Part 1: True or False - Indicate Tor Fon the answer sheet (2 points each question - 20 points total). 1) Under the perpetual inventory system, the cost of goods sold is recorded each time a sale occurs. 2) It is always beneficial for the buyer to take a discount when offered by the seller. 3). Under the FIFO method the cost of the earliest units purchased are the first charged to the cost of goods sold. 4) Terms 2/10 N30 means that the buyer can take a 2% discount if paid within the first 10 days of the next business month. 5)The more inventory a company has the greater the company's net income. 6). Generally all transactions are recorded in both a special journal and the general journal. 7). The Sales Journal is used to record all the sales of a merchandising company. 8) Gross Profit is the Net Income for a merchandising company. 9) A good system of internal control will ensure that financial statements are prepared on time. 10) Under the perpetual system, when the buyer takes a discount, the amount of the discount will be credited to the merchandise inventory account. Part II: Multiple Choice - Indicate the best answer by placing the appropriate letter on the answer sheet (2 points each question - 20 points total). 11) 12) After gross profit is calculated, operating expenses are deducted to determine: a) revenue b) net income c) gross margin d) net margin Howard Company purchased merchandise inventory of $7,000 under terms 2/10n30. What is the cost of the goods if Howard pays within the discount period? a) $6,300.00 b) $6,440.00 c) $6,860.00 d) 7,000.00 13) A control account: a) Does not appear on the Balance Sheet b) Has a balance that equals the sum of the balances in a group of related accounts in the subsidiary ledger c) Contains a complete list of transactions of entries made to the general ledger over time d) is related to a contra account in the general ledger Which assumption in a steadily rising market would yield a higher ending inventory? a) FIFO b) LIFO c) Weighted Average d) Specific Identification 14) 15) Which inventory valuation method is the most accurate? a) FIFO b) LIFO c) Weighted Average d) Specific identification 16). Python Company sells merchandise on account for $5,000 to Monte Company with credit terms 2/10n30. Monte returned $1500 worth of damaged merchandise. How much did Python receive if payment is made within the discount period? a) $3,430.00 b) $4,000.00 c) $4,900.00 d) $3,450.00 17) The most important reason for good measures of internal control would be: a) to safeguard the assets of the business b) to minimize fraud c) to ensure efficient business operations d) all of the above Use the following information to answer questions 18, 19 and 20: A company just starting business made the following inventory purchases in May: Date May 1 May 10 May 15 May 28 Number of Units 150 200 200 Total Cost $ 390.00 $ 598.00 $ 630.00 $ 510.00 150 A physical count of inventory on May 31 reveals there are 200 units on hand. 18) Using the LIFO inventory method, what is the value of the ending inventory? a) $540.00 b) $668.00 c) $1,460.00 d) $1,588.00 19) _Using the FIFO inventory method, what is the costs of goods sold figure for May 31"? a) $540.00 b) $668.00 c) $1460.00 d) $1,588.00 20) Using the weighted Average method, what is the value of the ending inventory? a) 540.00 b) $608.00 c) $668.00 d) $1,520.00 PART III: PLEASE ANSWER ON THE ANSWER SHEET - 15 POINTS 21) Boyd Company has the following options in purchasing inventory from Smith Company: a) purchase 10 units at $55.00 per unit FOB Shipping Point, or b) purchase 10 units at $57.00 per unit FOB Destination Which option is more favorable to Boyd? FULLY EXPLAIN YOUR ANSWER PART IV: PLEASE ANSWER ON THE ANSWER SHEET-15 POINTS Presented below is information for Oakley Company for the month of May 2020: Costs of Goods Sold Advertising Expense Insurance Expense Sales Revenue $524,000 $ 7,500 $ 5,000 $825,000 Rent Expense Sales Discounts Sales Returns & Allowances Salaries and Wages Expense $36.000 $ 8,800 $11,000 $75,000 22) Prepare a Multi-step Income Statement based on the above information PART V: PLEASE ANSWER ON THE ANSWER SHEET - 15 POINTS 23) Prepare the necessary general journal entries to record each of the following transactions under the perpetual inventory system: May 5 May 7: Eustace sells $50,000 of merchandise terms 1/10n30. The merchandise cost $30,000. The buyer returns $4,000 of the merchandise to Eustace. The merchandise returned cost $2,400 Eustace receives the balance due within the discount period (the buyer takes the Discount. May 10: PART VI: PLEASE ANSWER ON THE ANSWER SHEET - 15 POINTS Use the following information to answer questions 24, 25 and 26: Soggy Bottom Company reports the following for the month of April, 2020: Units Arpril 1 Inventory 300 April 12 Purchase 450 April 23 Purchase 750 April 30 Inventory 180 Unit Cost $5.00 $6.00 $8.00 Total Cost $1,500.00 $2,700.00 $6,000.00 24) Compute the cost of inventory under FIFO 25) Compute the cost of goods sold under LIFO 26) Compute the cost of inventory under Weighted Average