Atom company just began business

At May 1, 2012, Heineken Company had beginning inventory consisting of 100 units with a unit cost of $7. During May, the company purchased inventory as follows: 200 units at $7 300 units at $8 The company sold 500 units during the month for $12 per unit. Heineken uses the average cost method. Heineken's gross profit for the month of May is (Points : 1)

$2,250 $3,750 $4,500 $6,000

1 of 10

Quark Inc. just began business and made the following four inventory purchases in June:

June

1

150 units

$ 825

June

10

200 units

1,120

June

15

200 units

1,140

June

28

150 units

885

$3,970

A physical count of merchandise inventory on June 30 reveals that there are 250 units on hand. Using the FIFO inventory method, the amount allocated to ending inventory for June is (Points : 1)

$1,385. $1,425. $1,455. $1,475.

2 of 10

Which of the following is not considered in computing net cost of purchases? (Points : 1)

Purchases returns and allowances Purchases Freight paid on purchased goods Freight paid on goods shipped to customers

3 of 10

Atom Company just began business and made the following four inventory purchases in June:

June

1

150 units

$ 825

June

10

200 units

1,120

June

15

200 units

1,140

June

28

150 units

885

$3,970

A physical count of merchandise inventory on June 30 reveals that there are 250 units on hand. Using the LIFO inventory method, the value of the ending inventory on June 30 is (Points : 1)

$1,385. $1,425. $1,455. $1,475.

4 of 10

In a period of increasing prices, which inventory flow assumption will result in the lowest amount of income tax expense? (Points : 1)

FIFO LIFO Average Cost Method Income tax expense for the period will be the same under all assumptions.

5 of 10

Adams Company is a retailer and uses a perpetual inventory system. Which statement is correct? (Points : 1)

Returns of merchandise inventory by Adams Company to a manufacturer are credited to Inventory. Freight paid to get merchandise inventory to Adams Company's store is debited to Freight Expense. A return of merchandise inventory by one of Adams Company's customers is credited to Inventory. Discounts taken by Adams Company's customers are credited to Inventory.

6 of 10

Two companies report the same cost of goods available for sale but each employs a different inventory costing method. If the price of goods has increased during the period, then the company using (Points : 1)

LIFO will have the highest ending inventory. FIFO will have the highest cost of goods sold. FIFO will have the highest ending inventory. LIFO will have the lowest cost of goods sold.

7 of 10

Which of the following statements is true regarding the profit margin ratio? (Points : 1)

The profit margin ratio can be improved by decreasing the gross profit rate and/or controlling operating expenses and other costs The profit margin ratio does not vary across industries. Discount stores with high merchandise turnover generally have higher profit margins. If the profit margin ratio has a higher value, this suggests favorable return on each dollar of sales.

8 of 10

In periods of rising prices, which is an advantage of using the LIFO inventory costing method? (Points : 1)

Ending inventory will include latest (most recent) costs and thus be more realistic. Cost of goods sold will include latest (most recent) costs and thus will be more realistic. Net income will be the highest and thus reflect the prosperity of the company. Phantom profits are reported.

9 of 10

Gross profit equals the difference between (Points : 1)

net income and operating expenses. net sales revenues and cost of goods sold. net sales revenues and operating expenses. net sales revenues and cost of goods sold plus operating expenses.