Assume Grammar Company Uses the Periodic Inventory System and Has

question 110

Multiple Choice

Assume Grammar Company uses the periodic inventory system and has a beginning inventory balance of $5,000, purchases of $75,000, and sales of $125,000.Grammar closes its records once a year on December 31.In the accounting records, the inventory account would be expected to have a balance on December 31 prior to adjusting and closing entries that was

• A)equal to $5,000.
• B)more than $5,000.
• C)less than $5,000.
• D)indeterminate.

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Definitions:

LIFO Method

Last In, First Out; an accounting method for valuing inventory by treating the most recently produced items as the first to be sold.

Cost Of Goods Sold

Direct costs attributable to the production of goods sold by a company, including materials, labor, and overhead.

Merchandise

Goods that are purchased, stored, and sold by a business in the ordinary course of its operations, often referred to as inventory.

Gross Profit Rate

The gross profit rate, also known as gross profit margin, is the ratio of gross profit (sales minus cost of goods sold) to sales, expressed as a percentage.