Silvertone Corp. sold merchandise to a customer on credit. The invoice amount was $1,000; the invoice date was June 10; credit terms were 1/10, n/30. Which one of the following statements is true?
a.The customer can take a $10 discount if the invoice is paid on June 30
b. The customer should pay $1,000 if the invoice is paid on July 9
c. The customer must pay a $10 penalty if payment is made after July 9.
d. The customer must pay $1,010 if payment is made after June 20.
Which one of the following statements is false?
a.The inventory account is updated after every sale and after every merchandise purchase under the perpetual inventory system.
b.The inventory account is updated only at the end of the accounting period under the periodic inventory system.
c.A cost of goods sold account is updated after each sale of merchandise under the periodic inventory system.
d.A purchases account is used only under the periodic inventory system.
At the year end inventory count, if goods in transit are shipped FOB destination, they should be included in the inventory count of
a.The seller
b.The buyer
c.The shipping company
d.Neither the buyer nor the seller
For which type of inventory would a company most likely use the specific identification method?
a.Barbie dolls
b.Cartons of milk
c.Custom designed diamond rings
d.Gasoline in storage tanks at a gasoline station
dawson, Inc.
Dawson uses a periodic inventory system. At the end of April, Dawson had 20 units on hand.
April 1 On hand, 10 units @ $2 each
$ 20
19 Purchased 90 units @ $3 each
270
Goods available for sale
$290
Refer to Dawson, Inc. If Dawson, Inc. uses FIFO inventory costing, how much is cost of goods sold for April?
a.$230
b.$232
c.$240
d.$250
Dawson, Inc.
Dawson uses a periodic inventory system. At the end of April, Dawson had 20 units on hand.
April 1 On hand, 10 units @ $2 each
$ 20
19 Purchased 90 units @ $3 each
270
Goods available for sale
$290
Refer to Dawson, Inc. If Dawson uses the LIFO inventory method, how much is inventory on the balance sheet as of April 30?
a.$40
b.$50
c.$58
d.$60
During a period of increasing cost prices, which inventory costing method will yield the lowest cost of goods sold?
a.Any method in which the company uses a periodic inventory system
b.FIFO
c.LIFO
d.Weighted Average CostIf
the amount assigned to ending inventory is incorrect,
a.The balance sheet is affected, but the income statement is not
b.The income statement is affected, but the balance sheet is not
c.The balance sheet is affected, but cost of goods sold is not
d.Both the balance sheet and the income statement are affected
Advent Corp. uses a periodic inventory system. At the beginning of 2010 its inventory balance was $40,000. During the first 4 months of 2010, net purchases amounted to $110,000 and net sales were $200,000. On May 1, 2010, a tornado destroyed the company’s warehouse and its entire inventory. The average gross profit percentage in recent years had been 40%. What is the estimated amount of Advent’s inventory loss on May 1, 2010?
a.$20,000
b.$30,000
c.$40,000
d.$70,000
Selected data for Fish, Inc. and Worm Corp., two companies in the same industry, are presented below:
Fish, Inc.
Worm Corp.
Sales
$50,000
$80,000
Cost of goods sold
30,000
50,000
Average inventory balance
5,000
5,000
Based on this data, which statement below is true?
a.Fish, Inc. has a lower gross profit ratio than Worm Corp.
b.Worm Corp has a higher net income than Fish, Inc.
c.Worm Corp sells its inventory faster than Fish, Inc.
d.Fish, Inc. has lower storage costs and a lower investment in inventory than Worm Corp.