A company just starting in business purchased three

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7. A company just starting in business purchased three inventory items at the following prices: first purchase $110; second purchase $115; third purchase $120. If the company sold two units for a total of $300 and used FIFO costing, the gross profit for the period would be: a. $65. b. $60. *c. $75. d. $70. Answer: c
Learning objective 5.5. Explain the basis of accounting for inventories and apply the inventory cost flow methods under a periodic inventory system.
8. A truck costing $12,000 and on which $9,000 of accumulated depreciation has been recorded was discarded as having no value. The entry to record this event would include a:
9. Timeless Ltd produces clocks and sells them with a one-year warranty. The warranty provision account currently has a debit balance of $4,000. The estimated cost of repairing clocks that have already been sold is $18,000. The adjustment needed to update the warranty provision account is:
10. The cumulative effect of the declaration and payment of a cash dividend on a company’s financial statements is to: a. decrease total liabilities and equity. b. increase total expenses and total liabilities. c. increase total assets and equity. *d. decrease total assets and equity. Answer: d Learning objective 10.5 – Prepare the entries for cash dividends and share dividends and describe the impact on equity and assets. Feedback: The declaration and subsequent payment of a cash dividend will decrease the total assets and decrease equity of a company.

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