Q4 4-7

Prof Cris, CPA 4. During the taking of its physical inventory on December 31, 2016, The Bike Shop ncorrectly counted its inventory as $270,000 instead of the correct amount of $190,000. Th e effect on the balance sheet and income statement would be as follows: a. assets overstated by $80,000: retained earnings understated by $80,000; net income statement understated by $80,000. b. assets and retained earnings overstated by $80,000; net income understated by $80,000. c. assets overstated by $80,000; retained earnings u nderstated by $80,000; no effect on the income statement. d. assets and retained earnings overstated by $80,000; net income overstated by $80,000. 5. A compan y receives payment on August 5 for services rendered, two weeks earlier, to ould be recorded if the one of its customers on account. Which of the following entries w company uses accrual basis accounting? a. Cash debit; Accounts Receivable credit. b. Accounts Receivable debit; Fees Earned credit. c. Cash debit; Fees Earned credit. d. None of these are correct. r the accrual method of accounting, but not under cash basis accounting? a. Unearned Revenue. b. Salary Expense. c. Service Revenue. d. Cash. usethefollowing informationto answerauestionez. The Wood Company sells blankets for $60 each. The following was taken from the inventory records during May. The company had no beginning inventory on May 1. Product Z Units Cost $30 Date May 3 Purchase May 10 May 17 May 20 May 23 May 30 Purchase 5 Sale Purchase 10 34 Sale Sale 10 $40 7. Assuming that the company uses the perpetual inventory system, determine the cost o merchandise sold for the sale of May 20 using the LIFO inventory cost method a. $204 b. $196 c. $124 d. $240