- If the estimated rate of gross profit is 30%, what is the estimated cost of the merchandise inventory on September 30, based on the following data?
| Sep. 1 | Merchandise inventory (at cost) | $125,000 |
| Sep. 1-30 | Purchases, net (at cost) | 300,000 |
| Sep. 1-30 | Sales | 150,000 |
| a. | $105,000 | |
| b. | $320,000 | |
| c. | $192,500 | |
| d. | $275,000 |
Answer = b
- The following lots of a particular commodity were available for sale during the year:
| Beginning inventory | 10 units at $30 |
| First purchase | 25 units at $32 |
| Second purchase | 30 units at $34 |
| Third purchase | 10 units at $35 |
- The firm uses the periodic system and there are 20 units of the commodity on hand at the end of the year. What is the amount of inventory at the end of the year according to the FIFO method?
| a. | $655 | |
| b. | $620 | |
| c. | $659 | |
| d. | $690 |
Answer = d
- If a company mistakenly counts more items during a physical inventory than actually exist, how will the error affect their bottom line?
| a. | only gross profit will be affected | |
| b. | no change to net income | |
| c. | net income will be understated | |
| d. | net income will be overstated |
Answer = d
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