Question

1.Kaiser Co. counted inventory on December 31, 2019 and had $2,490,000 worth of inventory on their books. Their records indicate that they purchased $18,675,000 worth of inventory during the year and that they sold $20,542,500 worth of inventory during the year. How much inventory did they have on January 1, 2019?

		$622,500
		$2,490,000
		$4,357,500
		$18,675,000

2.

The balance in the income summary account before it is closed should equal which of the following values?

		Beginning Total Assets.
		Net Income for the period.
		Ending Retained Earnings.
		Income from Continuing Operations for the period.

3. Which of the following is the primary benefit of using the worksheet method we discussed in the videos for converting cash to accruals?

		To determine the correct value of cost of good sold during the period.
		To calculate the correct value of cash flow from investing activities.
		To change from cash to accruals or from accruals to cash.
		To match expenses and revenues.

Answer 1

1. Opening inventory = Closing value of inventory + Sale value of inventory - Purchase value of inventory

= $2490000 + $20542500 - $18675000= $4357500

Therefore, the value of opening inventory is $4357500

2. The balance in the income summary account before it is closed should equal the Net Income for the period. After balancing the income suumary account the balance will be carried forward either to Capital account or Retained earnings account depending upon the nature of the entity.

3. The primary benefit of using the worksheet method for converting cash to accruals is nothing but to change from cash to accruals or from accruals to cash.