11. True or false. Because of the cost principle, inventory is reported on the balance sheet at its selling price, not at what it cost to purchase the merchandise.
- True
- False
12. Where is the value of a raw material tracked?
- Inventory sub-account
- Equipment
- Inventory general category
- Deferred revenue
13. Inventory errors will affect all of the following except:
- Income Statement
- Other accrued liabilities
- The following month’s books
- Balance Sheet
14. Please use this information for Question 5 - 9:
School’s back in session and Stan at ‘The Bizzy Bee’ has sold 85 of his Fidget Bands this week alone, and at the end of September, he had sold 142 total. He purchased 500 of them in August at $1,200 including shipping, and he is selling them for $12.99 each.
What is the purchase cost (or inventory value cost) for those 500 units before any sales? (Format your answer as $x,xxx)
$1,200
15. (Use info from question 5)
Where would Stan record the 85 Fidget Bands he sold this week?
- He needs to record the total sale on both the income statement and balance sheet as revenue.
- As a credit on his journal under the cost of goods sold expense account.
- As a credit on his journal under the cost of goods sold income account.
- There is not enough information to answer this question.
16. (Use info from question 5)
What is Stan’s gross revenue from the sale of his 142 Fidget Bands? (Format your answer as $x,xxx.xx)
$1,844.58
17. (Use info from question 5)
What is Stan’s COGS for those 142 Fidget Bands? (Format your answer as $xxx.xx)
$340.80
18. (Use info from question 5)
What is the gross profit on Stan’s income statement for the sale of those 142 Fidget Bands? Remember Revenue - COGS = Gross Profit. (Format your answer as $x,xxx.xx)
$1,503.78
Shuffle Q/A 2
19. When you buy raw materials, and record the purchase of those materials, this entry is a ________________ to raw materials inventory, and a ____________________ to cash or accounts payable.
- Equipment, Notes Payable
- Credit, Debit
- Notes Payable, Equipment
- Debit, Credit
20. Sarah is the owner of “Pish-Posh,” a bath shoppe with specialty candles, soaps, and bath bombs. She has decided to utilize the average costing method to calculate her raw inventory value. The prices listed are for the amount of ingredient listed (not necessarily per ounce). Looking at the ingredient list below, what would be the average cost per ounce to make her bath bombs? (Format answer x.xx, no words)
$0.79