ACC 151 Lecture 11: ACC 151 – Lecture 11 – Inventory

29 views5 pages

harlequinfox232

19 Jan 2016

School

Department

Course

Professor

For unlimited access to Class Notes, a Class+ subscription is required.

Document Summary

The cost of inventory sold shifts from asset to expense when the seller delivers goods to the buyer. Sales revenue based on sales price of inventory sold. Cost of goods sold based on cost of inventory sold. Inventory based on cost of inventory on hand. Number of units of inventory (what is in the inventory. Do not include those held for another company in inventory. Do include those items belonging to the company out on consignment. At the point when the goods leave the seller"s shipping dock (they belong to the customer) Only at the point of delivery to the customer do the goods belong to the customer. Company with legal title to the goods while in transit pays the transportation costs. Keeps a running record of all goods bought, sold, and on hand. Does not keep a running record of all goods bought, sold, and on hand. Inventory counted at least once a year.

Related Questions

MATCHING

Inventory system that updates the merchandise inventory account only at the end of the accounting period based on a physical count of merchandise on hand.

Statement where net income is determined by deducting all expenses from all revenues.

Inventory system that updates the merchandise inventory account for every purchase and sale transaction.

Payment arrangements determined by the seller as to when invoices are due and whether early payment discount is offered.

Shipping terms where the ownership of merchandise passes to the buyer when the seller delivers the merchandise to the freight carrier.

Statement that includes subtotals for net sales, gross profit, and net operating income in determining net income.

Losses of inventory due to theft, damage, spoilage, etc. that cause the actual inventory on hand to be less than that on record.

Shipping terms where the ownership of merchandise passes to the buyer when the buyer receives the merchandise.

FOB destination
Periodic inventory system

Credit terms
FOB shipping point

Multiple-step income statement
Inventory shrinkage

Perpetual inventory system

Single-step income statement

1. Inventory is classified on the balance sheet as a

a.current liability

b.long-term asset

c.current asset

d.long-term liability

2. What is the term applied to the excess of sales over the cost of goods sold?

a.net income

b.gross profit

c.operations

d.gross sales

3. The inventory system employing accounting records that continuously disclose the amount of inventory is called

a.periodic

b.retail

c.perpetual

d.physical

4. Calculate the gross profit for Jefferson Company based on the following:

Sales $764,000

Selling Expenses $42,500

Cost of Goods Sold $538,000

a.$183,500

b.$721,500

c.$495,500

d.$226,000

5. Calculate income from operations for Jonas Company based on the following data:

Sales $764,000

Selling Expenses $52,500

Cost of Goods Sold $538,000

a.$226,000

b.$711,500

c.$485,500

d.$173,500

6. The primary difference between the periodic and perpetual inventory systems is that a

a.periodic system keeps a record showing the inventory on hand at all times

b.periodic system determines the inventory on hand only at the end of the accounting period

c.periodic system records the cost of the sale on the date the sale is made

d.periodic system provides an easy means to determine inventory shrinkage

7. In credit terms of 3/15, n/45, the "3" represents the

a.percent of the cash discount

b.full amount of the invoice

c.number of days when the entire amount is due

d.number of days in the discount period

8. Which of the following accounts has a normal credit balance?

a.Inventory

b.Accounts Receivable

c.Sales

d.Delivery Expense

9. Using a perpetual inventory system, the entry to record the purchase of $30,000 of merchandise on account would include a

a.debit to Inventory

b.debit to Accounts Payable

c.credit to Sales

d.credit to Inventory

10. Which of the following accounts usually has a debit balance?

a.Sales

b.Inventory

c.Accounts Payable

d.Sales Tax Payable

11. If title to merchandise purchases passes to the buyer when the goods are shipped from the seller, the terms are

a.n/30

b.consigned

c.FOB shipping point

d.FOB destination

12. When goods are shipped FOB destination and the seller pays the freight charges, the buyer

a.does not take a discount

b.journalizes a reduction for the cost of the merchandise

c.makes no journal entry for the freight

d.journalizes a reimbursement to the seller

13. When the perpetual inventory system is used, the inventory sold is debited to

a.Supplies Expense

b.Cost of Goods Sold

c.Sales

d.Inventory

14. Generally, the revenue account for a merchandising business is entitled

a.Gross Sales

b.Sales

c.Gross Profit

d.Fees Earned

lemonpug879

Capwell Corporation uses a periodic inventory system. Thecompany's ending inventory on December 31, 2018, its fiscal-yearend, based on a physical count, was determined to be $338,000.Capwell's unadjusted trial balance also showed the followingaccount balances: Purchases, $740,000; Accounts payable; $270,000;Accounts receivable, $285,000; Sales revenue, $920,000.

The internal audit department discovered the following items:

Goods valued at $44,000 held on consignment from Dix Companywere included in the physical count but not recorded as apurchase.

Purchases from Xavier Corporation were incorrectly recorded at$64,000 instead of the correct amount of $46,000. The correctamount was included in the ending inventory.

Goods that cost $37,000 were shipped from a vendor on December28, 2018, terms f.o.b. destination. The merchandise arrived onJanuary 3, 2019. The purchase and related accounts payable wererecorded in 2018.

One inventory item was incorrectly included in ending inventoryas 220 units, instead of the correct amount of 1,600 units. Thisitem cost $50 per unit.

The 2017 balance sheet reported inventory of $472,000. Theinternal auditors discovered that a mathematical error caused thisinventory to be understated by $74,000. This amount is consideredto be material. Comparative financial statements will beissued.

Goods shipped to a customer f.o.b. destination on December 25,2018, were received by the customer on January 4, 2019. The salesprice was $52,000 and the merchandise cost $28,000. The sale andcorresponding accounts receivable were recorded in 2018.

Goods shipped from a vendor f.o.b. shipping point on December27, 2018, were received on January 3, 2019. The merchandise cost$30,000. The purchase was not recorded until 2019.

Required:
1. Determine the correct amounts for 2018 endinginventory, purchases, accounts payable, accounts receivable, andsales revenue.
2. Calculate cost of goods sold for 2018.
3. What was the effect of the error in endinginventory on 2017 before-tax income

Determine the correct amounts for 2018 ending inventory,purchases, accounts payable, accounts receivable, sales revenue,and cost of goods sold.


Ending inventory
Purchases
Accounts payable
Accounts receivable
Sales revenue
Cost of goods sold

What was the effect of the error in ending inventory on 2017before-tax income?

2017 before-tax incomewas

ACC 151 Lecture 11: ACC 151 – Lecture 11 – Inventory

Document Summary

Get access

Related Documents

ACC 151 Chapter Notes - Chapter 3: Deferral, Income Statement, Fiscal Year

ACC 151 Lecture Notes - Lecture 10: General Ledger, Market Liquidity, Income Statement

COMMERCE 1AA3 Study Guide - Final Guide: Fifo (Computing And Electronics), Cash Cash, Combined Gas And Steam

Related Questions