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

(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