A company discovered in 2012 that it had overstated the inventory balance for Dec 31, 2010 by $10,000. The company had (incorrectly) reported Net Income to be $300,000 for 2010, and $400,000 for 2011. What should be the corrected Net Incomes for 2010 and 2011?
Answer
A. Corrected 2010 Net Income Corrected 2011 Net Income
$290,000 $410,000
B. Corrected 2010 Net Income Corrected 2011 Net Income
$310,000 $390,000
C. Corrected 2010 Net Income Corrected 2011 Net Income
$290,000 $390,000
D. Corrected 2010 Net Income Corrected 2011 Net Income
$310,000 $410,000
Question 2
Cheryl Company uses the periodic inventory system. For the current month, the beginning inventory consisted of 1,200 units that cost $12 each. During the month, the company made two purchases: 500 units at $13 each and 2,000 units at $13.50 each. Cheryl Company also sold 2,150 units during the month. Using the periodic FIFO method, what is the cost of ending inventory?
Answer
A. $18,600
B. $20,925
C. $18,950
D. $20,073
Question 3
Clint Company and Black Company reported the following information in their financial statements, prior to their merger:
Clint Company Black Company
$millions Sales COGS Inventories Sales COGS Inventories
2011 $14,250 $9,650 $3,335 $22,140 $16,050 $8,450
2010 13,750 8,560 4,220 23,050 14,200 7,700
To the closest hundredth, how much is the 2011 inventory turnover for Black Company?
Answer
A. 1.72
B. 1.99
C. 1.80
D. 0.90
Question 4
Cook Company uses the LIFO inventory costing method for both its tax reporting purposes and its financial reporting purposes. Cook Company's inventories are reported at $502 million on its balance sheet. In its footnotes, Cook Company is required to report the amount at which inventories would have been reported under FIFO method. The difference between these two numbers is commonly referred to as what?
Answer
A. LIFO holding gain
B. LIFO liquidation
C. LIFO reserve
D. LCM disclosures
Question 5
Cork Company imports and sells a product produced in Canada. In the summer of 2011, a natural disaster disrupted production, affecting its supply of product. Cork uses the LIFO inventory method. On January 1, 2011, Cork's inventory records were as follows:
Year purchased Quantity (units) Cost per unit Total cost
2009 2,000 $40 $ 80,000
2010 5,000 $55 275,000
Total 7,000 $355,000
Through mid December of 2011, purchases were limited to 8,000 units, because the cost had increased to $80 per unit. Cork sold 14,200 units during 2011 at a price of $98 per unit, which significantly depleted its inventory.
Assume that Cork purchases 11,400 more of the $80 units on December 31, 2011. Compute Cork's gross profit for 2011.
Answer
A. $1,036,600
B. $ 255,600
C. $ 912,000
D. $ 428,600
Question 6
During its first and second years of operations, Roger Company, a corporation using a periodic inventory system, made undiscovered errors in taking its year-end inventories that overstated year 1 ending inventory by $70,000 and overstated year 2 ending inventory by $50,000. The combined effect of these errors on reported income is:
Answer
A. Year 1 Year 2 Year 3
Overstated Overstated Understated
$70,000 $120,000 $50,000
B. Year 1 Year 2 Year 3
Overstated Overstated Not affected
$70,000 $50,000
C. Year 1 Year 2 Year 3
Understated Understated Not affected
$70,000 $120,000
D. Year 1 Year 2 Year 3
Overstated Understated Understated
$70,000 $20,000 $50,000
E. None of the above
Question 7
During its first year of operations, Walker Company, using a periodic inventory system, made undiscovered errors in taking its year-end inventory that overstated year 1 ending inventory by $35,000. The effect of these errors on reported income is:
Answer
A. Year 1 Year 2
Understated Overstated
$35,000 $35,000
B. Year 1 Year 2
Overstated Understated
$35,000 $35,000
C. Year 1 Year 2
Overstated Not affected
$35,000
D. Year 1 Year 2
Overstated Overstated
$35,000 $35,000
E. None of the above
Question 8
For 2011, Bono Company reported sales of $900,000, cost of goods sold of $640,000, and a gross profit of $260,000. Bono's inventory at January 1, 2011 was $150,000; the inventory at December 31, 2011 was $100,000. Bono's 2011 inventory turnover is:
Answer
A. 7.20
B. 4.27
C. 5.12
D. 2.08
E. None of the above