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A company’s gross profit was $132,640 and its net sales were $512,500. Its gross margin ratio equals:
 
    25.9%
    74.1%.
    $379,860.
    9.0%.
    $132,640.
 
132,640 / 512,500 = .2588 x 100 = 2.59
   
A company's current assets are $23,920, its quick assets are $14,090 and its current liabilities are $12,270. Its acid-test ratio equals:
 
    1.41.
    1.15
    0.871.
    0.51.
    1.95.
 
14,090 / 12,270 = 1.15
   
A company purchased $2,600 of merchandise on July 5 with terms 1/10, n/30. On July 7, it returned $285 worth of merchandise.
On July 8, it paid the full amount due. The amount of the cash paid on July 8 equals:
 
    $2,315.
    $2,600.
    $2,292.
    $285.
    $2,289
 
2,600 - 285 = 2,315
2,600 x .01 = 26.00
2,315 - 26 = 2,289
   
Garza Company had sales of $146,200, sales discounts of $2,200, and sales returns of $3,510. Garza Company's net sales equals:
 
    $5,710.
    $144,000.
    $146,200.
    $151,910.
    $140,490
 
146,200 - 3,510 - 2,200
   
A company had net sales of $772,100 and cost of goods sold of $553,650. Its net income was $22,020.
The company's gross margin ratio equals:
 
    25.4%
    20.2%
    39.5%
    35.5%
    28.3%
 
772,100 - 553,650 / 772,100 = .282929 x 100 = 28.3
   
In the current year, Borden Corporation had sales of $2,020,000 and cost of goods sold of $1,210,000.
Borden expects returns in the following year to equal 6% of sales.
The unadjusted balance in Inventory Returns Estimated is a debit of $8,000, and the unadjusted balance in Sales Refund Payable is a credit of $12,000.
The adjusting entry or entries to record the expected sales returns is (are):
 
    Sales Returns and Allowances               109,200                
                Sales Refund Payable                                     109,200
    Inventory Returns Estimated 64,600  
                Cost of goods sold                                           64,600
 
2,020,000 x .06 - 12,000 = 109,200
1,210,000 x .06 – 8,000 = 64,600
   
In its first year of business, Borden Corporation had sales of $2,000,000 and cost of goods sold of $1,200,000.
Borden expects returns in the following year to equal 8% of sales.
The adjusting entry or entries to record the expected sales returns is (are):
 
Sales Returns and Allowances    160,000
Sales Refund Payable                                                     160,000
Inventory Returns Estimated                      96,000
Cost of goods sold                                                           96,000
 
2,000,000 x .08
1,200,000 x .08
   
A company purchased $10,500 of merchandise on June 15 with terms of 2/10, n/45, and FOB shipping point.
The freight charge, $750, was added to the invoice amount. On June 20, it returned $1,200 of that merchandise.
On June 24, it paid the balance owed for the merchandise taking any discount it is entitled to. The cash paid on June 24 equals:
 
    $10,850.
    $10,950.
    $9,224.
    $9,864.
    $11,250.
 
10500 + 750 - 1200) - (10500-1200) x .02 = 10,050 – 186 = 9,864
   
Netherland Corporation has the following unadjusted balances: Accounts Receivable, $98,000 (debit),
and Allowance for Sales Discounts $480 (credit). Of the receivables, $68,000 of them are within the 3% discount period, and Netherland expects
buyers to take $2,040 in future-period discounts ($68,000 × 3%) arising from this period’s sales. The adjusting entry to estimate sales discounts is (are):
 
Sales Discounts                                                 1,560     
Allowance for Sales Discounts    1,560
 
 
2,040 – 480 = 1,560
   
Using the following year-end information for Bauman, LLC, calculate the current ratio and acid-test ratio:
 

Cash	$ 44,210
Short-term investment	9,800
Accounts receivable	42,000
Inventory	244,000
Prepaid expenses	14,990
Accounts payable	90,000
Other current payable	23,500

 
3.13 and 0.85.
 
44,210 + 9,800 + 42,000 + 244,000 + $14,990 = $355,000
90,000 + 23,500 = $113,500
355,000 / 113,500 = 3.127 or 3.13
 
355,000 - ($244,000 + $14,990) / 113,500
($355,000 - 258,990) / 113,500 = 96,010 / 113,500 = 0.845 or 0.85
   
On September 12, Ryan Company sold merchandise in the amount of $9,200 to Johnson Company, with credit terms of 3/10, n/30.
The cost of the items sold is $5,700. Johnson uses the periodic inventory system and the net method of accounting for purchases.
The journal entry that Johnson will make on September 12 is:
 
Merchandise Inventory $ 8,924.00         
Accounts payable                            $ 8,924.00
 
9,200.00 - (9,200 x .03) = 8,924.00
   
Using the following year-end information for Calvin's Clothing, Inc., calculate the current ratio and acid-test ratio for the business:
 
Cash                                                      $52,000
Short-term investments               12,000
Accounts receivable                       54,000
Inventory                                            325,000
Prepaid expenses                            17,500
Accounts payable                            106,500
Other current payables 25,000
 
3.50 and 0.90
 
Cash                                                      52,000                                 
Short Term Investments               12,000                                 
Accounts Receivables                    54,000                                 
Inventory                                            325,000                                              
Prepaid Expenses                            17,500                                 
Total Current Assets                       460,500                                              
                                                                                                                               
Accounts Payable                            106,500                                              
Other Current Payables                 25,000                                 
Total Current Liabilities 131,500
 
460500 / 131500 = 3.50
460500 - (325000 + 17500) = 118,000   
118000 / 131500 = 0.90
   
A company purchased $8,900 of merchandise on June 15 with terms of 3/10, n/45. On June 20, it returned $445 of that merchandise.
On June 24, it paid the balance owed for the merchandise taking any discount it was entitled to. The cash paid on June 24 equals:
 
$8,201
 
8,900 - 445) x (1 - .03) = 8,201.35

 
Mega Skateboard Supplier had net sales of $2.4 million, its cost of goods sold was $1.3 million, and its net income was $.8 million.
Its gross margin ratio equals:
 
46%.
 
2.4 - 1.3 / 2.4 = 0.458333333 or 0.46 x 100 = 46%
   
Cushman Company had $820,000 in sales, sales discounts of $12,300, sales returns and allowances of $18,450,
cost of goods sold of $389,500, and $282,080 in operating expenses. Gross profit equals:
 
$117,670.
 
820,000 - 12,300 - 18,450 = 789,250
789,250 - 389,500 = 399,750
399,750 - 282,080 = 117,670
   
A company purchased $3,300 worth of merchandise. Transportation costs were an additional $290.
The company returned $230 worth of merchandise and then paid the invoice within the 3% cash discount period.
The total cost of this merchandise is:
 
$3,267.90.
 
3,300 – 230 = 3,100
3,100 – (3,100 x .03) = 3,267.90
   
A company has net sales of $852,000 and cost of goods sold of $565,000. Its net income is $101,800. The company's gross margin and operating expenses, respectively, are:
 
$287,000 and $185,200
 
852,000 - 565,000 = 287,000
287,000 – 101,800 = 185,200
   
On September 12, Vander Company sold merchandise in the amount of $6,400 to Jepson Company, with credit terms of 5/10, n/30.
The cost of the items sold is $4,600. Vander uses the periodic inventory system and the gross method of accounting for sales.
The journal entry or entries that Vander will make on September 12 is:
 
Accounts receivable                                       6,400   
Sales                                                                      6,400
Cost of goods sold                                           4,600   
Merchandise Inventory                                 4,600
   
Prentice Company had cash sales of $94,400, credit sales of $83,525, sales returns and allowances of $1,750,
and sales discounts of $3,525. Prentice’s net sales for this period equal:
 
$172,650.
 
94,400 + 83,525 - 1,750 - 3,525 = $172,650
   
Cushman Company had $836,000 in sales, sales discounts of $12,540, sales returns and allowances of $18,810,
cost of goods sold of $397,100, and $287,585 in operating expenses. Gross profit equals:
 
$407,550

836,000 - 12,540 - 18,810 - 397,100 = $407,550
   
Cushman Company had $844,000 in sales, sales discounts of $12,660, sales returns and allowances of $18,990,
cost of goods sold of $400,900, and $290,335 in operating expenses. Net income equals:
 
$121,115

844,000 - 12,660 - 18,990 - 400,900 - 290,335 = 121,115
   
A company's current assets are $24,920, its quick assets are $14,490 and its current liabilities are $12,370. Its acid-test ratio equals:
 
1.17


14,490 / 12,370 = 1.17
   
A company's current assets are $19,490, its quick assets are $10,800 and its current liabilities are $12,700. Its quick ratio equals:
 
0.85

10800 / 12700 = 0.8503
   
A company has sales of $735,800 and cost of goods sold of $294,800 Its gross profit equals:
 
$441,000

735,800 - 294,800 = 441,000
   
KLM Corporation's quick assets are $5,915,000, its current assets are $11,895,000 and its current liabilities are $8,017,000.
Its acid-test ratio equals:
 
0.74

5,915,000 / 8,017,000 = 0.74
   
Using the following year-end information for Calvin's Clothing, calculate the current ratio and acid-test ratio for the business:

Cash                                                      $             61,360
Short-term investments                                 17,000
Accounts receivable                                        64,000
Inventory                                                             330,000
Prepaid expenses                                             9,370
Accounts payable                                             111,000
Other current payables                  32,800
 
3.35 and 0.99

481,730 / 143,800 = 3.35
142,360 / 143,800 = 0.99
   
A company's net sales were $702,300, its cost of goods sold was $240,890 and its net income was $47,700.
Its gross margin ratio equals:
 
65.7%

702,300 - 240,890 / 702,300 = .657 x 100 = 65.7
   
On September 12, Vander Company sold merchandise in the amount of $2,600 to Jepson Company, with credit
terms of 2/10, n/30. The cost of the items sold is $1,800. Vander uses the periodic inventory system. On September 14,
Jepson returns some of the merchandise.
The selling price of the merchandise is $225 and the cost of the merchandise returned is $160. Jepson pays the invoice on September 18, and takes the appropriate discount. The journal entry that Vander makes on September 18 is:
 
Cash                                                      2,327.50
Sales discounts                 47.50
Accounts receivable                       2,375.00

2,600 - 225 = 2,375.00
2,375 x .02 = 47.50
2,375 - 47.50 = 2,327.50
   
A company purchased $8,900 of merchandise on June 15 with terms of 3/10, n/45. On June 20, it returned $445 of that merchandise.
On June 24, it paid the balance owed for the merchandise taking any discount it was entitled to. The cash paid on June 24 equals:
 
$8,201.

(8,900 - 445) x 0.97 = 8,201
   
According to the IASB, which of the following least accurately describes financial reporting? Financial reporting:
 
A) provides information about changes in financial position of an entity.
B) is useful to a wide range of users.
C) uses the information in a company's financial statements to make economic decisions.
   
Which of the following is least likely to be considered a role of financial statement analysis?
 
A) To make economic decisions.
B) Determining whether to invest in the company's securities.
C) Assessing the management skill of the company's executives.
   
Which of the following best describes financial reporting and financial
statement analysis?
 
Financial reporting refers to how companies show their financial performance and financial analysis refers to
using the information to make economic decisions.
   
Which of the following statements about financial statement analysis and reporting is least accurate?
 
Financial statement analysis focuses on the way companies show their financial performance to investors by preparing
and presenting financial statements.
   
Which of the following statements represents information at a specific
point in time?
 
A) The balance sheet.
B) The income statement and the balance sheet.
C) The income statement.
   
A company's operating revenues for a reporting period are most likely to be shown on its:
 
A) cash flow statement.
B) balance sheet.
C) income statement.
   
The Management Discussion and Analysis (MD&A) portion of the financial disclosure is required to discuss all of the following EXCEPT:
 
A) capital resources and liquidity.
B) expected effects of marketplace events.
C) results of operations.
   
Which of the following statements regarding footnotes to the financial statements is least accurate?
 
A) Footnotes may contain information regarding contingent losses.
B) Some supplementary schedules are audited whereas footnotes are not audited.
C) Footnotes provide information about assumptions and estimates used by management.
   
Which of the following statements concerning the notes to the audited financial statements of a company is least accurate?
financial statement notes:
 
A) include management's assessment of the company's operating performance and financial results.
B) are audited.
C) contain information about contingent losses that may occur.
   
The Management Discussion and Analysis (MD&A) portion of the financial statements:
 
A) is not required by the SEC.
B) includes audited disclosures that help explain the information summarized in the financial statements.
C) includes such items as discontinued operations, extraordinary items, and other unusual or infrequent events.
   
Which of the following is an independent auditor least likely to do with respect to a company's financial statements?
 
A) Prepare and accept responsibility for them.
B) Provide an opinion concerning their fairness and reliability.
C) Confirm assets and liabilities contained in them.
   
Which of the following would NOT require an explanatory paragraph added to the auditors' report?
 
A) Doubt regarding the "going concern" assumption.
B) Statements that the financial information was prepared according to GAAP.
C) Uncertainty due to litigation.
   
The standard auditor's report is most likely required to:
 
A) provide reasonable assurance that the financial statements contain no material errors.
B) provide an "unqualified" opinion if material uncertainties exist.
C) provide reasonable assurance that management is reliable.
   
Which of the following is least likely to be available on EDGAR (Electronic Data Gathering, Analysis, and Retrieval System)?
 
A) Corporate press releases.
B) SEC filings.
C) Form 10Q.
   
Which of the following is an analyst least likely to rely on as objective information to include in a company analysis?
 
A) Corporate press releases.
B) Proxy statements.
C) Government agency statistical data on the economy and the company's industry.
   
Which of the following statements about proxy statements is least accurate? Proxy statements are:
 
A) not filed with the SEC.
B) available on the EDGAR web site.
C) a good source of information about the qualifications of board members and management.
   
Which of the following statements least accurately describes a role of financial statement analysis?
 
A. Use the information in financial statements to make economic decisions.
B. Provide reasonable assurance that the financial statements are free of material errors.
C. Evaluate an entity's financial position and past performance to form opinions about its future ability
     to earn profits and generate cash flow.
   
A firm's financial position at a specific point in time is reported in the:
 
A. balance sheet.
B. income statement.
C. cash flow statement.
   
Which of the following accounts would appear on the post-closing trial balance?
 
Accounts Receivable
   
What goes on a post-closing trial balance?
 
Only permanent accounts
   
Which of the following accounts appears in one of the Income Statement columns of the worksheet?
 
Salaries Expense
   
After completing the closing entries for Revenues and Expenses, the Income Summary account has a credit balance of $1,500.
The journal entry to close out the $1,500 credit balance of Income Summary would be:
 
Income Summary            1500
Retained Earnings            1500
   
Which of the steps below comes first in the accounting cycle?
 
Analyze and journalize transactions
   
A company had net sales of $829,500 and cost of goods sold of $583,200. Its net income was $34,690.
The company's gross margin ratio equals:
 
29.69
 
829,500 - 583,200 / 829,500 = .282929 x 100 = 29.69
   
A company's current assets are $26,420, its quick assets are $15,090 and its current liabilities are $12,520. Its acid-test ratio equals:
 
1.21
 
15,090 / 12,520 = 1.21
   
A company has net sales of $795,800and cost of goods sold of $574,800. Its net income is $28,030.
The company's gross margin and operating expenses, respectively, are:
 
$221,000 and $192,970
 
795,800 - 574,800 = 221,000
221,000 - 28,030 = 192,970
   
A company purchased $3,000 of merchandise on July 5 with terms 2/10, n/30. On July 7, it returned $330 worth of merchandise.
On July 8, it paid the full amount due. The amount of the cash paid on July 8 equals:
 
$2,617
 
(3,000 - 330) x 0.98 = 2,617
   
Cushman Company had $830,000 in net sales, $363,125 in gross profit, and $207,500 in operating expenses. Cost of goods sold equals:
 
$466,875
 
830,000 - 363,125 = 466,875
   
A company has beginning inventory of 10 units at a cost of $10 each on February 1. On February 3, it purchases 20 units at $12 each.
12 units are sold on February 5. Using the FIFO periodic inventory method, what is the cost of the 12 units that are sold?
 
$124
 
(10 x 10) + (2 × 12) = $124
   
A company had inventory on November 1 of 5 units at a cost of $10 each. On November 2, they purchased 19 units at $12 each.
On November 6 they purchased 15 units at $15 each. On November 8, 17 units were sold for $45 each.
Using the LIFO perpetual inventory method, what was the value of the inventory on November 8 after the sale?
 
$254
 
5 + 19 + 15 = 39
39 - 17 = 22 units
 (5 x 10) + (17 x 12) = 254
   
Use the following information for Shafer Company to compute inventory turnover for 2015.
 
2015                                      2014
Net sales                                                             $656,500                             $584,700
Cost of goods sold                                           390,300                               361,020
Ending inventory                                             79,500                  81,180
 
4.86
 
390,300 / [(79,500 + 81,180) / 2
390,300 / 80,340 = 4.86
   
On September 1 of the current year, Scots Company experienced a flood that destroyed the company's entire inventory.
Because the company had not completed its month end reporting for August, it must estimate the amount of inventory lost
using the gross profit method. At the beginning of August, the company reported beginning inventory of $215,800. Inventory
purchased during August was $192,670. Sales for the month of August were $543,200. Assuming the company's typical gross profit ratio is 40%,
estimate the amount of inventory destroyed in the flood.
 
$82,550
 
215,800 + 192,670 = 408,470
543,200 x .6 = 325,920
408,470 − 325,920 = 82,550
   
Jammer Company uses a weighted average perpetual inventory system and reports the following:
 
August 2 Purchase 7 units at $10.00 per unit.
August 18 Purchase 9 units at $13.00 per unit.
August 29 Sale 14 units.
August 31 Purchase 12 units at $13.00 per unit.
 
What is the per-unit value of ending inventory on August 31?
 
$12.81
 
187 / 16 = 11.69
179 / 14 = 12.81
   
A company's inventory records report the following:
 
August 1 Beginning balance 22 units @ $12
August 5 Purchase 17 units @ $11
August 12 Purchase 21 units @ $12
 
On August 15, it sold 44 units. Using the FIFO perpetual inventory method, what is the value of the inventory at August 15 after the sale?
 
$192
   
Giorgio had cost of goods sold of $9,613 million, ending inventory of $2,281 million, and average inventory of $2,157 million.
Its inventory turnover equals:
 
4.46
 
9,613 / 2,157 = 4.46
   
Grays Company has inventory of 22 units at a cost of $10 each on August 1. On August 3,
it purchased 32 units at $12 each. 24 units are sold on August 5. Using the FIFO perpetual inventory method,
what amount will be reported in cost of goods sold for the 24 units that were sold?
 
$244
 
(22 x 10) + (2 x 12) = 244.00
   
A company's inventory records report the following:
 
August 1 Beginning balance 27 units @ $17
August 5 Purchase 22 units @ $16
August 12 Purchase 26 units @ $17
 
On August 15, it sold 54 units. Using the FIFO perpetual inventory method, what is the value of the inventory at August 15 after the sale?
 
$357
 
27 + 22 + 26 = 75
75 - 54 = 21
21 x 17 = 357
   
Jefferson Company has sales of $302,000 and cost of goods available for sale of $270,200.
If the gross profit ratio is typically 30%, the estimated cost of the ending inventory under the gross profit method would be:
 
$58,800
 
302,000 x .3 = 90,600
302,000 – 90,600 = 211,400
270,200 – 211,400 = 58,800
   
Grays Company has inventory of 16 units at a cost of $11 each on August 1. On August 3, it purchased 26 units at $10 each.
18 units are sold on August 5. Using the FIFO perpetual inventory method, what amount will be reported in cost of goods sold for the 18 units that were sold?
 
$196
 
(16 x 11) + (2 x 10) = 196
   
On September 1 of the current year, Scots Company experienced a flood that destroyed the company's entire inventory.
Because the company had not completed its month end reporting for August, it must estimate the amount of inventory lost using
the gross profit method. At the beginning of August, the company reported beginning inventory of $215,500. Inventory purchased
during August was $192,550. Sales for the month of August were $542,600. Assuming the company's typical gross profit ratio is
40%, estimate the amount of inventory destroyed in the flood.
 
$82,490
 
215,500 + 192,550 = 408,050
542,600 x 60% = 325,560
408,050 − 325,560 = 82,490.
   
A company had inventory on November 1 of 5 units at a cost of $10 each. On November 2, they purchased 19 units at $12 each.
On November 6 they purchased 15 units at $15 each. On November 8, 17 units were sold for $45 each. Using the LIFO perpetual inventory method,
what was the value of the inventory on November 8 after the sale?
 
$254
 
5 + 19 + 15 = 39
39 - 17 = 22
 (5 x 10) + (17 x 12) = 254
   
Marquis Company uses a weighted-average perpetual inventory system.
 
August 2, 24 units were purchased at $5 per unit.
August 18, 29 units were purchased at $7 per unit.
August 29, 26 units were sold.
 
What is the amount of the cost of goods sold for this sale?
 
$158.45
 
(24 x 5) + (29 x 7) / 53 = 6.09
26 units x 6.09 = 158.45
   
Bedrock Company reported a December 31 ending inventory balance of $413,500. The following additional information is also available:
 
• The ending inventory balance of $413,500 included $72,300 of consigned inventory for which Bedrock was the consignor.
• The ending inventory balance of $413,500 included $22,600 of office supplies that were stored in the warehouse and
    were to be used by the company's supervisors and managers during the coming year.
Based on this information, the correct balance for ending inventory on December 31 is:
 
$390,900
 
 
413,500 − 22,600 = 390,900
   
A company's warehouse contents were destroyed by a flood on September 12. The following information was the only information that was salvaged:
 
1. Inventory, beginning: $             28,500
2. Purchases for the period:                         17,500
3. Sales for the period:                   55,500
4. Sales returns for the period:   750
 
The company's average gross profit ratio is 40%. What is the estimated cost of the lost inventory?
 
$13,150.00
 
COGS = (55,500 − 750) × 60% = 32,850.00
28,500 + 17,500 = 46,000
46,000 - 32,850.00 = 13,150.00
   
A company had the following purchases during the current year:
 
January:                               18 units at $128
February:                             28 units at $138
May:                                      23 units at $148
September:                         20 units at $158
November:                          18 units at $168
 
On December 31, there were 58 units remaining in ending inventory. These 58 units consisted of 10 from January,
12 from February, 14 from May, 12 from September, and 10 from November.
Using the specific identification method, what is the cost of the ending inventory?
 
$8,584
 
Ending Inventory
10@$128=$1,280
12@$138 =1,656
14@$148 =2,072
12@$158=1,896
10 @$168 =1,680
58 units $ 8,584
   
A company had beginning inventory of 10 units at a cost of $25 each on March 1. On March 2, it purchased 10 units at $44 each.
On March 6 it purchased 6 units at $30 each. On March 8, it sold 22 units for $73 each.
Using the FIFO perpetual inventory method, what was the cost of the 22 units sold?
 
$750
 
(10 x $25) + (10 x 44) + (2 x 30) = 750
   
A company had inventory on November 1 of 5 units at a cost of $17 each. On November 2, they purchased 12 units at $19 each.
On November 6 they purchased 8 units at $22 each. On November 8, 12 units were sold for $52 each.
Using the LIFO perpetual inventory method, what was the value of the inventory on November 8 after the sale?
 
$237
 
5 + 12 + 8 = 25 units
25 - 12 units = 13 units
 (5 x $17) + (8 x $19) = $237
   
On April 24 of the current year, The Memphis Pecan Company experienced a tornado that destroyed the company's entire inventory.
At the beginning of April, the company reported beginning inventory of $228,550. Inventory purchased during April (until the date of the tornado)
was $199,600. Sales for the month of April through April 24 were $644,300. Assuming the company's typical gross profit ratio is 50%,
estimate the amount of inventory destroyed in the tornado.
 
$106,000
 
228,550 + 199,600 = 428,150
.5 x 644,300 = 322,150
428,150 - 322,150 = 106,000
   
A company's warehouse contents were destroyed by a flood on September 12. The following information was the only information that was salvaged:
 
1. Inventory, beginning: $             29,900
2. Purchases for the period:                         18,900
3. Sales for the period:                   56,900
4. Sales returns for the period:   890
 
The company's average gross profit ratio is 21%. What is the estimated cost of the lost inventory?
 
$4,552.10
 
COGS = ($56,900 − $890) × 79% = $44,247.90
29,900 + 18,900 = 48,800
48,800 - 44,247.90 = 4,552.10
   
Jammer Company uses a weighted average perpetual inventory system and reports the following:
 
August 2 Purchase 23 units at $18.00 per unit.
August 18 Purchase 25 units at $19.00 per unit.
August 29 Sale 46 units.
August 31 Purchase 28 units at $21.00 per unit.
 
What is the per-unit value of ending inventory on August 31?
 
$20.83
 
889 / 48 units = 18.52
625.04 / 30 units = $20.83
   
Sandoval needs to determine its year-end inventory. The warehouse contains 38,000 units, of which 4,800 were damaged by flood and are not sellable.
Another 3,800 units were purchased from Markor Company, FOB shipping point, and are currently in transit. The company also consigns goods and has
5,800 units at a consignee's location. How many units should Sandoval include in its year-end inventory?
 
42,800
 
38,000 - 4,800 + 3,800 + 5,800 = 42,800
   
Grays Company has inventory of 27 units at a cost of $8 each on August 1. On August 3, it purchased 37 units at $9 each. 29 units are sold on August 5.
Using the FIFO perpetual inventory method, what amount will be reported in cost of goods sold for the 29 units that were sold?
 
$234
 
(27 units x 8) + (2 units x $9) = $234
   
On September 1 of the current year, Scots Company experienced a flood that destroyed the company's entire inventory.
Because the company had not completed its month end reporting for August, it must estimate the amount of inventory lost using the gross profit method.
At the beginning of August, the company reported beginning inventory of $216,150. Inventory purchased during August was $192,810.
Sales for the month of August were $543,900.
Assuming the company's typical gross profit ratio is 40%, estimate the amount of inventory destroyed in the flood.
 
$82,620
 
216,150 + 192,810 = 408,960
543,900 x .6 = 326,340
408,960 − 326,340 = 82,620
   
Giorgio had cost of goods sold of $9,565 million, ending inventory of $2,233 million, and average inventory of $2,109 million. Its inventory turnover equals:
 
4.54
 
9,565 / 2,109 = 4.54
   
A company had inventory on November 1 of 5 units at a cost of $15 each. On November 2, they purchased 14 units at $17 each.
On November 6 they purchased 10 units at $20 each. On November 8, 12 units were sold for $50 each. Using the LIFO perpetual inventory method,
what was the value of the inventory on November 8 after the sale?
 
$279
 
5 + 14 + 10 = 29
29 - 12 = 17
 (5 x 15) + (12 x 17) = 279
   
A company's inventory records report the following in November of the current year:
 
Beginning November 14 units @ $8
Purchase November 211 units @ $10
Purchase November 67 units @ $12
 
On November 8, it sold 20 units for $38 each.
Using the LIFO perpetual inventory method, what was the amount recorded in the cost of goods sold account for the 20 units sold?
 
$210
 
(7 x 12) + (11 x 10) + (2 x 8) = 210
   
Big Box Store has operated with a 30% average gross profit ratio for a number of years.
It had $112,000 in sales during the second quarter of this year. If it began the quarter with $19,200 of inventory at cost and purchased $73,200
of inventory during the quarter, its estimated ending inventory by the gross profit method is:
 
$14,000
 
COGS = 112,000 × 70% = 78,400
19,200 + 73,200 = 92,400
92,400 - 78,400 = 14,000
   
Jefferson Company has sales of $302,000 and cost of goods available for sale of $270,200.
If the gross profit ratio is typically 30%, the estimated cost of the ending inventory under the gross profit method would be:
 
$58,800
 
302,000 x .3 = 90,600.
302,000 – 90,600 = 211,400
270,200 - 211,400 = 58,800
   
On September 1 of the current year, Scots Company experienced a flood that destroyed the company's entire inventory.
Because the company had not completed its month end reporting for August, it must estimate the amount of inventory lost using the gross profit method.
At the beginning of August, the company reported beginning inventory of $216,050. Inventory purchased during August was $192,770.
Sales for the month of August were $543,700.
Assuming the company's typical gross profit ratio is 40%, estimate the amount of inventory destroyed in the flood.
 
$82,600
 
216,050 + 192,770 = 408,820
543,700 x .6 = 326,220
408,820 − 326,220 = 82,600
   
On April 24 of the current year, The Memphis Pecan Company experienced a tornado that destroyed the company's entire inventory.
At the beginning of April, the company reported beginning inventory of $228,250.
Inventory purchased during April (until the date of the tornado) was $199,300.
Sales for the month of April through April 24 were $644,000.
Assuming the company's typical gross profit ratio is 50%, estimate the amount of inventory destroyed in the tornado.
 
$105,550
 
228,250 + 199,300 = 427,550
.5 x 644,000 = 322,000
427,550 – 322,000 = 105,550
   
A company's warehouse contents were destroyed by a flood on September 12. The following information was the only information that was salvaged:
 
1. Inventory, beginning: $             28,100
2. Purchases for the period:                         17,100
3. Sales for the period:                   55,100
4. Sales returns for the period:   710
 
The company's average gross profit ratio is 36%. What is the estimated cost of the lost inventory?
$10,390.40.
 
COGS = (55,100 − 710) × .64 = 34,809.60
28,100 + 17,100 = 45,200
45,200 - 34,809.60 = 10,390.40
   
Information about accounting estimates, assumptions, and methods chosen for reporting is most likely found in:
 
A. the auditor's opinion.
B. financial statement notes.
C. Management's Discussion and Analysis.
   
If an auditor finds that a company's financial statements have made a specific exception to applicable accounting principles, she is most likely to issue a:
 
A. dissenting opinion.
B. cautionary note.
C. qualified opinion.
   
Information about elections of members to a company's Board of Directors is most likely found in:
 
A. a 10-Q filing.
B. a proxy statement.
C. footnotes to the financial statements.
   
Which of these steps is least likely to be a part of the financial statement analysis framework?
 
A. State the purpose and context of the analysis.
B. Determine whether the company's securities are suitable for the client.
C. Adjust the financial statement data and compare the company to its industry peers.
   
Providing information about the performance and financial position of companies so that users can make
economic decisions best describes the role of:
 
A. auditing.
B. financial reporting.
C. financial statement analysis.
   
Which of the following accounts would be included in the property, plant, and equipment category of the classified balance sheet?
 
A. Land held for investment
B. Accumulated Depreciation
C. Office Supplies
D. Mortgage Payable
   
Which situation indicates a net loss within the Income Statement section of the worksheet?
 
A. Total credits exceed total debits
B. Total debits exceed total credits
C. Total debits equal total credits
D. None of the above
   
Which of the following accounts is not closed?
 
A. Depreciation Expense
B. Dividends
C. Service Revenue
D. Accumulated Depreciation
   
What do closing entries accomplish?
 
A. Zero out the revenues, expenses, and dividends
B. Transfer revenues, expenses, and dividends to the Retained Earnings
account
C. Bring the Retained Earnings account to its correct ending balance
D. All of the above
   
Which of the following is not a closing entry?
 
A. Retained Earnings xxx                Dividends xxx
B. Service Revenue xxx                   Income Summary xxx
C. Salaries Payable xxx                  Income Summary xxx
D. Income Summary xxx                 Rent xxx
   
Which of the following accounts may appear on a post-closing trial balance?
 
A. Cash, Salaries Payable, and Retained Earnings
B. Cash, Salaries Payable, and Service Revenue
C. Cash, Service Revenue, and Salaries Expense
D. Cash, Salaries Payable, and Salaries Expense
   
Which of the following steps of the accounting cycle is not completed at the end of the period?
 
A. Journalize transactions as they occur
B. Journalize and post the closing entries
C. Prepare the post-closing trial balance
D. Prepare the financial statements
A
 
Clean water softener systems has cash of $600, accounts receivable of $900, and office supplies of $400.
Clean owes $500 on accounts payable and salaries payable of $200. cleans current ratio is
 
A. 2.71
B. 2.50
C. 0.63
D. 0.37
   
Which of the following statements concerning reversing entries is true?
 
A. Reversing entries are required by Generally Accepted Accounting Principles
B. Reversing entries are most often used with accrual-type adjustments
C. Reversing entries are dated December 31, the end of the fiscal year
D. Reversing entries are recorded before adjusting entries
   
A company's current financial position would best be evaluated using the:
 
A. balance sheet
B. income statement.
C. statement of cash flows.
   
A company's profitability for a period would best be evaluated using the:
 
A. balance sheet
B. income statement.
C. statement of cash flows.
   
Accounting policies, methods, and estimates used in preparing financial statements are most likely found in the:
 
A. auditor's report.
B. management commentary.
C. notes to the financial statements.
C is correct.
   
Information about management and director compensation would least likely be found in the:
 
A. auditor's report.
B. proxy statement.
C. notes to the financial statements.
   
Information about a company's objectives, strategies, and significant risks would most likely be found in the:
 
A. auditor's report.
B. management commentary.
C. notes to the financial statements.
B is correct
   
What type of audit opinion is preferred when analyzing financial statements?
 
A. Qualified.
B. Adverse.
C. Unqualified
   
Ratios are an input into which step in the financial statement analysis framework?
 
A. Process data.
B. Collect input data.
C. Analyze/interpret the processed data.
   
A company purchased $10,000 of merchandise on June 15 with terms of 3/10, n/45. On Junes 20, it returned $800 of that merchandise.
On June 24, it paid the balance owed for the merchandise taking any discount it is entitled to. The cash paid on June 24 equals:
 
8,924
   
A company had beginning inventory of $100,000, merchandise purchases of $400,000 and ending inventory of $50,000.
It's cost of goods sold was:
 
$450,000
   
A company had inventory on November 1 of 5 units at a cost of $20 each. On November 2, they purchased 10 units at $22 each.
On November 6 they purchased 6 units at $25 each. On November 8, 8 units were sold for $55 each. Using LIFO perpetual inventory method,
what was the value of the inventory on November 8 after the sale?
 
$276
   
The entry necessary to establish a petty cash fund should include:
 
A debit to Petty Cash and credit to Cash
   
Brig Company had $600,000 in net sales, $250,000 in gross profit, and $200,000 in operating expenses.
Cost of goods sold equals:
 
$350,000
   
The current period's ending inventory is:
 
The next period's beginning inventory
   
The inventory valuation method that identifies the invoice cost of each item in ending inventory to determine the
cost assigned to the inventory is the:
 
Specific Identification Method.
   
A company's net income was $83, 750, its net sales were $347,800, and its cost of goods sold was $147,800.
The gross profit was:
 
$200,000
   
During a period of steadily rising costs, the inventory valuation method that yields the highest reported net income is:
 
FIFO method
   
A company normally sells its product for @20 per unit. However, the selling price has fallen to $15 per unit.
The company's current inventory consists of 200 units purchased at $16 per unit. Replacement cost has now fallen to $13 per unit.
Calculate the value of this company's inventory at the lower of cost or market.
 
$2600
   
Herald Company had sales of $135,000, sales discounts of $2000, and sales returns of $3200. Herald Company's net sales equals:
 
$129,800
   
A company has net sales of cost of goods sold of $753,000 and $543,000, respectively. Its net income is $17,530.
The company's gross margin and operating expenses are ____ and______.
 
$209,000,  $191,470
   
A company records the following journal entry; debit Cash $1470, debit Sales Discounts $30, and credit Accounts Receivable $1500.
This means that a customer has taken a ____cash discount for early payment.
 
2%
   
A company had net sales of $581,000 and cost of goods sold of $363,000. Its gross margin equals $944,000.
 
False
   
A company had a gross profit of $330,000 based on sales of $415,000. Its cost of goods sold equals $745,000.
 
False
   
A company's current ratio is 2.1 and its quick ratio is 0.36. This company is probably an excellent credit risk because the ratios
reveal no indication of liquidity problems.
 
False
   
Which of the following inventory costing methods will always result in the same values for ending inventory and cost of goods
sold regardless of whether a perpetual or periodic inventory system is used?
 
Specific identification and FIFO
   
Georgia Peach Company reported net sales in June of the current year of $1,000,000. At the beginning of June,
the company reported beginning inventory of $368,000. Cost of goods purchased during June amounted to $217,500.
The company reported ending inventory at the end of June of $226,750.
The company's gross profit for June of the current year was:
 
$641,250
   
Outstanding checks refer to checks that have been:
 
Written, recorded on the company books, set to the payee, but have not yet been paid by the bank.
   
Assume that the custodian of a $450 petty cash fund has $62.50 in coins and currency plus $382.50 in receipts at the end of the month.
The entry to replenish the petty cash fund will include:
 
A credit to Cash for $287.50
   
Which of the following is the most serious limitation of internal controls?
Human fraud or human error
   
A company had net sales of $575,000 and cost of goods sold of $360,000. Its gross margin equals $935,000.
False
   
A company's current ratio is 1.8 and its quick ratio is 0.25. This company is probably an excellent credit risk because
the ratios reveal no indication of liquidity problems.
 
False Using the retail inventory method, if the cost to retail ratio is 70% and ending inventory at retail is $152,000,
then estimated ending inventory at cost is $214,143.
 
False
 
$152,000 X 0.70 = $106,400
   
Current ratio formula?
 
Current Ratio = total current assets/total current liabilities
   
When is the post closing trial balance performed?
 
is prepared after the closing entries are recorded and posted to the ledger
   
What does the post closing trial balance contain?
 
only assets, liabilities, Common Stock, and Retained Earnings accounts
   
What does the current ratio measure?
 
a company's ability to pay its current liabilities with its current assets
   
What is the last step in the accounting cycle?
 
Prepare the post-closing trial balance
   
Which of following may appear on the post-closing trial balance?
 
Cash, accounts receivable, and prepaid rent
   
Which situation indicates a net income within the income statement columns of the worksheet?
 
Total credits exceeds total debits
   
Ellison Electronics has
Cash of                                                 $200
Accounts Receivable of                  $800,
Supplies of                                          $400
Supplies Expense of                         $200
Service Revenue of                          $900.
 
Ellison owes $300 on Accounts Payable
$500 on Salary Payable
$700 on Long-term Note Payable.
 
What is Ellison's current ratio (rounded to two decimal places)
 
1.75
   
Christopher's Closet sells men's clothing. At the end of the current year, Christopher's Closet has Rent Expense of $1,500,
and Supplies Expense of $829. What closing entry will Christopher's Closet make for these expense accounts?
 
Income Summary            2,329
Rent Expense                    1,500
Supplies Expense             829
   
Which of the steps below comes first in the accounting cycle?
 
analyze and journalize transactions
   
Which of the following accounts appears in one of the Balance Sheet columns of the worksheet?
 
accounts receivable
   
Smith Company recorded an adjustment for salaries on December 31 of $1,500. On January 1 of the following year,
the company reverses this adjusting entry before payment.
What is the journal entry made on January 1 to reverse the adjusting entry made on December 31 of the previous year?
 
salaries payable                1500
salaries expense                               1500
   
Jones Company has Cash of $600, Accounts Receivable of $500, Office Supplies of $100, and a Building with a cost of $50,000.
Jones Company owes $300 on Accounts Payable and has Salaries Payable of $200.
What is Jones Company's current ratio?
 
2.40
 
600 + 500 +1 00 = 1200
300 + 200 = 500
1200 / 500 = 2.40
   
On the worksheet, after totaling the debit and credit Balance Sheet columns, the difference is __________.
 
the amount of net income/loss for the period
   
Which of the following accounts would NOT appear on the post-closing trial balance?
 
Service Revenue

    Homework   1.1  1.2   2.1  2.2  3.1  3.2   4.1  4.2  5.1  5.2   6.1   6.2  7.1  7.2  8.1  8.2  9.1  9.2  10.1   10.2  11.1   11.2  12.1  12.2   13.1  13.2