7. Peter Co. uses a periodic inventory system. Beginning inventory on January 1 was overstated by $32,000, and its ending inventory on December 31 was understated by $62,000. These errors were not discovered until the next year. As a result, Peters cost of goods sold for this year was:

A) Understated by $94,000.

B) Overstated by $30,000.

C) Overstated by $94,000.

D) Understated by $30,000.

8. Richard Co. uses a periodic inventory system. Beginning inventory on January 1 was understated by $30,000, and its ending inventory on December 31 was understated by $17,000. In addition, a purchase of merchandise costing $20,000 was incorrectly recorded as a $2,000 purchase. None of these errors were discovered until the next year. As a result, Poppy's cost of goods sold for this year was:

A) Understated by $31,000.

B) Overstated by $5,000.

C) Overstated by $31,000.

D) Understated by $48,000.

9. On July 10, 2021, Lynn Corporation signed a purchase commitment to purchase inventory for $200,000 on or before February 15, 2022. The company's fiscal year-end is December 31. The contract was exercised on February 1, 2022, and the inventory was purchased for cash at the contract price. On the purchase date of February 1, the market price of the inventory was $210,000. The market price of the inventory on December 31, 2021, was $180,000. The company uses a perpetual inventory system.

At what amount will Lynn record the inventory purchased on February 1, 2022?

A) $210,000.

B) $200,000.

C) $190,000.

D) $180,000.

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10. On March 1, 2021, Seaview Co. entered into an agreement with the state of Alaska to obtain the rights to operate a mineral mine for $6 million. The mine is expected to produce 100,000 tons of mineral. As part of the agreement, Shipley agrees to restore the land to its original condition after mining operations are completed in approximately five years. Management has provided the following possible outflows for the restoration costs that will occur five years from now:

Cash Outflow					Probability
$	300,000						25	%
	400,000						50	%
	500,000						25	%

Shipley's credit-adjusted risk-free interest rate is 10%. During 2021, Shipley extracted 18,000 tons of ore from the mine. How much accretion expense will the company record in its income statement for the 2021 fiscal year?

A) $30,326.

B) $27,294

C) $24,837.

D) $20,697

1. On July 8, a fire destroyed the entire merchandise inventory on hand of Smith Wholesale Corporation. The following information is available:

Sales, January 1 through July 8	$	700,000
Inventory, January 1		130,000
Purchases, January 1 through July 8		660,000
Gross profit ratio		40	%

What is the estimated inventory on July 8 immediately prior to the fire?

A) $192,000.

B) $370,000.

C) $510,000.

D) $280,000.

1. On July 8, a fire destroyed the entire merchandise inventory on hand of Smith Wholesale Corporation. The following information is available:

Sales, January 1 through July 8	$	700,000
Inventory, January 1		130,000
Purchases, January 1 through July 8		660,000
Gross profit ratio		40	%

What is the estimated inventory on July 8 immediately prior to the fire?

A) $192,000.

B) $370,000.

C) $510,000.

D) $280,000.