Assume that Widgets, Inc. uses a perpetual FIFO Inventory system. During the period, It sold 12 units on credit to one customer

Q-mart failed to include inventory that was kept in a separate warehouse in its 12/31
end-of-the-period inventory count Consequently, the ending inventory on 12/31 was understated on
the balance sheet. Explain how this error will effect the current year's income statement. (Check all
that apply.)

The current year's net income will be too low.
The current year's cost of goods sold will be too low.
The current year's net income will be too high.
The current year's cost of goods sold will be too high.



Assume that Widgets, Inc. uses a perpetual FIFO Inventory system. During the period, It sold 12 units
on credit to one customer. Demonstrate tile joun1al entry required to record the sale and the cost of
tile sale'"' select alI of the correct items below. (Check all that apply.)
Jan1 Begining Inventory 100$12
Mayi Purchase 10@ $15

Augs Sale 12 units x $60 each


Cost of Goods Sold is debited for $150.
Merchandise Inventory is credited for $720.
Cost of Goods Sold Is debited for $720.
Accounts Receivable Is debited for $720.
Sales is credited for $720.
Merchandise Inventory is credited for $150.
Sales Is debited for $720.
Purchases is credited for $150.

[Cost of goods sold is computed as $150 (10x$1.2)+(2x$15).