36. AAA Co. uses a periodic inventory system and has the following information in regard to its inventory:

Beginning inventory 350 units @ 14 $4,900

Purchase on January 25 450 units @ 15 6,750

Purchase on March 15 350 units @ 16 5,600

Purchase on October 2 550 units @ 17 9,350

Goods available for sale $26,600

There are 850 units in ending inventory. What is the amount of the ending inventory using the FIFO method?

A $4,900

B $11,650

C $9,350

D $14,150

37. Engstrom Company makes a sale and collects a total of $446.90, which includes a 9% sales tax. What is the amount that will be credited to the Sales Revenue account?

A. $408.00

B. $410.00

C. $487.12

D. $446.90

38. Assume that no dividends were declared during the current year. Which of the following statements about the effect of a net loss on the closing process is correct?

A. If a company has a net loss, the amount of revenues to be closed will be greater than the amount of expenses to be closed in the closing process.

B. If a company has a net loss during the current accounting period, then the ending Retained Earnings will be smaller than the beginning Retained Earnings.

C. When closing entries are prepared, Common Stock is debited if a company has a net loss.

D. If a company has a net loss, the closing entry will include debits to the revenue accounts, credits to the expense accounts, and a credit to Retained Earnings.

39. The Grass is Greener Company borrows money from a bank. Part of the loan agreement requires Grass is Greener to maintain stockholders' equity of at least 40% of assets or otherwise to pay a higher interest rate. This requirement is referred to as a:

A. call feature.

B. bond rating.

C. loan covenant.

D. credit rating.

40. One of the major advantages of making adjustments in order to improve the quality of financial statements is that they:

A. provide an opportunity to manipulate the numbers to the best advantage of the reporting company.

B. ensure that all estimates of future activities are eliminated from consideration.

C. ensure that revenues and expenses are recognized conservatively during the period in which they are paid.

D. ensure that revenues and expenses are recognized during the period they are earned and incurred.