exhibit 7 2 edwards co purchased raw materials with a cost of 95 000 on march 2 2015 4313873

exhibit 7 2 edwards co purchased raw materials with a cost of 95 000 on march 2 2015 4313873

Exhibit 7-2

Edwards Co. purchased raw materials with a cost of $95,000 on March 2, 2015. Credit terms of 3/20, n/60 applied.

41.Refer to Exhibit 7-2. If Edwards uses the net method and pays for the purchase on March 18, 2015, what amount is recorded in the Purchase Discounts Taken account?

a.

$0

b.

$2,850

c.

$5,000

d.

$3,000

42.Refer to Exhibit 7-2. If Edwards uses the net method and pays for the purchase on March 31, 2015, what amount is recorded in the Purchase Discounts Lost account?

a.

$0

b.

$2,850

c.

$4,000

d.

$8,000

43.McClure Corp. purchased raw materials with a cost of $86,000. Credit terms of 3/10, n/60 apply. If McClure uses the net price method, the purchase should be recorded as

a.

$77,400

b.

$86,000

c.

$83,420

d.

$88,580

44.Which one of the following types of costs is most likely to be included in determining the cost of inventory?

a.

freight-in costs

b.

freight-out costs

c.

interest cost for amounts borrowed to finance the purchase of inventory

d.

marketing costs

45.Concerning purchase discounts, which one of the following statements is true?

a.

Purchase discounts taken should be deducted from the acquisition cost of the inventory.

b.

The net price method results in recording accounts payable at the maximum value of the liability that the company may be required to pay out.

c.

Purchase discounts lost should be included in the cost of inventory.

d.

An advantage of the gross price method is that it isolates purchase discounts lost and thus highlights inefficiencies.

46.On June 1, Dollar Hardware, Inc. had an inventory of 300 gas grills costing $100 each. Purchases and sales during June are as follows:

Date

Purchases

Sales

June 3

100 @ $125 each

June 10

50 @ $110 each

June 17

150 @ $130 each

June 28

50 @ $120 each

What is the cost of Dollar’s inventory on June 30 using the FIFO method?

a.

$15,000

b.

$16,000

c.

$16,500

d.

$18,000

47.On August 1, Micro Encoders, Inc. had 120 units of a certain software package that cost $6 per unit. DuringAugust, the following purchases were made:

August 7

60 units @ $9.00 per unit

15

80 units @ $12.00 per unit

21

140 units @ $10.50 per unit

During August, 300 units were sold. If Micro Encoders uses the weighted average method, the cost of ending inventory would be

a.

$922.50

b.

$2,767.50

c.

$937.50

d.

$2,812.20

48.Rubric, Inc. provided the following inventory transaction summary for May:

5/1

Purchased 200 units @ $3.00 per unit

5/15

Sold 40 units

5/21

Purchased 300 units @ $5.00 per unit

5/31

Purchased 40 units @ $10.00 per unit

In addition, it has been determined that Rubric’s inventory at the beginning of the month was $400.00 (200 units).

What was Rubric’s cost per unit at the end of May, using the moving average method?

a.

$3.00

b.

$2.00

c.

$4.00

d.

$6.00

49.Morton uses the moving average flow assumption. On January 1, there were 180 units on hand and the total inventory cost was $900. On January 10, 40 more units were purchased at a cost of $6 per unit. Sales included 20 units on January 3 and 60 units on January 17. What was the total cost of goods sold recorded for the units sold on January 17?

a.

$728

b.

$330

c.

$100

d.

$312

50.Eller Company uses a periodic inventory system. Relevant inventory information for the year follows:

1-Jan

Beginning inventory

20 units @ $170 per unit

23-May

Purchased

20 units @ $135 per unit

5-Nov

Purchased

400 units @ $185 per unit

18-Nov

Purchased

100 units @ $195 per unit

At year-end, 50 units remain in inventory. What is the cost of the ending inventory on a LIFO basis?

a.

$7,950

b.

$7,100

c.

$8,750

d.

$8,450

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