Mastering Inventory Questions.


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Mastering Inventory Questions.docx Question 1 BaCo Company opens its business in 20X1 and purchases merchandise on account for $88,000. In 20X2, BaCo pays $67,000 cash on the $88,000 due, sales are $145,000, and ending inventory is $24,000. BaCo’s gross profit for 20X2 is $57,000 $78,000 $81,000 $102,000 Question 2 GeCo begins 20X4 with merchandise costing $69,000. Sales are $233,000, purchases are $198,000 and ending inventory is $81,000. GeCo’s 20X4 cost of goods sold is $186,000 $210,000 $221,000 $245,000 Question 3 On December 3, HuCo purchases merchandise for $47,000 on account, F.O.B. destination. Freight charges are $800. On December 26, HuCo pays the vendor $14,000. On HuCo’s December 31 balance sheet, the Accounts Payable balance will be $33,000 $33,800 $47,000 $47,800 Question 4 MoCo begins operations in April, uses the perpetual method, and records merchandise purchases at net. MoCo makes two purchases on account. Terms are 1/15, n/45. On April 4, MoCo purchases merchandise for $3,000, which it pays for on April 16. On April 11, it makes a $9,000 purchase that it pays for on April 29, but there are no sales in April. On April 30, the balance in MoCo’s Inventory ledger account is $11,880 $11,910 $11,970 $12,000 Question 5 PiCo uses the perpetual method. On February 17, PiCo sells $30,000 in merchandise on account that cost $10,000. On February 23, 10% of these goods are returned. Prepare the entry that PiCo makes on February 23 to record the sales return. Debit Sales Returns $3,000 and credit Accounts Receivable $3,000 Debit Sales Returns $1,000; debit Gross Profit $2,000; and credit Accounts Receivable $3,000 Debit Sales Returns $3,000 and credit Accounts Receivable $3,000 and then debit Inventory $1,000 and credit Cost of Goods Sold $1,000 Debit Sales Returns $3,000 and credit Accounts Receivable $3,000 and then debit Inventory $1,000 and credit Purchase Returns $1,000 Question 6 RiCo uses the perpetual method for inventory and records purchases at gross. In 20X4, it has total merchandise purchases of $324,000. It returns $19,000 of the merchandise for full credit and receives $7,000 in allowances from its vendors for defective merchandise and takes cash discounts of $1,000. The net cost of RiCo’s 20X4 merchandise purchases is $297,000 $298,000 $305,000 $324,000 Question 7 VeCo, which uses the perpetual method, records merchandise purchases at gross. On October 3, VeCo buys $42,000 of merchandise on account. Terms are 2/10, n/40. On October 9, VeCo returns goods that cost $10,000. On October 11, VeCo pays $31,360. What entry does VeCo record on October 11? Debit Accounts Payable $31,360 and credit Cash $31,360 Debit Accounts Payable $32,000; credit Cash $31,360; and credit Purchase Discounts $640 Debit Accounts Payable $32,000; credit Cash $31,360; and credit Inventory $640 Debit Accounts Payable $31,360; credit Purchase Discounts $640; credit Cash $31,360; and credit Inventory $640 Question 8 JaCo uses the periodic method and records merchandise purchases at net. Its 20X4 ending inventory is $69,000. During 20X5, JaCo purchases merchandise for $878,000, with freight-in of $11,000. Purchase returns are $17,000, purchase discounts lost are $4,000, and the cost of merchandise on hand at year end is $91,000. At year-end, JaCo records the following entry to close out all inventory-related accounts and compute cost of goods sold. Ending Inventory 91,000 Purchase Returns 17,000 Cost of Goods Sold 850,000 Purchases 878,000 Freight-In 11,000 Beginning Inventory 69,000 Ending Inventory 91,000 Purchase Returns 17,000 Cost of Goods Sold 846,000 Purchase Discounts Lost 4,000 878,000 Purchases 11,000 Freight-In 69,000 Beginning Inventory Ending Inventory 91,000 Purchase Returns 17,000 Cost of Goods Sold 854,000 Purchases 878,000 Freight-In 11,000 Beginning Inventory 69,000 Purchase Discounts Lost 4,000 Ending Inventory 6

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