ASSIGNMENT 2 (Group of two) Grade: _____

INSTRUCTION
Full Name: _____________________________________
Full Name: _____________________________________
• Worth: 10 %
• Due: November 30, 2022
• LATE SUBMISSION WILL NOT BE ACCEPTED IN ANY CIRCUMSTANCES.

Question 1 (5 marks)

Indicate whether it’s True or False for the following:

1) Y-Mart had sales of $350,000. Its cost of goods sold was $200,000. Its gross profit was
$550,000.

2) The terms 2/10, n/30 means that the seller offers the purchaser a 2% cash discount if the
amount is paid in full within 10 days. Otherwise, the full amount is due in 30 days.

3) Cost of goods sold is an operating expense.

4) Gross margin is equal to net sales plus cost of goods sold.

5) Goods in transit are automatically included in inventory.

6) A merchandiser earns profit by buying and selling merchandise

7) The two main types of inventory systems are the perpetual system and the periodic system.

8) The specific-unit-cost method is useful for inventory items that have common characteristics,
such as tonnes of ore or litres of paint.

9) The cost of an inventory item includes its invoice price plus any added or incidental costs
necessary to put it in a place and condition for sale.

10) Under moving-weighted-average cost method, the cost of goods sold is based on the oldest

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Question 2 ( 5 marks)

For each of the following, choose the letter that corresponds to the best (only one) answer.

1) To update the inventory records for the sale of merchandise under a perpetual inventory
system, the entry would include a:
A) debit to Inventory.
B) credit to Accounts Payable.
C) debit to Sales Revenue.
D) debit to Cost of Goods Sold.

2) Which of the following is true about freight in under the perpetual inventory system?
A) Freight in is added to the cost of merchandise inventory.
B) Freight in is a selling expense.
C) Freight in is an operating expense.
D) Freight in is deducted from Accounts payable.

3) Under a perpetual inventory system, the adjusting entry to account for inventory shrinkage
(reduction of the inventory) would include a:
A) credit to other Expense.
B) credit to Cost of Goods Sold.
C) credit to Inventory.
D) debit to other Expense.

4) Costs included in the value of inventory are

A. Purchase price less discounts
B. Transportation-in
C. Storage
D. Insurance
E. All of the above

5.Trekking Company had the following purchases during the year:

January 1: 10 units at $120

February 1: 20 units at $130
May 1: 15 units at $140
September 1: 12 units at $150
November 1: 10 units at $160

2
On December 31, there were 26 units in ending inventory. These 26 units consisted of 2 from
January, 4 from February, 6 from May, 4 from September, and 10 from November. Using the
specific identification method, what is the cost of the ending inventory?
A. $3,500
B. $3,800
C. $3,960
D. $3,280
E. $3,640

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