FINANCIAL ACCOUNTING FINAL EXAM

MNGT-511 FINAL EXAM (Total points 100)
Name: Rebecca Malandrino
Chapter 7

1) Which of the following types of inventory usually is not held by a manufacturing business? (3P) C) Merchandise inventory

2) The following information was taken from the 2007 income statement of Cobra Company: Pretax income, $12,000; Total operating expenses, $20,000; Sales revenue, $120,000. Compute cost of goods sold. (5P) A) $88,000 (120,000 – 20,000 – 12,000) 12,000 (pre-tax income) + 20,000 (operating expenses) = 32,000 (gross margin)
120,000 (sales revenue) - 32,000 (gross margin) = 88,000 ( cost of goods sold)

3) Sheffield Company had the following information taken from its 2006 adjusted trial balance: Sales, $400,000; Sales Discounts, $12,000; Beginning Inventory, $20,000; and Purchases, $200,000. A physical count of the merchandise on hand at the end of the year showed $25,000. Compute the gross margin (gross profit) that would appear in the income statement. (10P) C) $193,000.

$20,000 (beginning inventory) + $200,000 (purchases) = $220,000 (end inventory)
$220,000 (end inventory) - $25,000 (inventory at end of year) = $195,000 (cost of goods sold)
$400,000 (sales) - $12,000 (discounts) = $388,000 (net sales)
$388,000 (net sales) - $195,000 (cost of goods) = $193,000 (gross profit margin) Use the following to answer questions 4 and 5
Cyclone Co. uses the periodic inventory system. The following information about their inventory of Model XX Mountain Bicycles is available:

Date
Transaction
Number of Units
Cost per Unit
Total Cost of Goods Available for sale
1/1
Beginning Inventory
50
$800
$40,000
4/12
Purchase
80
$820
$65,600
7/8
Purchase
75
$840
$63,000
9/22
Purchase
90
$850
$76,500

Grand total units
295
Grand total cost of goods available for sale
$245,100

During the year, 235 bicycles were sold at a price of $1,500 each. Other operating costs equaled $80,000 and their tax rate is 30%. Round final