1. Hardy Company is a wholesale electronics distributor. On December 31, 2011, it prepared the following partial income statement: Gross sales ............................... $600,400 Sales discounts ........................... 400 Net sales ................................. $600,000 Cost of goods sold: Beginning inventory ..................... $200,000 Net purchases ........................... 300,000 Given this information, if Hardy Company's gross margin is 30 percent of net sales, what is the correct ending inventory balance? $80,000 $120,000 $180,000 $500,000 2. The term LIFO reserve refers to a cost flow assumption for valuing inventory. a special fund set aside to cover LIFO liquidations. inventory pools used in the dollar-value LIFO method. the difference between the ending inventory amount under LIFO and the ending inventory amount under another inventory cost flow assumption. 3. A company using a periodic inventory system neglected to record a purchase of merchandise on account at year-end. This merchandise was omitted from the year-end physical count. How will these errors affect inventory at year-end and cost of goods sold for the year? Inventory Cost of Goods Sold a. No effect Understate b. No effect Overstate c. Understate Understate d. Understate No effect