Exam 15: Accounting for Merchandise Inventory

Joe owns an auto parts store called Joe's Auto Care.The following transactions took place during November of the current year. $\text {November 7}$ $\quad$$\text {Turchased merchandise on account from Wheeler Auto for \$ 4,300.}$ $\text {November 9}$ $\quad$ $\text {Paid freight charges of \$ 230 on merchandise purchases on the 7 th.}$ $\text {November 11}$ $\quad$ $\text {Sold merchandise on acrount to Lancaster Auto 5 ales for \$ 3,500. The cost of the merchandise was \(\$ 2,500\).}$ $\text {November 13}$ $\quad$ $\text {Received a credit memo from Wheeler for merchandise returned, \$ 670.}$ $\text {November 20 }$ $\quad$$\text {Issued a credit memo to Lancaster Auto 5ales for merchandise returned, \$B20. The cost of}$ Journalize the above transactions using the perpetual inventory system.

During a period of inflation,LIFO will produce the highest net income.

The principle of consistency states that:

If a change is made in the inventory valuation method,full disclosure should be indicated.

An inventory ledger may be used to track inventory.

Under the periodic inventory system,in addition to making the entry to record a sale,a company would:

St.Paul Corporation had a beginning inventory of $2,500 which would retail for $4,000.They made $9,000 in purchases which would retail at $14,400.The sales for the period were $15,000.What is the estimated cost of ending inventory under the retail inventory method?

Given the following accounts: [1] Cash [2] Accounts receivable [3] Merchandise inventory [4] Supplies [5] Accounts payable [6] Sales [7] Sales returns and allowances [8] Sales discounts [9] Cost of goods sold [10] Purchases [11] Purchase returns and allowances [12] Purchase discounts [13] Freight-in Indicate the account(s) to be debited and credited to record the following transactions. -Customer returned goods - Periodic Debit ________ & ________ Credit ________ & ________

One advantage of the LIFO method is that:

Goods on consignment to another company:

Under the perpetual inventory system,in addition to making the entry to record a return of goods from a customer,a company would:

If merchandise is purchased ________,the buyer becomes the owner when the merchandise is placed on the carrier.

The company returned $200 of damaged merchandise.The entry to record this under the periodic inventory method is:

Assume that in Year 1,the ending merchandise inventory is overstated by $30,000.If this is the only error in Years 1 and 2,fill in the items below,indicating which items will be understated,overstated,or correctly stated for Year 2. Ending merchandise inventory Year 2 Beginning merchandise inventory Year 2 Cost of goods sold Year 2 Gross profit Year 2 Net income Year 2 Ending owner's capital Year 2

If a mistake is made in calculating ending inventory,it will take three accounting periods to be self-correcting.

Calculate the ending inventory under each of the following methods given the information below about purchases and sales during the year.Assume a periodic inventory system. April 1 Beginning inventory 20 units \ \ 30 11 Purchases 70 units @\ 32 21 Purchases 50 units @\ 35 Sales for April: 115 units a)________ FIFO b)________ LIFO c)________ Weighted-average

The journal entry to record a sale of inventory under the perpetual system includes:

An incorrect inventory figure will affect only the income statement.

Under the ________ inventory system,no entries are made to the merchandise inventory or cost of goods sold account during the year.

A customer returned merchandise that had been paid for within a discount period for credit.The entry was recorded with a debit to Sales Returns and Allowances and a credit to Accounts Receivable for the net amount.This error would cause: