Question

Cobb Company's accounting records show the following ending on December 31, 2013 Purchase Discounts Freight-in Purchases Beginning Inventory Ending Inventory Purchase Returns $ 5,600 7.800 202,000 23.500 28,800 7.400 Using the periodic system, the cost of goods purchased is a. $189,000 b. $191,500. c. S202,100. d. $196,800 Which of the following statements is correct with respect to inventories? a. The FIFO method assumes that the costs of the earliest goods acquired are the last to be sold b. It is generally good business management to sell the most recently acquired goods first c. Under FIFO, the ending inventory is based on the latest units purchased. d. FIFO seldom coincides with the actual physical flow of inventory. An error in the physical count of goods on hand at the end of a period reviled in a $15.000 understatemet of the ending inventory. The effect of this crror in the current period is Cost of Goods Sold Net Income Understated Understated b. Overstated Overstated Understated Overstated Overstated Understated c. 10. The following information is available for Everett Company at December 31, 2013: beginning inventory $80,000; ending inventory $120,000; cost of goods sold 5880,000; and sales $1.200,000. Everette's inventory turnover in 2013 is a. b. c. d. 5.8 times. 7 times. 8.8 times. 12 times. 11. Two individuals at a retail store simultaneously work the same cash register. You evaluate this ituation as: a. a violation of establishment of responsibility. b. a violation of separation of duties. c. supporting the establishment of responsibility, d. supporting internal independent verification.

Answer 1

7.b.$191,500.

working:

purchases	202,000
add; freight in	7800
beginning inventory	23,500
less: purchase discounts	(5,600)
less: purchase returns	(7,400)
less: ending inventory	(28,800)
cost of goods purchased	191,500

8.c.under FIFO the ending inventory is based on the latest units purchased.

SInce FIFO assumes that First purchased goods will be sold first, the ending inventory will be based on latest units purchased.

9.d. over stated (cost of goods sold) ................(under stated net income)..

10.c.8.8 times.

inventory turnover ratio = cost of goods sold / (average inventory)

=>$880,000 / (120,000+80,000)/2.

=>$880,000 / 100,000

=>8.8 times.

11. a. a violation of establishment of responsibilty

when two people are working on same cash register it is hard to make one person responsible.