1. Consider the following information: beginning inventory (physically counted) was $4,000, ending inventory (physically counted) was $2,000; purchases during the period totaled $10,000; and the recorded cost of goods sold during the period totaled $9,000. What was the amount of shrinkage during the period?
  2. $1,000
  3. $2,000
  4. $3,000
  5. $5,000
  1. Calculate the Cost of Goods Sold under (a) FIFO (b) LIFO and (c) Weighted average based on the following information. Assume a PERIODIC inventory system.

Beginning Inventory:2,000 units @$20/each

Sale #1 :1,000 units

Purchase #1 :6,000 units @ $22/each

Sale #2 :3,000 units

Purchase #2 :8,000 units @$25/each

Sale #3 :5,000 units

Total Units Sold 9,000

Total Units in EI7,000

Total Units available for sale 16,000

Total Cost of Goods Available for sale$372,000

**These are helpful totals to start with!!!!**

(a) FIFO Sell oldest inventory first.

2,000 units @ $20= $40,000

6,000 units @ $22=$132,000

1,000 units @ $25= $25,000

9,000 units sold=$197,000 COGS!

(b) LIFO Sell newest inventory first. (most recently purchased)

8,000 units @ $25=$200,000

1,000 units @ $22= $22,000

9,000 units sold=$222,000 COGS

c) Weighted Average An average cost/unit

Total Cost of Goods Available for Sale$372,000 = $23.25/unit

Total Units Available for Sale 16,000

=$23.25 * 9,000 units sold= $209,250 COGS

  1. At the end of the year, Wildcat Company understated its ending inventory by $15,000. This will cause:
  2. Cost of goods sold to be understated
  3. Net income to be understated
  4. Stockholder’s equity to be overstated
  5. Next year’s ending inventory to be overstated
  1. On average, 5% of credit sales has been uncollectible in the past. At the end of the year, the balance of accounts receivable is $100,000 and the allowance for doubtful accounts has a credit balance of $500 net credit sales during the year were $150,000. Using the percentage of credit sales method, the estimated bad debt expense would be:
  2. $5,000
  3. $7,000
  4. $7,500
  5. indeterminable
  1. The amount of uncollectible accounts at the end of the year is estimated to be $25,000 using the aging of accounts receivable method. The balance in the Allowance of Doubtful Accounts account is an $8,000 credit before adjustment. Assuming no accounts are written off during the period, what will be the amount of bad debts expense for the period?
  2. $8,000
  3. $17,000
  4. $25,000
  5. $33,000
  1. Sure Company purchased a machine on January 1, 2004, at a cash cost of $12,000. The estimated useful life is 10 years, and the estimated residual value is $3,000. The company will use the double declining-balance method. Depreciation expense for the second year will be
  2. $2,400.
  3. $2,230.
  4. $1,920.
  5. $ 900.
  1. The Widget Tool and Die Company buys a $400,000 stamping machine that has an estimated residual value of $20,000. The company expects the machine to produce two million units. It makes 400,000 units during the current period. If the units-of-production method is used, the depreciation expense for this period is:
  2. $80,000.
  3. $400,000.
  4. $76,000.
  5. $380,000.
  1. Simpkins Co. disposed of an asset at the end of year 8 of the asset's life originally estimated to be 10 years. The original cost was $50,000 with an estimated residual value of $5,000 and it was being depreciated under the straight-line method. It was sold for $10,000 cash. What was the gain or loss on the disposal at the end of year 8?
  2. $4,000 gain
  3. $4,000 loss
  4. $1,000 gain
  5. No gain or loss
  1. Cy Corporation sold its $1,000,000, 7%, ten-year bonds to the public on January 1, 2004. The bonds pay interest annually, beginning on December 31, 2004. Austin received $1,153,420 in cash at the issuance of the bonds. The market rate of interest when the bonds were sold was 5%.

What is the carrying value of the bond on December 31, 2005 assuming the effective-interest method is used?

  1. $1,000,000
  2. $1,128,146
  3. $1,135,782
  4. $1,153,420
  1. During 2004, Thomas Company recorded bad debt expense of $15,000 and wrote off an uncollectible account receivable amount to $5,000. Assuming a January 1,2004, balance in the allowance for doubtful accounts of $10,000, the December 31, 2004 balance in the allowance account would be
  2. $25,000
  3. $20,000
  4. $15,000
  5. $5,000