The journal entry to record the payment of an ordinary notes is:
A) Debit cash; credit notes payable
B) Debit cash; credit accounts payable
C) Debit notes payable and interest expense; credit cash
D) Debit notes payable and interest receivable; credit cash
Answer: C
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Accounting Chapter 9
- True or False: Purchase returns and purchase discounts are ignored when computing cost-to-retail ratios for the retail method.
- True or False: In using the LIFO retail method, the current period cost-to-retail percentage includes both net markdowns and net markups.
- True or False: Inventory written down due to LCM may be written back up if market values go back up.
- True or False: Losses on reduction to LCM may be charged to either cost of goods sold or to a current loss account without distorting financial statement ratios.
- True or False: The purpose of ceilings and floors in LCM is to prevent profit distortion.
- True or False: The primary motivation behind LCM is consistency.
- True or False: Net Realizable Value is selling price less costs of completion and disposal.
- True or False: In determining lower-of-cost-or-market, market is the expected selling price under normal operations.
- When applying the lower-of-cost-or-market rule to inventory valuation according to International Financial Reporting Standards, market always is:
- Sullivan Corporation. has determined its year-end inventory on a FIFO basis to be $500,000. Information pertaining to that inventory is as follows:
- Sullivan Corporation. has determined its year-end inventory on a FIFO basis to be $500,000. Information pertaining to that inventory is as follows:
- On July 10, 2011, Johnson Corporation signed a purchase commitment to purchase inventory for $200,000 on or before February 15, 2012. The company's fiscal year-end is December 31. The contract was exercised on February 1, 2012 and the inventory was purchased for cash at the contract price. On the purchase date of February 1, the market price of the inventory was $210,000. The market price of the inventory on December 31, 2011, was $180,000. The company uses a perpetual inventory system. At what amount will Johnson record the inventory purchased on February 1, 2012?
- On July 10, 2011, Johnson Corporation signed a purchase commitment to purchase inventory for $200,000 on or before February 15, 2012. The company's fiscal year-end is December 31. The contract was exercised on February 1, 2012 and the inventory was purchased for cash at the contract price. On the purchase date of February 1, the market price of the inventory was $210,000. The market price of the inventory on December 31, 2011, was $180,000. The company uses a perpetual inventory system. How much loss on purchase commitment will Johnson recognize in 2011?
- Prunedale Co. uses a periodic inventory system. Beginning inventory on January 1 was understated by $30,000, and its ending inventory on December 31 was understated by $17,000. In addition, a purchase of merchandise costing $20,000 was incorrectly recorded as a $2,000 purchase. None of these errors were discovered until the next year. As a result, Prunedale's cost of goods sold for this year was:
- Prunedale Co. uses a periodic inventory system. Beginning inventory on January 1 was overstated by $32,000, and its ending inventory on December 31 was understated by $62,000. These errors were not discovered until the next year. As a result, Prunedale cost of goods sold for this year was:
- Retrospective treatment of prior years' financial statements is required when there is a change from:
- Harlequin Co. has used the dollar-value LIFO retail method since it began operations in early 2010 (its base year). Its beginning inventory for 2011 was $36,000 at cost and $72,000 at retail prices. At the end of 2011, it computed its estimated ending inventory at retail to be $120,000. Assuming its cost-to-retail percentage for 2011 transactions was 60%, what is the inventory balance that Harlequin Co. would report in its 12/31/11 balance sheet?
- To determine the value of a LIFO layer, using dollar-value LIFO retail:
- To determine if an increase in the dollar value of inventory is due to increased quantities, using dollar value LIFO retail:
- To use the dollar-value LIFO retail method for inventory, the second step is to determine the estimated:
- To use the dollar-value LIFO retail method for inventory, the first step is to:
- Using the dollar-value LIFO retail method for inventory:
- Clarabell Inc. uses the conventional retail method to estimate ending inventory. Cost data for the most recent quarter is shown below:
- Clarabell Inc. uses the conventional retail method to estimate ending inventory. Cost data for the most recent quarter is shown below:
- Willie Nelson's Boots uses the conventional retail method to estimate ending inventory. Cost data for the most recent quarter is shown below:
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