Question

1.Jackson Manufacturing Company had a beginning inventory of $30,000. During the year, the company recorded inventory...

1.Jackson Manufacturing Company had a beginning inventory of $30,000. During the year, the company recorded inventory purchases of $90,000 and cost of goods sold of $100,000. The ending inventory must equal:

a.$54,000.

b.$52,000.

c.$20,000.

d.$50,000.

2.Assuming the perpetual inventory system is used, which of the following statements about the multistep income statement is correct?

a.Contra-revenue accounts increase Other Expenses.

b.Sales discounts affect the calculation of Gross Profit.

c.Sales discounts are a Selling, General, and Administrative Expense.

d.Contra-accounts affect the Cost of Goods Sold.

Business   Accounting   
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Answer #1

1.

Beginning inventory = $30,000

Purchases = $90,000

Cost of goods sold = $100,000

Ending inventory = ?

Cost of goods sold =  Beginning inventory + Purchases - Ending inventory

100,000 = 30,000 + 90,000 - Ending inventory

Ending inventory = $20,000

Correct option is (C)

2.

Contra revenue accounts decrease revenue and not expenses.

Sales discounts affect the calculation of Gross Profit --- It is true

Sales discounts are a Selling, General, and Administrative Expense --- It is false, Since sales discount is a contra sales account.

Contra-accounts affect the Cost of Goods Sold --- It is false, since contra accounts affect revenues.

Correct option is (B)

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