Inventories and profit margin assignment

Inventories and profit margin assignment
Which of the following expenses would you regard as part of the cost of goods sold?
(a) Advertising the goods for sale
(b) Insurance and freight on importing goods for sale
(c) Packing the goods for delivery to customers
(d) Insurance of goods in the warehouse against fire and theft
6.3 If carriage inwards amounting to £57,800 is included as part of carriage outwards the impact of the error
would be:
(a) Gross profit as well as net profit will be understated
(b) Gross profit will be overstated but net profit unaffected
(c) Gross profit as well as net profit will be overstated
(d) Gross profit as well as net profit will not be affected
6.4 How would you account for the goods removed for own use by the proprietor?
(a) Credit Sales account and debit Drawings account with the sale price of the goods
(b) Credit Purchases account and debit Drawings account with the cost price of the goods
(c) Credit ‘Opening’ inventory account and debit Drawings account with cost price of the goods
(d) Credit Statement of income and debit Drawings account with the cost price of the goods
6.5 If closing inventory is accounted for as £240,000 instead of £180,000:
(a) Gross profit and net profit would both be understated
(b) Gross profit will be exaggerated and net profit understated
(c) Gross profit will be overstated but net profit correctly reported
(d) Gross profit as well as net profit will be overstated
6.6 Which of the following will result from a failure to account for goods removed by the proprietor for
own use:
(a) Both net profit and the Capital account balance at year-end will be understated
(b) It would not make any difference to the net profit for the year or the Capital account balance
(a) Net profit will remain the same but the closing balance in the Capital account will be overstated
(d) Net profit will be understated but the closing balance in the Capital account will not change