Question 1

At the end of the month Main Ltd. determined that the ending balance of inventory was $125,000. How might this information be recorded?

Multiple Choice

The information is not recorded as no economic event had taken place.

None of the other alternatives are correct

A decrease in inventory of $125,000 and an increase in expenses of $125,000

An increase in expenses of $125,000 and an increase in accounts payable of $125,000

An increase in inventory of $125,000 and a decrease in cash of $125,000.

Question 2

When a company uses the perpetual inventory system in accounting for its merchandise inventory, which of the following is true?

Multiple Choice

The inventory account is updated after each sale

The inventory account is updated throughout the year as purchases are made.

Cost of goods sold is computed at the end of the accounting period rather than at each sale.

None of the other alternatives are correct

Purchases are recorded in the cost of goods sold account.

Question 3

The following amounts have been extracted from the accounts of Sell-It at its year-end, December 31, 20x9:

Sales	$	50,000
Cost of Goods Sold	$	43,000
Inventory	$	10,000
Account Payable	$	8,000

If an error were made computing Sell-its ending inventory and inventory were understated by $2,000 then:

Multiple Choice

Cost of goods sold is understated

liabilities are overstated by $2,000

net income is overstated by $2,000

gross profit is understated by $2,000

None of the other alternatives are correct

Question 4

The following amounts have been extracted from the accounts of Sell-It at its year-end, December 31, 20x9:

Sales	$	50,000
Cost of Goods Sold	$	35,000
Inventory	$	10,000
Account Payable	$	8,000

The gross profit which Sell-it would report is

Multiple Choice

$15,000

$40,000

$7,000

None of the other alternatives are correct

$50,000

Question 5

AB Ltd.'s sales revenue for year 1 is $5,280 with gross profit percentage of 40%. Also during the year AB Ltd.s Inventory decreased by $1,175.

Required: ABs net purchases for the period must have been: $

Question 6

AB Ltd. presents the following selected accounts, all balances are after adjusting journal entries. All accounts have normal balances (accounts which are normally debits have debit balances here and visa-versa). Prepare a multi-step income statement.

Advertising Expense 1,300 Advetising Payable 1,520 Interest Expense 350 Interest Payable 1,050 Inventory at beginning of the period 15,100 Inventory at the end of the period 10,200 Equipment - Accumulated Depreciation 800 Equipment - Depreciation Expense 100 Purchases 8,005 Purchases Discounts 550 Purchases Returns and Allowance 70 Salary and Wages Expense 7,100 Salary and Wages Payable 530 Sales 32,738 Sales Discounts 880 Sales Returns and Allowances 1,230 Transportation In 400 Transportation Out 300 Utilities Expense 8,005

Required 1: ABs Net Sales for the period must have been: $

Required 2: ABs Cost of Goods Available for Sale for the period must have been: $

Required 3: ABs Cost of Goods Sold for the period must have been: $

Required 4: ABs Gross Profit on Sales in dollars for the period must have been: $

Required 5: ABs total Operating Expenses (not including COGS) for the period must have been: $

Required 6: ABs Net Income (loss) in dollars for the period must have been: $