Question 1: A company purchased 100 units for $20 each on January 31. It purchased 100 units for $30 on February 28. It sold 150 units for $45 each from March 1 through December 31. If the company uses the Last-In, First-Out inventory costing method, what is the amount of Cost of goods sold on the December 31 income statement?
- $4,000
- $3,750
- $6,750
- $3,500
- None of these is correct
Question 2: In a periodic system, inventory balances and the cost of goods sold for the current period are determined:
- at the time of sale.
- on a frequent basis.
- on the first day of each year.
- when a physical inventory count is taken.
Question 3: A purchase return of goods purchased on credit is recorded by the purchasing company as a debit to what account?
- Accounts receivable
- Inventory
- Cost of goods sold
- Accounts payable
Question 4: When a company uses FIFO, the Cost of goods sold correlates to the most recently purchased goods, and the ending inventory correlates to the oldest goods in stock.
Question 5: The following data is available:
Net sales, first month $13,000
Normal gross profit 45%
Beginning inventory 8,000
Net purchases 7,000
Using the gross profit method, the Estimated ending inventory balance would be:
- $15,000
- $ 7,150
- $ 7,850
- $ 5,850
- None of these is correct