Principles of Accounting
12th Edition
ISBN: 9781133626985
Author: Belverd E. Needles, Marian Powers, Susan V. Crosson
Publisher: Cengage Learning
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Textbook Question
Chapter 6, Problem 1EA
Sutton Hills Company’s management made the decisions that follow.
Indicate which of the decisions relates primarily to (a) classification, (b) merchandising inventory, (c) periodic inventory system, or (d) operating cycle.
- 1. Decided to purchase and sell goods.
- 2. Decided to use a form of income statement that would show gross margin separately from operating income.
- 3. Decided to reduce the credit terms offered to customers from 30 days to 20 days to speed up collection of accounts.
- 4. Decided that the benefits of keeping track of each item of inventory as it is bought and sold would exceed the costs of such a system.
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Students have asked these similar questions
Indicate whether the following statements are true or false.
1.
A merchandising company reports gross profit but a service company does not.
2.
Under a periodic inventory system, a company determines the cost of goods sold each time a sale occurs.
3.
A service company is likely to use accounts receivable but a merchandising company is not likely to do so.
4.
Under a periodic inventory system, the cost of goods on hand at the beginning of the accounting period plus the cost of goods purchased less the cost of goods on hand at the end of the accounting period equals cost of goods sold.
When a company that uses the periodic inventory system wants to remove beginning estimated returns inventory, which of the following accounts is debited?
a.Estimated Returns Inventory
b.Cost of Goods Sold
c.Customer Refunds Payable
d.Income Summary
You have been given responsibility for overseeing a bank's small business loans division.
The bank has included loan covenants requiring a minimum current ratio of 1.60 in all
small business loans. When you ask which inventory costing method the covenant
assumes, the previous loans manager gives you a blank look. To explain to him that a
company's inventory costing method is important, you present the following balance
sheet information. Current assets other than inventory $ 33 Inventory (a) Other (
noncurrent) assets 149 Total assets $ (b) Current liabilities $ 52 Other (noncurrent)
liabilities 67 Stockholders' equity (d) Total liabilities and stockholders' equity $ (c) You
ask the former loans manager to find amounts for (a), (b), (c), and (d) assuming the
company began the year with 4 units of inventory at a unit cost of $13, then purchased 7
units at a cost of $14 each, and finally purchased 5 units at a cost of $18 each. A year -
end inventory count determined that 3 units are on…
Chapter 6 Solutions
Principles of Accounting
Ch. 6 - Prob. 1DQCh. 6 - Prob. 2DQCh. 6 - Prob. 3DQCh. 6 - Assume a large shipment of uninsured merchandise...Ch. 6 - Prob. 5DQCh. 6 - Prob. 6DQCh. 6 - Prob. 7DQCh. 6 - Indicate whether each of the statements that...Ch. 6 - Prob. 2SECh. 6 - Prob. 3SE
Ch. 6 - Prob. 4SECh. 6 - Prob. 5SECh. 6 - Prob. 6SECh. 6 - Prob. 7SECh. 6 - Prob. 8SECh. 6 - Record the following transactions using T...Ch. 6 - Prob. 10SECh. 6 - Prob. 11SECh. 6 - Sutton Hills Companys management made the...Ch. 6 - Prob. 2EACh. 6 - A company has the following data: net sales,...Ch. 6 - Prob. 4EACh. 6 - Prob. 5EACh. 6 - Linear Company engaged in the following...Ch. 6 - Prob. 7EACh. 6 - Prob. 8EACh. 6 - Prob. 9EACh. 6 - Prob. 10EACh. 6 - Prob. 11EACh. 6 - Prob. 12EACh. 6 - Prob. 13EACh. 6 - Prob. 14EACh. 6 - Prob. 15EACh. 6 - Matuska Tools Corporations income statements...Ch. 6 - Selected accounts from Murrays Furniture Stores...Ch. 6 - Prob. 3PCh. 6 - Selected accounts from Dences Gourmet Shops...Ch. 6 - Prob. 5PCh. 6 - Teague Company engaged in the following...Ch. 6 - Prob. 7APCh. 6 - Prob. 8APCh. 6 - Prob. 9APCh. 6 - Prob. 10APCh. 6 - Prob. 11APCh. 6 - Prob. 12APCh. 6 - Prob. 1CCh. 6 - Prob. 2CCh. 6 - Prob. 3CCh. 6 - Prob. 4CCh. 6 - Prob. 5CCh. 6 - Prob. 6C
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