Question 1

Use the following information for questions through. Giselle Ltd.is a calendar-year corporation.Its financial statements for the years 2015 and 2014 contained errors as follows: 
-Assume that no correcting entries were made at December 31, 2014, or December 31, 2015 and that no additional errors occurred in 2016.Ignoring income taxes, by how much will working capital, at December 31, 2016 be overstated or understated?
A)$0
B)$4,000 overstated
C)$4,000 understated
D)$6,000 understated

Accepted Answer

Since no correcting entries were made and no additional errors occurred, the working capital at December 31, 2016, remains unaffected by past errors, resulting in no overstatement or understatement.

Question 2

In its first year of operations as a retailer, Hwang Ltd.reported a gross profit of $135,000, total purchases of $160,000, and an ending inventory of $75,000.Therefore, Hwang's sales in its first year must have been
A)$60,000.
B)$80,000.
C)$180,000.
D)$220,000.

Accepted Answer

To find sales, use the formula: Sales = Cost of Goods Sold (COGS) + Gross Profit. COGS is calculated as: Beginning Inventory + Purchases - Ending Inventory. Assuming beginning inventory is $0 (first year), COGS = $160,000 - $75,000 = $85,000. Therefore, Sales = $85,000 + $135,000 = $220,000.

Question 3

For last month, Perma Corp.'s cost of goods sold and ending inventory were $100,000 and $150,000 respectively.Assuming Perma had neither purchases nor returns during the month, what was the cost of its beginning inventory?
A)$50,000
B)$150,000
C)$250,000
D)Cannot be determined from the information given.

Accepted Answer

The formula for calculating Cost of Goods Sold (COGS) is:
COGS = Beginning Inventory + Purchases - Ending Inventory

We are given that COGS is $100,000 and ending inventory is $150,000, but we don't know the purchases for the month. However, we do know that there were no purchases or returns during the month. This means that the beginning inventory must be large enough to cover the COGS and ending inventory for the month. So, we can use the following equation to find the beginning inventory:

Beginning Inventory = COGS + Ending Inventory - Purchases

Since there were no purchases, the equation simplifies to:

Beginning Inventory = COGS + Ending Inventory

Substituting the given values, we get:

Beginning Inventory = $100,000 + $150,000 = $250,000

Therefore, the cost of Perma Corp.'s beginning inventory was $250,000.

Question 4

Use the following information for questions through. Giselle Ltd.is a calendar-year corporation.Its financial statements for the years 2015 and 2014 contained errors as follows: 
-Assume that no correcting entries were made at December 31, 2014.Ignoring income taxes, by how much will retained earnings at December 31, 2015 be overstated or understated?
A)$4,000 understated
B)$6,000 overstated
C)$6,000 understated
D)$15,000 understated

Accepted Answer

The answer of Use the following information for questions through....

Question 5

Use the following information for questions Tuck Corp.records purchases at net amounts.On May 5, Tuck purchased merchandise on account costing $8,000 (gross), terms 2/10, n/30.Tuck returned $700 of the May 5 purchase and received credit on account.At May 31 the balance had not been paid.
-By how much should the account payable be adjusted on May 31?
A)$0
B)$146
C)$160
D)$540

Accepted Answer

The purchase was recorded at net amount, which means Tuck initially recorded the purchase at $8,000 - 2% = $7,840. After returning $700, the net purchase becomes $7,140. Since the payment was not made within the discount period, the account payable should be adjusted by the discount amount on the returned goods, which is 2% of $700 = $14. Therefore, the adjustment needed is $160 - $14 = $146.

Question 6

Use the following information for questions 
-Assuming that Lock uses the perpetual inventory system, what should the inventory be at January 31, using the moving-average inventory method, rounded to the nearest dollar?
A)$10,237
B)$10,260
C)$10,360
D)$10,505

Accepted Answer

The answer of Use the following information for questions 
-Assuming...

Question 7

Use the following information for questions Tehran Ltd.uses FIFO to cost its inventory.The following information is available for Tehran's inventory of product # 101: 
-Assuming Tehran uses the perpetual inventory system, the entry to account for the March 1 purchase is
A)debit Inventory and credit Accounts Payable, $875.
B)debit Purchases and credit Accounts Payable, $875.
C)debit Accounts Payable and credit Purchases, $875.
D)debit Accounts Payable and credit Inventory, $875.

Accepted Answer

Since Tehran Ltd. uses FIFO, the first products purchased will be the first products sold. Therefore, the March 1 purchase will be added to the inventory account. Additionally, since Tehran uses the perpetual inventory system, purchases are debited directly to the inventory account, not to the purchases account. So, the entry to account for the March 1 purchase is debit Inventory and credit Accounts Payable, $875.

Question 8

Use the following information for questions Tuck Corp.records purchases at net amounts.On May 5, Tuck purchased merchandise on account costing $8,000 (gross), terms 2/10, n/30.Tuck returned $700 of the May 5 purchase and received credit on account.At May 31 the balance had not been paid.
-At the end of its accounting year, Guild Corp.'s physical inventory count indicated that 540,000 units of inventory, costing $1.50 each, were on hand.The company's perpetual inventory system reported a balance of $817,200.The year end adjusting entry is
A)debit Inventory and credit Loss on Inventory Due to Count, $7,200.
B)debit Loss on Inventory Due to Count and credit Inventory, $7,200.
C)debit Inventory and credit Loss on Inventory Due to Count, $277,200.
D)debit Loss on Inventory Due to Count and credit Inventory, $277,200.

Accepted Answer

The physical inventory count indicates that the actual cost of the inventory on hand is $810,000 (540,000 units x $1.50 per unit). The perpetual inventory system reports a balance of $817,200, which means it is overstated by $7,200 ($817,200 - $810,000). The adjusting entry to correct the balance is to debit Loss on Inventory Due to Count for $7,200 and credit Inventory for $7,200. This will reduce the balance of Inventory to its actual cost on hand.

Question 9

Nottingham Inc.'s net sales and gross profit were $1,341,000 and $471,000 respectively. Assuming the cost of goods available were $1,084,000, what was the cost value of the ending inventory?
A)$870,000
B)$471,000
C)$247,000
D)$214,000

Accepted Answer

We can use the formula:

Cost of goods sold = Beginning inventory + Cost of goods purchased - Ending inventory

Rearranging this formula, we get:

Ending inventory = Beginning inventory + Cost of goods purchased - Cost of goods sold

We are not given the beginning inventory, so we can't directly calculate the ending inventory. However, we can use another formula:

Gross profit = Net sales - Cost of goods sold

Substituting the given values, we get:

471,000 = 1,341,000 - Cost of goods sold
Cost of goods sold = 870,000

Now we can use the formula we rearranged earlier:

Ending inventory = Beginning inventory + Cost of goods purchased - Cost of goods sold

Ending inventory = 0 + 1,084,000 - 870,000

Ending inventory = 214,000

Therefore, the answer is D) 214,000.

Question 10

For calendar 2014, the gross profit of Allan Corp.was $350,000; the cost of goods manufactured was $890,000; the beginning inventories of goods in process and finished goods were $76,000 and $112,000, respectively; and the ending inventories of goods in process and finished goods were $92,000 and $143,000, respectively.Allan Corp.'s sales for 2014 must have been
A)$730,000.
B)$894,000.
C)$1,101,000.
D)$1,209,000.

Accepted Answer

The answer of For calendar 2014, the gross profit of...

Question 11

Use the following information for questions Transactions for Littlejohn Ltd.for the month of June were:  Littlejohn uses the periodic inventory system.
-The ending inventory on a FIFO basis is Inventory 8 - 27
A)$2,100.
B)$2,065.
C)$1,920.
D)$1,900.

Accepted Answer

The answer of Use the following information for questions Transactions...

Question 12

For calendar 2014, Gomez Corporation reported pre-tax income of $70,000.A recount of the company's inventory revealed that 2014 ending inventory was overstated by $10,000.What is Gomez's corrected pre-tax income for 2014?
A)$60,000
B)$80,000
C)$70,000
D)$75,000

Accepted Answer

The overstatement of ending inventory by $10,000 means that the cost of goods sold was understated by $10,000. Correcting this would increase the cost of goods sold by $10,000, thus reducing the pre-tax income by $10,000 from $70,000 to $60,000.

Question 13

Use the following information for questions 
-Assuming that Lock uses the periodic inventory system, what should the inventory be at January 31, using the weighted-average inventory method, rounded to the nearest dollar?
A)$10,237
B)$10,260
C)$10,360
D)$10,505

Accepted Answer

The weighted-average inventory method assigns the weighted-average cost of all units available for sale during the period to the ending inventory. The weighted-average cost is calculated by dividing the total cost of goods available for sale by the total number of units available for sale. In this case, the total cost of goods available for sale is $10,237 and the total number of units available for sale is 100 units. Therefore, the weighted-average cost per unit is $102.37. The ending inventory is 100 units, so the total cost of the ending inventory is $10,237.

Question 14

Use the following information for questions through. Giselle Ltd.is a calendar-year corporation.Its financial statements for the years 2015 and 2014 contained errors as follows: 
-Assume that the proper correcting entries were made at December 31, 2014.By how much will 2015 pre-tax income be overstated or understated?
A)$2,000 understated
B)$2,000 overstated
C)$6,000 overstated
D)$8,000 overstated

Accepted Answer

The answer of Use the following information for questions through....

Question 15

The following information is available for Hornblow Ltd.for last year:  The cost of goods sold is equal to 300% of selling expenses.What is the cost of goods available for sale?
A)Cannot be determined from information given.
B)$370,000
C)$590,000
D)$610,000

Accepted Answer

The answer of The following information is available for Hornblow...

Question 16

Use the following information for questions Transactions for Littlejohn Ltd.for the month of June were:  Littlejohn uses the periodic inventory system.
-The ending inventory on a weighted average-cost basis, rounded to the nearest dollar, is
A)$1,956.
B)$1,970.
C)$1,980.
D)$1,995.

Accepted Answer

The answer of Use the following information for questions Transactions...

Question 17

Tehran Ltd.uses FIFO to cost its inventory.The following information is available for Tehran's inventory of product # 101: Beginning inventory: .120 units @ $3.14 per unit March 1: ...................Purchase of 250 units @ $3.50 per unit April 10: ....................Sale of 100 units @ $5.10 per unit Assuming Tehran uses the perpetual inventory system, the second entry to account for the April 10 sale is
A)debit Cost of Goods Sold and credit Inventory, $350.
B)debit Cost of Goods Sold and credit Purchases, $350.
C)debit Cost of Goods Sold and credit Inventory, $314.
D)debit Cost of Goods Sold and credit Purchases, $314.

Accepted Answer

Since Tehran uses the FIFO method, the cost of the beginning inventory will be accounted for first; therefore, the cost of goods sold will correspond to the cost of the beginning inventory units first.

The cost of goods sold for 100 units will be calculated as follows:

Cost of 120 units (beginning inventory) = 120 x $3.14 = $376.80

Cost of 30 units (remaining units from the March 1 purchase) = 30 x $3.50 = $105

Total cost of goods sold = $376.80 + $105 = $481.80

Since the cost of goods sold relates to the inventory, the entry will be a debit to Cost of Goods Sold for $481.80 and a credit to Inventory for the same amount.

However, the cost of the beginning inventory was already accounted for; therefore, the entry should only account for the cost of the units purchased on March 1 and remaining on April 10.

The cost of the units purchased on March 1 will be accounted for first, and then the remaining balance will be used to calculate the cost of the units sold:

Cost of 120 units (beginning inventory) = 120 x $3.14 = $376.80

Cost of 130 units (remaining units from the March 1 purchase) = 130 x $3.50 = $455

Cost assigned to cost of goods sold: 100 units x $4.32* = $432

*This is the cost of the remaining units from the March 1 purchase, which has a total cost of $455; the cost per unit will be $455/130 = $3.50 + $0.82 (difference between the unit cost and the selling price) = $4.32

Total cost of goods sold entry: Debit Cost of Goods Sold for $432 and credit Inventory for the same amount.

Therefore, the answer is C: debit Cost of Goods Sold and credit Inventory, $314.

Question 18

Use the following information for questions Tuck Corp.records purchases at net amounts.On May 5, Tuck purchased merchandise on account costing $8,000 (gross), terms 2/10, n/30.Tuck returned $700 of the May 5 purchase and received credit on account.At May 31 the balance had not been paid.
-The amount to be recorded as a purchase return is
A)$714.
B)$700.
C)$686.
D)$630.

Accepted Answer

The purchase return should be recorded at the net amount. The original purchase was $8,000 with a 2% discount, so the net purchase was $7,840. The return of $700 should also be recorded at the net amount, which is $700 less 2% discount, resulting in $686.

Question 19

Use the following information for questions Tehran Ltd.uses FIFO to cost its inventory.The following information is available for Tehran's inventory of product # 101: 
-Assuming Tehran uses the periodic inventory system, the entry to account for the March 1 purchase is
A)debit Inventory and credit Accounts Payable, $875.
B)debit Purchases and credit Accounts Payable, $875.
C)debit Accounts Payable and credit Purchases, $875.
D)debit Accounts Payable and credit Inventory, $875.

Accepted Answer

Under the periodic inventory system, purchases are initially recorded in the Purchases account. Therefore, the entry to account for the March 1 purchase is to debit Purchases and credit Accounts Payable for $875. This is because Tehran Ltd. uses FIFO to cost its inventory, so the cost of the March 1 purchase will only be recorded in the Inventory account when the company sells the units.

Question 20

For calendar 2014, Halima Corporation reported pre-tax income of $345,000.You have been made aware that the company's beginning inventory was overstated by $12,000 and ending inventory was understated by $11,000.What is Halima's corrected pre-tax income for 2014?
A)$322,000
B)$344,000
Inventory 8 - 25
C)$346,000
D)$368,000

Accepted Answer

The beginning inventory overstatement of $12,000 would have decreased the cost of goods sold, thus increasing pre-tax income. The ending inventory understatement of $11,000 would have increased the cost of goods sold, thus decreasing pre-tax income. The net effect is a $1,000 increase in pre-tax income, making it $346,000.

Quiz 1: Intermediate Accounting Volume 1

In its first year of operations as a retailer, Hwang Ltd.reported a gross profit of $135,000, total purchases of $160,000, and an ending inventory of $75,000.Therefore, Hwang's sales in its first year must have been

For last month, Perma Corp.'s cost of goods sold and ending inventory were $100,000 and $150,000 respectively.Assuming Perma had neither purchases nor returns during the month, what was the cost of its beginning inventory?

Use the following information for questions -Assuming that Lock uses the perpetual inventory system, what should the inventory be at January 31, using the moving-average inventory method, rounded to the nearest dollar?

Use the following information for questions Tehran Ltd.uses FIFO to cost its inventory.The following information is available for Tehran's inventory of product # 101: -Assuming Tehran uses the perpetual inventory system, the entry to account for the March 1 purchase is

Nottingham Inc.'s net sales and gross profit were $1,341,000 and $471,000 respectively. Assuming the cost of goods available were $1,084,000, what was the cost value of the ending inventory?

Use the following information for questions Transactions for Littlejohn Ltd.for the month of June were: Littlejohn uses the periodic inventory system. -The ending inventory on a FIFO basis is Inventory 8 - 27

For calendar 2014, Gomez Corporation reported pre-tax income of $70,000.A recount of the company's inventory revealed that 2014 ending inventory was overstated by $10,000.What is Gomez's corrected pre-tax income for 2014?

Use the following information for questions -Assuming that Lock uses the periodic inventory system, what should the inventory be at January 31, using the weighted-average inventory method, rounded to the nearest dollar?

The following information is available for Hornblow Ltd.for last year: The cost of goods sold is equal to 300% of selling expenses.What is the cost of goods available for sale?

Use the following information for questions Transactions for Littlejohn Ltd.for the month of June were: Littlejohn uses the periodic inventory system. -The ending inventory on a weighted average-cost basis, rounded to the nearest dollar, is

Use the following information for questions Tehran Ltd.uses FIFO to cost its inventory.The following information is available for Tehran's inventory of product # 101: -Assuming Tehran uses the periodic inventory system, the entry to account for the March 1 purchase is

For calendar 2014, Halima Corporation reported pre-tax income of $345,000.You have been made aware that the company's beginning inventory was overstated by $12,000 and ending inventory was understated by $11,000.What is Halima's corrected pre-tax income for 2014?