Question

5. When the physical count of Rosanna Company's inventory showed only 54,350 at year-end and the unadjusted balance in Inventory was $4,500, Rosanna will have to make the following entry: a. Cost of Goods Sold... 150 Inventory .... ........... b. Inventory ........ 150 Cost of Goods Sold... c. Income Summary ........... 150 Inventory ......... d. Cost of Goods Sold.......... 4,500 Inventory 4,500 6. A company's choice of an appropriate inventory cost flow assumption (FIFO, LIFO, etc.) is made by a. the external auditors. b. the SEC. c. the internal auditors. d. company management. 7. A company sells an asset, which originally cost $360,000, for $120,000 on December 31, 2019. The Accumulated Depreciation account had a balance of $145,000 on the date of sale. The company should recognize a a. $240,000 loss on disposal. b. $95,000 gain on disposal. c. $95.000 loss on disposal. d. $60,000 loss on disposal. - 8 Randy Company lends Luann Inc. $10,000 on April 1, accepting a 4-month, 6% interest note. What journal entry should be made by Randy to record Luann's repayment of the loan? a. Note Receivable ............. 10,000 Cash ... 10,000 b. Cash... 10,200 Note Receivable ............... 10,000 Interest Revenue 200 c. Cash... 10,000 Note Receivable ......... 10,000 d. Cash 10,600 Note Receivable ... 10,000 Interest Revenue ... 600 Overstating ending inventory will overstate all of the following except a. assets. b. cost of goods sold. c. net income. d. stockholders' equity.

Answer 1

5.

Cost of goods sold = Unadjusted inventory - Physical ending inventory

= 4,500 - 4,350

= $150

The following adjusting entry will be made:

	Cost of goods sold	150
	Inventory		150

Correct option is (a)

6.

A company's choice of an appropriate inventory cost flow assumption is made by company management.

Correct option is (d)

7.

Cost of asset = $360,000

Accumulated depreciation = $145,000

Book value of asset = Cost of asset - Accumulated depreciation

= 360,000 - 145,000

= $215,000

Sale price of asset = $120,000

Loss on disposal = Book value of asset - Sale price of asset

= 215,000 - 120,000

= $95,000

Correct option is (c)

8.

Interest revenue = 10,000 x 6% x 4/12

= $200

Following entry will be made at the maturity of the bill:

	Cash	10,200
	Note receivable		10,000
	Interest revenue		200

Correct option is (b)

9.

Overstating ending inventory will overstate assets, net income and stockholders' equity but not cost of goods sold.

Correct option is (b)

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