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    Accounting MCQ: inventory, equipment cost, R&D, liabilities.

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    Gomez Company had a gross profit of $360,000, total purchases of $420,000, and an ending inventory of $240,000 in its first year of operations as a retailer. Gomez's sales in its first year must have been
    a. $540,000.
    b. $660,000.
    c. $180,000.
    d. $600,000.

    Tyson Chandler Company purchased equipment for $10,000. Sales tax on the purchase was $500. Other costs incurred were freight charges of $200, repairs of $350 for damage during installation, and installation costs of $225. What is the cost of the equipment?
    a. $10,000
    b. $10,500
    c. $10,925
    d. $11,275

    In 2006, Edwards Corporation incurred research and development costs as follows:
    Materials and equipment $ 80,000
    Personnel 120,000
    Indirect costs 150,000
    $350,000
    These costs relate to a product that will be marketed in 2007. It is estimated that these costs will be recouped by December 31, 2009. The equipment has no alternative future use. What is the amount of research and development costs that should be expensed in 2006?
    a. $0.
    b. $200,000.
    c. $270,000.
    d. $350,000.

    Liabilities are
    a. any accounts having credit balances after closing entries are made.
    b. deferred credits that are recognized and measured in conformity with generally accepted accounting principles.
    c. obligations to transfer ownership shares to other entities in the future.
    d. obligations arising from past transactions and payable in assets or services in the future.

    Which of the following is a current liability?
    a. Preferred dividends in arrears
    b. A dividend payable in the form of additional shares of stock
    c. A cash dividend payable to preferred stockholders
    d. All of these

    The following information is available for October for Jordan Company.
    Beginning inventory $ 50,000
    Net purchases 150,000
    Net sales 300,000
    Percentage markup on cost 66.67%
    A fire destroyed Jordan's October 31 inventory, leaving undamaged inventory with a cost of $3,000. Using the gross profit method, the estimated ending inventory destroyed by fire is
    a. $17,000.
    b. $77,000.
    c. $80,000.
    d. $100,000.

    In a period of rising prices, the inventory method which tends to give the highest reported net income is
    a. base stock.
    b. first-in, first-out.
    c. last-in, first-out.
    d. weighted-average.

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    Solution Preview

    Gomez Company had a gross profit of $360,000, total purchases of $420,000, and an ending inventory of $240,000 in its first year of operations as a retailer. Gomez's sales in its first year must have been
    a. $540,000.
    b. $660,000.
    c. $180,000.
    d. $600,000.

    Answer: A

    Sales - (Total purchases - Ending Inventory) = Gross Profit
    Sales - (420,000 - 240,000) = 360,000
    Sales = 540,000

    Tyson Chandler Company purchased equipment for $10,000. Sales tax on the purchase was $500. Other costs incurred were freight charges of $200, repairs of $350 for damage during installation, and installation costs of $225. What is the cost of the equipment?
    a. $10,000
    b. $10,500
    c. $10,925
    d. $11,275

    Answer: C

    $10,000 + $500 + $200 + $225 = $10,925.

    In ...

    Solution Summary

    This solution is comprised of a detailed explanation to answer what is Gomez's sales in its first year.

    $2.19