Question

6) Assume the Murtha Company reported the following adjusted account balances at year-end. 2016 2015 $1,560,200 $1,210,92% (79.000) _(64.600) $1.481,200 $1,146,320 Accounts Receivable Allowance for Doubtful Accounts Accounts Receivable, Net D) $64,600 C) $79,000 w the company recorded no write-offs or recoveries during 2016. What was the amount of BI B) $14,400 Assume the company recorded no write-offs or Expense reported in 2016? A) $28,800 7) Your company has 100 units in in market value of $14. The en many has 100 units in inventory, purchased at $16 per unit. These units have a current ne of $14. The entry to write down the inventory will include a: A) debit to Cost of Goods Sold for $1,400. B) debit to Inventory for $1,400. C) credit to Cost of Goods Sold for $200. D) credit to Inventory for $200. ales Returns and Allowances are reported on the: A) income statement as a reduction to Cost of Goods Sold B) balance sheet as a reduction to Gross Profit C) income statements as a contra-revenue account D) balance sheet as a contra-inventory account 9) A company has net sales of $612,850 and cost of goods sold of $441,252. The company's gross profit percentage is: A) 28%. B) 0.28%. C) 72% D) 38.9% 10) When a company has inventory which is subject to gradually increasing prices, the use of the LIFO method of valuing inventory will result in the: A) highest amount of assets and the highest amount of net income. B) highest amount of assets and the lowest amount of net income. C) lowest amount of assets and the highest amount of net income. D) lowest amount of assets and the lowest amount of net income. 11) Which of the following costs should be added to the buyer's Inventory account? A) Freight-out costs with terms FOB shipping point B) Freight-in costs with terms FOB destination C) Freight-out costs with terms FOB destination D) Freight-in costs with terms FOB shipping point

Answer 1

Solution 6:

Bad debts expense reported in 2016 = Ending balance in allowance account - Beginning balance in allowance account

= $79,000 - $64,600 = $14,400

Hence option B is correct.

Solution 7:

The entry to write down inventory will include a "Credit to inventory for $200"

Hence option D is correct.

Solution 8:

Sales returns and allowances are reported on the income statement as contra revenue account.

Hence option c is correct.

Solution 9:

Gross profit percentage = Gross profit / sales = ($612,850 - $441,252) / $612,850 = 28%

Hence option a is correct.

Solution 10:

The use of LIFO method under increasing price will result in "Lowest amount of assets and lowest amount of net income"

Hence option d is correct.

Solution 11:

Freight in costs with FOB shipping point should be added to buyer's inventory account.

Hence option D is correct.