Unit 2 | |

1. | Question : | RK, Inc. had the following activity for an inventory item during June:
Assuming RK uses a perpetual moving average cost flow assumption, ending inventory for June would be | | | Student Answer: | | $512 | | | | $560 | | | | $768 | | | | $720 | | | | | 2. | Question : | Phillips Corp. purchased raw materials with a catalog price of $60,000. Credit terms of 3/15, n/60 apply. If Phillips uses the net price method, the purchase should be recorded at | | | Student Answer: | | $61,800 | | | | $60,000 | | | | $58,200 | | | | $51,000 | | | | | 3. | Question : | Walters Co. purchased raw materials with a catalog price of $70,000 on March 2, 2010. Credit terms of 4/20, n/60 applied. Walters uses a perpetual inventory system and the net price method. If Walters pays for the purchase on March 18, 2010, what amount is recorded for inventory on March 2, 2010? | | | Student Answer: | | $42,000 | | | | $56,000 | | | | $67,200 | | | | $70,000 | | | | 4. | Question : | Concerning purchase discounts, which one of the following statements is true? | | | Student Answer: | | Purchase discounts taken should be deducted from the acquisition cost of the inventory. | | | | The net price method results in recording accounts payable at the maximum value of the liability that the company may be required to pay out. | | | | Purchase discounts lost should be included in the cost of inventory. | | | | An advantage of the gross price method is that it isolates purchase discounts lost and thus highlights inefficiencies. | | | | 5. | Question : | Which one of the following types of costs should be included in the cost of a manufactured inventory? | | | Student Answer: | | abnormal