Practice Quiz A
1. A company just starting its business made the following four inventory purchases in June:
Date
Jun 1
Jun 10
Jun 15
Jun 28
Number of Units
150
200
200
150
Total Cost
$480
660
680
525
On June 25th, the company made its first sale when a local customer purchased 500 units for
$3,500. The company uses a perpetual inventory system. Using the average cost formula, the cost
of the ending inventory on June 30th is
(a) $670.00
(b) $690.00
(c) $1,675.00
(d) $1,645.55
2. Giants Company sold merchandise to Yankees Company on account for $65,000 with credit
terms of 3/10, n/30. The cost of the merchandise sold was $43,800. During the discount period,
Yankees Company returned $??? of merchandise and paid its account in full (minus the discount)
by remitting $43,300 in cash. Yankees Company uses a perpetual inventory system. How much of
merchandize was the returned by the Yankees Company (to Giants Company)?
3. In a period of rising prices which inventory method generally provides the greatest amount of
net income?
A. Average-cost.
B. FIFO.
C. Specific Identification.
D. Cannot be determined.
4. Which of the following ratio should you consider (if any) when analyzing the inventory
turnover?
a) Earnings per Share
b) Price Earnings Ratio
c) Debt to Asset Ratio
d) Current Ratio
5. A company shows a balance in Salaries and Wages Payable of $48,000 at the end of the
September, 2025. The next payroll amounting to $54,000 is to be paid in the following month of
October, 2025. What will be the journal entry to record the payment of salaries?
A.
Salaries and Wages Expense 54,000
B.
Salaries and Wages Expense 54,000
C.
Salaries and Wages Expense 6,000
D.
Salaries and Wages Expense 6,000
Salaries and Wages Payable 48,000
/
Salaries and Wages Payable 54,000
/
Cash
54,000
/
Cash
6,000
/
Cash
54,000
6. Each of the following statements is justified by a fundamental quality or an enhancing quality
of useful information. Write the letter in the blank next to each statement corresponding to the
quality involved.
a.
b.
c.
Comparability
Understandability
Verifiable
_____ 6-1.
_____ 6-2.
_____ 6-3.
_____ 6-4.
_____ 6-5.
d.
e.
f.
Consistency
Relevance
Faithful representation
A company uses the same accounting principles from year to year.
Information where independent measures, using the same methods, obtain similar
results.
Information presented in a clear and concise fashion.
Information that makes a difference in a decision.
Information accurately depicts what really happened.
7. Answer the following questions using B/S below.
FRANKLIN LTD
Statement of Financial Position
December 31, 2018
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Cash
$ 65,000
Accounts payable
$ 66,000
Prepaid insurance
15,000
Salaries payable
25,000
Accounts receivable
95,000
Bonds payable (3yrs)
225,000
Inventory
120,000
Total liabilities
316,000
Land
165,000
Building
Less: Accumulated
depreciation
$235,000
Trademark
Less: Accum. Amort.
$125,000
(37,500)
Total Assets
$712,000
(70,500)
Common shares
Retained earnings
Total shareholders’ Equity
250,000
146,000
396,000
Total Liab. and Equity
$712,000
7-1. Calculate Current Ratio and Working Capital.
7-2. Calculate Debt-equity Ratio.
7-3. Assuming COGS = $450,000 and Inventory for 2017 year end is also $120,000, compute the
Inventory Turnover.