part 1?

Accounting Principles 1

Exam 3 (Chapters 5 & 6)

Businsky Spring 2013

Name ________________________

	POINTS	POINTS
PROBLEM	POSSIBLE	RECEIVED
1	16
2	30
3	14
4	15
TOTAL	75

PROBLEM 1 (16 points)

The merchandise inventory of Planter Co was destroyed by flood on August 15. The following data was obtained from the accounting records:

Jan 1 Inventory $650,000

Jan 1 – August 15 Purchases (net) 1,100,000

Sales (net) 2,600,000

Gross Profit Rate 40%

Instructions: Estimate the cost of the inventory destroyed in the flood. Show all work.

Sales (1/1 – 8/15)		100%
Cost of Goods Sold (1/1 – 8/15)		60%
Gross Profit		40%

Inventory
Beg Inventory (1/1) -	COGS (1/1 – 8/15):
Purchases (1/1 – 8/15):
Ending (8/15):

Problem 2 (30 points)

Beginning inventory, purchases, and sales data for personal organizers are as follows:

Jan 1 Beginning Inventory 45 units @ $24

3 Sold 35 units

8 Purchased 70 units @ $32

21 Sold 65 units

30 Purchased 25 units @ $47

Instructions: 1 - Using the above transactions prepare the perpetual inventory record using each of the costing methods listed below. 2 – In the space provided below identify the ending inventory balance and cost of goods sold for June under each method.

a) FIFO

b) LIFO

c) Weighted Average (Round unit cost to the nearest cent and total

costs to the nearest dollar)

FIFO

FIFO	Purchases	Cost of Goods Sold	Inventory On Hand
Date	Quantity	Unit Cost	Total Cost	Quantity	Unit Cost	Total Cost	Quantity	Unit Cost	Total Cost
Jan 1							45	$24	$1,080
Jan 3				35	$24	$840	10	$24	$240
Jan 8	70	$32	$2,240				70	$32	$2,240
Jan21				10	$24	$240
				55	$32	$1,760	15	$32	$480
Jan30	25	$47	$1,175				25	$47	$1,175
				100		$2,840	40		$1,655

Ending Inventory: $1,655

Cost of Goods Sold: $2,840

LIFO

LIFO	Purchases	Cost of Goods Sold	Inventory On Hand
Date	Quantity	Unit Cost	Total Cost	Quantity	Unit Cost	Total Cost	Quantity	Unit Cost	Total Cost
Jan 1							45	$24	$1,080
Jan 3				35	$24	$840	10	$24	$240
Jan 8	70	$32	$2,240				70	$32	$2,240
Jan21				65	$32	$2,080
							10	$24	$240
							5	$32	$160
Jan30	25	$47	$1,175				25	$47	$1,175
Ending				100		$2,920	40		$1,575

Ending Inventory: $1,575

Cost of Goods Sold: $2,920

Weighted Average

Weighted Average	Purchases	Cost of Goods Sold	Inventory On Hand
Date	Quantity	Unit Cost	Total Cost	Quantity	Unit Cost	Total Cost	Quantity	Unit Cost	Total Cost
Jan 1							45	$24	$1,080
Jan 3				35	$24	$840	10	$24	$240
Jan 8	70	$32	$2,240				70	$32	$2,240
							80	$31	$2,480
Jan21				65	$31	$2,015	15	$31	$465
Jan30	25	$47	$1,175				25	$47	$1,175
Ending				100		$2,855	40		$1,130

Ending Inventory: $1,130

Cost of Goods Sold: $2,855

Problem 3 (14 points)

Lawlor Lawn Service had the following transactions in June. Prepare journal entries for these transactions assuming Lawlor Lawn Service uses a perpetual inventory system.

Jun 2 Completed lawn service and received cash of $800

5 Purchased 110 plants on account for inventory, $304, plus freight in

of $15

15 Sold 60 plants on account, $600

17 Consulted with a client on landscaping design for a fee of $250 on

account

20 Purchased 120 plants on account for inventory, $384

21 Paid on account, $400

25 Sold 110 plants for cash, $990

Extra Credit for June 30th transaction

30 Recorded the following adjusting entries

Depreciation, $30

Physical count of plant inventory, 30 plants

GENERAL JOURNAL
DATE	DESCRIPTION	REF	DEBIT	CREDIT
June	2	Cash		800
		Service Revenue			800
	5	Plant inventory		319
		Accounts payable			319
	15	Accounts receivable		600
		Sales revenue			600
	15	Cost of goods sold		174
		Plant inventory			174
	17	Accounts receivable		250
		Service Revenue			250
	20	Plant inventory		384
		Accounts payable			384
	21	Accounts payable		400
		Cash			400
	25	Cash		990
		Sales revenue			990
	25	Cost of goods sold		337
		Plant inventory			337
June	30	Depreciation expense – equip.		30
		Accumulated depr. – equip.			30
	30	Cost of goods sold		96
		Plant inventory			96

Problem 4 (15 total points)

1) FOB shipping point means that the:

A) seller normally pays the transportation costs.

B) buyer normally pays the transportation costs.

C) buyer and the seller split the shipping costs.

D) shipping costs are billed to the seller.

2) Which of the following is GENERALLY a merchandiser's major cost?

A) Salary expense

B) Buildings

C) Advertising

D) Cost of goods sold

3) Which of the following describes Net sales revenue?

A) Sales less Cost of goods sold

B) Sales less Sales discounts

C) Sales less Sales returns and allowances

D) Sales less Sales discounts less Sales returns and allowances

4) Which of the following are the normal balances of Sales, Sales discounts, and Sales returns and allowances, respectively?

A) Debit, credit, and credit

B) Debit, debit, and credit

C) Credit, debit, and debit

D) Credit, credit, and debit

5) Which of the following is subtracted from Net sales revenue to arrive at Gross profit?

A) Cost of goods available for sale

B) Cost of goods sold

C) Sales discounts and Sales returns and allowances

D) Operating expenses

6) In a multi-step income statement, Operating expenses are subtracted from Gross profit to compute:

A) Net loss.

B) Other income.

C) Net income.

D) Operating income.

7) Which of the following is NOT shown on a single-step income statement?

A) Gross profit

B) Net sales revenue

C) Cost of goods sold

D) Sales discounts

8) Which of the following is the result of cost of goods sold divided by average inventory?

A) Current ratio

B) Gross profit percentage

C) Debt ratio

D) Rate of inventory turnover

9) Which of the following states that the business should use the same accounting methods from period to period?

A) Materiality concept

B) Consistency principle

C) Accounting conservatism

D) Disclosure principle

10) Which of the following states that a company must perform strictly proper accounting ONLY for items that are significant to the business's financial statements?

A) Accounting conservatism

B) Materiality concept

C) Disclosure principle

D) Consistency principle

11) A company decides to ignore a very small error in their inventory balance. This is an example of which of the following principles?

A) Accounting conservatism

B) Materiality concept

C) Disclosure principle

D) Consistency principle

12) Which of the following states that a business must report enough information for outsiders to make knowledgeable decisions about the company?

A) Accounting conservatism

B) Materiality concept

C) Disclosure principle

D) Consistency principle

13) Which of the following requires that financial statements should report the LEAST favorable figures?

A) Accounting conservatism

B) Materiality concept

C) Disclosure principle

D) Consistency principle

14) Which of the following inventory costing methods is based on the actual cost of each particular unit of inventory?

A) Specific-unit-cost

B) Average-cost

C) Last-In, First-Out

D) First-In, First-Out

15) Ending inventory for the current accounting period is overstated by $3,500. What will be effect of this error?

A) Net income for the current period will be overstated by $3,500.

B) Cost of goods sold for the current period will be overstated by $3,500.

C) Ending inventory for the next period will be overstated by $3,500.

D) Equity at the end of the next accounting period will be overstated by $3,500.