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QUESTION ONE (one mark each)

10 MARKS

1.

Retail Company reported the following amounts on its 2013 income


statement:
Purchases, $45,000; Beginning 2013 inventory, $15,000;
and Cost of goods sold,
$50,000. What was the 2013 ending
inventory?
*A. $10,000
B. $25,000
C. $26,000
D. $27,000

2.

Which of the following types of inventory usually is not held by a


manufacturing business?
A. Finished goods inventory.
B. Raw material inventory.
C. Work in process inventory.
*D. Merchandise inventory.

3.

Which of the following businesses would not have cost of goods sold?
A. A jewellery store
B. A grocery store
*C. A law firm
C. A manufacturer of batteries

4. The bank has recorded in our account a deposit of $6,200 that belonged
to another company. To complete the month-end bank reconciliation, the
company should
A.advise the bank and no further action would be required.
B. advise the bank and add the deposit to the company's general ledger
balance.
C. advise the bookkeeper preparing the bank reconciliation to ignore the
error.
*D.advise the bank and deduct the error from the bank statement
balance.
5. Which of the following is true under the perpetual inventory system?
A. One entry is required to record a sales return.
B. Cost of goods sold cannot be determined unless a physical inventory
is taken.
*C.Two entries are required to record a sale.
C. A separate account for purchases is required.

6.

In 2013, C Co. had an inventory turnover ratio of 6.11 while P Co. had
an inventory
turnover ratio of 10.67. Which of the following might
most accurately explain the difference in their ratios?
A. C Co. had less inventory on hand in relation to their amount of
cost of goods sold.
B. C Co. has a lower sales figure so cost of goods sold is lower
leading to a higher
turnover ratio.
*C. C Co. takes a longer number of days to sell their inventory.
D. C Co. has a poor credit rating.
7.

"Toys 4 U" had cost of sales in 2012 of $8,191 million and $7,710
million in 2011. Their merchandise inventory in 2012 was $1,902 million
and $2,464 million in 2011. What was their inventory turnover in 2012?
A. 3.64
B. 3.53
C. 4.31
*D. 3.75

8.

In determining the method of inventory valuation, which of the


following statements is
true?
A. One method must be applied to all types of inventory.
*B. FIFO can be used in a perpetual inventory system and a physical
inventory system.
C. Specific identification method most widely used by Canadian
companies.
D. Average cost method will always result in the highest inventory
value.

9.

A cheque outstanding at the end of the month requires which of the


following actions to
reconcile the bank account?
A. The cheque should be reversed from the accounting records and rerecorded the
following month when the cheque would be
recorded by the bank..
B. No action would be required since the cheque has already been
recorded..
*C. The amount of the cheque should be deducted from the bank
balance.
D. None of the above

10.

An overstatement of the beginning inventory results in


A.no effect on the periods profit.
B. an overstatement of profit.
*C. an understatement of profit.

D. a need to adjust purchases.

QUESTION TWO (one mark each)


MARKS

10

Ronaldo Corp. purchases all merchandise inventory on credit and uses


a perpetual inventory system. The Accounts Payable accounts is used
for recording merchandise inventory purchases only; all other current
liabilities are accrued in separate accounts.
You are provided with the following selected information for the most
recent three years:
2012
Income statement data
Net sales
$219,500
Cost of goods sold
133,500
Gross profit
(9)
Operating expenses
(10)
Income tax expense
7,000
Profit
$ 30,000

2011

(1)

2010
$227,600

145,400

(5)

84,300

80,100

(2)

47,000

8,000

6,000

$ 36,000

Statement of financial position (balance sheet) data


Merchandise inventory
(3)
$ 14,700
10,000
Accounts payable
25,000
(7)
20,000

(6)

Additional information
Purchase of merchandise inventory $141,000
$132,000
Cash payments to suppliers
(4)
127,000

REQUIRED
Calculate the missing amounts for items (1) through (10).

(8)
160,000

1.

229,700

2.

40,300

7.

12,200

3.

10,300

8.

152,200

4.

128,200

5.
147,500
QUESTION THREE

6.

27,100

9.

86,000

10.

49,000
10 MARKS

The following information is available for Joanne Corporation for the month of
August, 20x5:
1.

The balance on the bank statement as at August 31, 20x5 is $16,733.

2.
The August 31, 20x5 deposit of $3,567 is not recorded on the bank
statement.
3.

The following cheques were written and in July and August 20x5 but
have not yet been cashed by the bank:
#315RaysPlumbingService
#367HandiHouse

$1,211
565

#368HydroCanada

1,897

#369ReceiverGeneralforCanada

2,540

#370DollcoPrinting

1,874

4.
NSF.

A customers cheque in the amount of $545 was returned by the bank

5.

Bank service charges amounted to $78.

6.

Cheque # 356 for office supplies was incorrectly recorded in the books
of accounts in the amount of $1,985. The correct amount (and the
amount that cleared the bank account) is $1,598.

7.

The bank charged interest on the line of credit in the amount of


$1,950.

8.

A cheque in the amount of $876 cleared the bank account. This cheque
was written by JoAnn Corporation and was charged to our account by
mistake.

9.

The cash account on the companys books shows a balance of

$15,275.
REQUIRED
Prepare a bank reconciliation as at August 31, 20x5.
Balance per bank
15,275

16,733

Add: Bank error


(545)

Balance per books


876

Add: Deposit in transit


(2,028)

3,567

Less: Outstanding cheques


387

(8,087)

Adjusted balance
13,089

NSF cheque
S/c and interest
Cheque error

13,089

Revised balance

QUESTION FOUR

10 MARKS

Messi Inc. had a beginning inventory on January 1 of 200 units of soccer balls
at a cost of $9 per unit. During the year, purchases were as follows:
UNITS

UNIT COST

TOTAL COST

February 20

600

$10

$6,000

May 5

500

12

6,000

August 15

600

11

6,600

December 8

300

13

3,900

Messi uses a periodic inventory system. At the end of the year, a physical
inventory count determined that there were 300 units on hand.
REQUIRED
Fill in the following blanks

a.

Cost of goods available for sale

24,300

b.

Value of ending inventory using FIFO

3,900

c.

Value of ending inventory using average cost 3,314

d.

Value of cost of goods sold using FIFO

e.

Value of cost of goods sold using average cost

20,400

Note: For average cost, calculate to the nearest dollar.

20,986