E6-6 Recording Journal Entries for Purchases, Purchase Discounts, and Purchase Returns Using a Perpetual Inventory System During the month of June, Ace Incorporated purchased goods from two suppliers. The sequence of events was as follows: June 3 Purchased goods for $3,200 from Diamond Ltd. with
E6-5 Reporting Purchases and Purchase Discounts Using a Perpetual Inventory System Using the information in E6-4, calculate the cost of inventory as of February 28.
E6-4 Recording Journal Entries for Purchases and Purchase Discounts Using a Perpetual Inventory System During the months of January and February, Axe Corporation purchased goods from three suppliers. The sequence of events was as follows: Jan. 6 Purchased goods for $1,200 from Green with terms
E6-3 Recording the Cost of Purchases for a Merchandiser Apparel.com purchased 80 new shirts and recorded a total cost of $3,015 determined as follows:Invoice cost $2,600 Transportation cost (freight-in) 165 Estimated cost of shipping to customers 250 $3,015 Required: Calculate the correct inventory
E6-2 Inferring Shrinkage Using a Perpetual Inventory System JCPenney Company, Inc., is a major retailer with department stores in all 50 states. The main part of the company’s business consists of providing merchandise and services to consumers through department stores. In 2006 JCPenney reported
E6-1 Inferring Shrinkage Using a Perpetual Inventory System Calculate the amount of shrinkage for each of the following independent cases: Beginning Cases Inventory Purchases Cost of Goods Sold Ending Inventory (as counted) Shrinkage ABCD $100 $700 $300 $420 $ ? 200 800 850 150 150 500 200 440 260
M6-14 Evaluating the Effect of Discounts and Returns on Gross Profit One of the few companies to report the extent of sales discounts and returns is sunglass maker Oakley, Inc. In the Management’s Discussion and Analysis section of its 2005 annual report, Oakley reports the following information
M6-13 Computing and Interpreting the Gross Profit Percentage Ziehart Pharmaceuticals reported net sales of $178,000 and cost of goods sold of $58,000. Candy Electronics Corp. reported net sales of $36,000 and cost of goods sold of $26,200. Calculate the gross profit percentage for both companies.
M6-12 Computing and Interpreting the Gross Profit Percentage Using the information in M6-11, calculate the gross profit percentage for 2010. Evaluate the company’s performance using Exhibit 6.8 as a benchmark.
M6-11 Preparing a Multistep Income Statement Sellall Department Stores reported the following amounts in its adjusted trial balance prepared as of its December 31, 2010, fiscal year-end: Administrative Expenses, $2,400; Cost of Goods Sold, $22,728; Income Tax Expense, $3,000; Interest Expense,
M6-10 Journal Entries to Record Sales Discounts Inventory that cost $500 is sold for $700, with terms of 2/10, n/30. Give the journal entries to record (a) the sale of merchandise and (b) collection of the accounts receivable assuming that it occurs during the discount period. (Use the method shown
M6-9 Reporting Net Sales and Gross Profit with Sales Discounts Using the information in M6-8, what amount will be reported on the income statement as net sales and as gross profit?
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