The Corner Frame Shop wants to know the effect of different inventory costing methods on its financial statements. Inventory and purchases data for June are:

$$\begin{array}{rlrrr} && \textbf{Units} & \textbf{Unit Cost} & \textbf{Total Cost}\\ \\ \text{Jun 1} & \text{Beginning inventory} & 2,500 & \$11.00 & \$27,500\\ 4 & \text{Purchase} & 1,800 & \$11.80 & 21,240\\ 9 & \text{Sale} & (1,900)\\ \end{array}$$

If The Corner Frame Shop uses the LIFO method, cost of goods sold will be

a. $21,200.

b.$21,240.

c. $20,900.

d.$22,340.

The sum of ending inventory and cost of goods sold is

A. Gross profit

B. Cost of goods available for sale

C. Net Purchases

D. Beginning inventory

Perfect Picture Frame Shop wants to know the effect of different inventory costing methods on its financial statements. Inventory and purchases data for June follow:

$$\begin{matrix} \quad & \quad & \text{Units} & \text{Unit Cost } & \text{Total Cost }\\ \text{Jun 1} & \text{Beginning inventory } & \text{2,100} & \text{\$11.00 } & \text{\$23,100 }\\ \text{4} & \text{Purchase} & \text{1,200} & \text{\$11.50 } & \text{13,800 }\\ \text{9} & \text{Sale} & \text{(1,400)}\\ \end{matrix}$$

If Perfect Picture uses the FIFO method, the cost of the ending inventory will be a. $15,700. b.$21,500. c. $13,800. d.$15,400.

The next two questions use the following facts. Perfect Picture Frame Shop wants to know the effect of different inventory costing methods on its financial statements. Inventory and purchases data for June follow:

$$\begin{matrix} \quad & \quad & \text{Units} & \text{Unit Cost } & \text{Total Cost }\\ \text{Jun 1} & \text{Beginning inventory } & \text{2,100} & \text{\$11.00 } & \text{\$23,100 }\\ \text{4} & \text{Purchase} & \text{1,200} & \text{\$11.50 } & \text{13,800 }\\ \text{9} & \text{Sale} & \text{(1,400)}\\ \end{matrix}$$

If Perfect Picture uses the LIFO method, cost of goods sold will be a. $16,000. b.$15,400. c. $13,800. d.$15,700.

Examine the excerpt of a footnote from Red Rock’s September 30, 2016, annual report to follow.

$$\begin{array}{lcc} \textbf{Balances of Major Classes of Property and}\\ \textbf{Equipment Are as Follows (in thousands)}\\ \hline &\textbf{Sep. 30, 2016}&\textbf{Sep. 30, 2015}\\ \hline \text{Land}&\$ 76,597&\$ 76,597\\ \text{Buildings and leasehold improvements}&2,219,767&2,219,767\\ \text{Capitalized real estate leases}&24,869&24,264\\ \text{Fixtures and equipment}&1,674,089&1,674,089\\ \text{Construction in progress and equipment not yet in service}&53,328&53,328\\ \text{}&4,048,650&3,537,846\\ \text{Less accumulated depreciation and amortization}&(1,853,963)&(1,644,414)\\ \text{}&\$ 2,194,687&\$1,893,432\\ \end{array}$$

1. What are Red Rock’s largest two categories of property and equipment as of September 30, 2016? Describe in general terms the types of expenditures included in these categories.

2. What was Red Rock’s gross cost of property and equipment at September 30, 2016? What was the book value of property and equipment on this date? Why is book value less than cost?

The word market as used in “the lower of cost or market” generally means

a. net realizable value.

b. liquidation price.

c. retail market price.

d. original cost.

The word market as used in “the lower of cost or market” generally means

a. liquidation price.
b. original cost.
c. retail market price.
d. current replacement cost.

Lakeside Software began January with $3,900 of merchandise inventory. During January, Lakeside made the following entries for its inventory transactions:

$$\begin{array}{lrr} \text{Inventory} & 6,000\\ \text{$\quad$Accounts Payable} && 6,000\\ \\ \text{Accounts Receivable} & 7,500\\ \text{$\quad$Sales Revenue} && 7,500\\ \\ \text{Cost of Goods Sold} & 5,600\\ \text{$\quad$Inventory} && 5,600\\ \end{array}$$

What was Lakeside’s gross profit for January?

a. $7,500

b.$ – 0 –

c. $1,900

d.$5,600

Lakeside Software began January with $3,900 of merchandise inventory. During January, Lakeside made the following entries for its inventory transactions:

$$\begin{array}{lrr} \text{Inventory} & 6,000\\ \text{$\quad$Accounts Payable} && 6,000\\ \\ \text{Accounts Receivable} & 7,500\\ \text{$\quad$Sales Revenue} && 7,500\\ \\ \text{Cost of Goods Sold} & 5,600\\ \text{$\quad$Inventory} && 5,600\\ \end{array}$$

How much was Lakeside’s inventory at the end of January?

a. $4,300

b.$9,900

c. $– 0 –

d.$6,000

Pineview Company ended the month of March with an inventory of $26,000. Pineview expects to end April with an inventory of$14,000 after selling goods at a cost of $98,000. How much inventory must Pineview purchase during April in order to accomplish these results? a.$112,000 b. $110,000 c.$138,000 d. $86,000

If Leading Edge Frame Shop uses the FIFO method, the cost of the ending inventory will be

a. $32,400.
b.$27,450.
c. $32,700.
d.$38,250.

On August 1, 2016, Azore, Inc., sold equipment and accepted a six-month, 8%, $30,000 note receivable. Azore’s year-end is December 31.

Write the journal entry on the maturity date (February 1, 2017).

On August 1, 2012, Azores, Inc., sold equipment and accepted a six-month, 11%, $30,000 note receivable. Azores’ year-end is December 31. Write the journal entry on the maturity date (February 1, 2013).

When does the cost of inventory become an expense? a. When payment is made to the supplier b. When inventory is delivered to a customer c. When cash is collected from the customer d. When inventory is purchased from the supplier