Irwin Industries had the following inventory transactions occur during the current
year:
Units Cost/unit
Feb. 1 Purchase 40 $42
Mar. 14 Purchase 60 $43
May 1 Purchase 53 $44
The company sold 100 units at $75 each and has a tax rate of 25%. Assuming that a
periodic inventory system is used and operating expenses are $2,000, what is the
company's gross profit using LIFO? (rounded to whole dollars)
$3,885
$3,145
$4,355
$3,147
$3,655
Give this one a try later!
, Using periodic LIFO, cost of goods sold includes the last inventory
purchased (i.e., the newest inventory).
Sales revenue = 100 x $75 = $7,500
Cost of goods sold = (53 x $44) + [(100 - 53) x $43] = $2,332+ 2,021= $4,353
Gross profit = Sales revenue - cost of goods sold = $7,500 - 4,353 = $3,147
When the auditor is satisfied that the financial statements provide a fair representation
of the company's financial position and results of operation in accordance with
generally accepted accounting principles, the auditor will express
Give this one a try later!
an unqualified opinion.
unqualified opinion - perfect
qualified opinion - not everything is in accordance with GAAP
adverse opinion - really bad, possibly fraud, very much against GAAP
procedure
Fran Company's ending inventory is understated by $4,000. What are the effects of
this error on the current year's cost of goods sold and net income, respectively?
Understated and understated
Overstated and overstated
None of these
Understated and overstated
Overstated and understated
Give this one a try later!
, If ending inventory is understated by $4,000, the amount subtracted from
goods available for sale is understated. This causes cost of goods sold to
be overstated, which in turn causes net income to be understated.
The accounting cycle is a series of certain steps that businesses, such as corporations,
perform in sequence and repeat in each accounting period. Although steps may be
missing among the options listed below, which of the following lists steps of the
accounting cycle in their correct order?
Give this one a try later!
The correct order is (i) use source documents to analyze transactions, (ii)
journalize transactions, (iii) post transactions to the ledger, (iv) prepare the
trial balance, (v) journalize and post the adjusting entries, (vi) prepare the
adjusted trial balance, (vii) prepare the financial statements, (viii) journalize
and post the closing entries, (ix) and prepare the post-closing trial balance.
Chapter 4, Learning objective 8
Companies can either lease or purchase assets that they need to operate their
business. For example, many companies lease vehicles instead of buying them. Which
of the following is not an advantage of leasing using an operating lease relative to
purchasing an asset?
The lessee does not report the item as an asset on its balance sheet
Little or no down payment by the lessee
Sharing of tax advantages between the lessor and lessee
All of these are advantages of operating leases
Higher risk of obsolescence by the lessee
Give this one a try later!
, Leases, and in particular operating leases usually have several advantages
over purchasing assets, including (1) reduced risk of obsolescence by the
lessee, little or no down payment required to be paid by the lessee, shared
tax advantages between the lessor and lessee (e.g., lessee's may have low
profits and cannot benefit from tax deductions available to owners of
assets but lessors can have these tax benefits and share them with lessee
via lower lease payments), and the lessee does not report the asset or
associated liability on its balance sheet.
What does a general ledger of a company contain?
Give this one a try later!
All the asset, liability, stockholders' equity, revenue, expense, and dividend
accounts
A general ledger lists all of the accounts of a company. These are the asset,
liability, stockholders' equity, revenue, expense, and dividend accounts.
In which of the following sequences are these financial statements usually prepared?
a. The balance sheet is prepared before the retained earnings statement.
b. The balance sheet is prepared before the inncome statement.
c. The retained earnings statement is prepared before the income statement.
d. None of these
e. All of these
Give this one a try later!
d. None of these
The financial statements are prepared in the following order: income
statement, retained earnings statement, and balance sheet. This is because
net income (from the income statement) is a required input for the retained
year:
Units Cost/unit
Feb. 1 Purchase 40 $42
Mar. 14 Purchase 60 $43
May 1 Purchase 53 $44
The company sold 100 units at $75 each and has a tax rate of 25%. Assuming that a
periodic inventory system is used and operating expenses are $2,000, what is the
company's gross profit using LIFO? (rounded to whole dollars)
$3,885
$3,145
$4,355
$3,147
$3,655
Give this one a try later!
, Using periodic LIFO, cost of goods sold includes the last inventory
purchased (i.e., the newest inventory).
Sales revenue = 100 x $75 = $7,500
Cost of goods sold = (53 x $44) + [(100 - 53) x $43] = $2,332+ 2,021= $4,353
Gross profit = Sales revenue - cost of goods sold = $7,500 - 4,353 = $3,147
When the auditor is satisfied that the financial statements provide a fair representation
of the company's financial position and results of operation in accordance with
generally accepted accounting principles, the auditor will express
Give this one a try later!
an unqualified opinion.
unqualified opinion - perfect
qualified opinion - not everything is in accordance with GAAP
adverse opinion - really bad, possibly fraud, very much against GAAP
procedure
Fran Company's ending inventory is understated by $4,000. What are the effects of
this error on the current year's cost of goods sold and net income, respectively?
Understated and understated
Overstated and overstated
None of these
Understated and overstated
Overstated and understated
Give this one a try later!
, If ending inventory is understated by $4,000, the amount subtracted from
goods available for sale is understated. This causes cost of goods sold to
be overstated, which in turn causes net income to be understated.
The accounting cycle is a series of certain steps that businesses, such as corporations,
perform in sequence and repeat in each accounting period. Although steps may be
missing among the options listed below, which of the following lists steps of the
accounting cycle in their correct order?
Give this one a try later!
The correct order is (i) use source documents to analyze transactions, (ii)
journalize transactions, (iii) post transactions to the ledger, (iv) prepare the
trial balance, (v) journalize and post the adjusting entries, (vi) prepare the
adjusted trial balance, (vii) prepare the financial statements, (viii) journalize
and post the closing entries, (ix) and prepare the post-closing trial balance.
Chapter 4, Learning objective 8
Companies can either lease or purchase assets that they need to operate their
business. For example, many companies lease vehicles instead of buying them. Which
of the following is not an advantage of leasing using an operating lease relative to
purchasing an asset?
The lessee does not report the item as an asset on its balance sheet
Little or no down payment by the lessee
Sharing of tax advantages between the lessor and lessee
All of these are advantages of operating leases
Higher risk of obsolescence by the lessee
Give this one a try later!
, Leases, and in particular operating leases usually have several advantages
over purchasing assets, including (1) reduced risk of obsolescence by the
lessee, little or no down payment required to be paid by the lessee, shared
tax advantages between the lessor and lessee (e.g., lessee's may have low
profits and cannot benefit from tax deductions available to owners of
assets but lessors can have these tax benefits and share them with lessee
via lower lease payments), and the lessee does not report the asset or
associated liability on its balance sheet.
What does a general ledger of a company contain?
Give this one a try later!
All the asset, liability, stockholders' equity, revenue, expense, and dividend
accounts
A general ledger lists all of the accounts of a company. These are the asset,
liability, stockholders' equity, revenue, expense, and dividend accounts.
In which of the following sequences are these financial statements usually prepared?
a. The balance sheet is prepared before the retained earnings statement.
b. The balance sheet is prepared before the inncome statement.
c. The retained earnings statement is prepared before the income statement.
d. None of these
e. All of these
Give this one a try later!
d. None of these
The financial statements are prepared in the following order: income
statement, retained earnings statement, and balance sheet. This is because
net income (from the income statement) is a required input for the retained
