rsm219 2012 term test2 Essay

1689 Words Feb 12th, 2014 7 Pages
University of Toronto
Joseph L. Rotman School of Management

October 25, 2012
Financial Accounting

Duration: 1 hour 50 minutes
Aids allowed: Non-programmable calculator

Please print your name, student number day and time of your tutorial in the space provided.

There are 10 multiple choice and 8 problems. Please use the space provided below for your answer to the multiple choice questions.

You must use a pen. Do not use WHITEOUT.

Clearly show all computations in the test paper in order to obtain full marks for the problems.

Tests written in pencil will not be considered for remarking.

_______________________________ _______________________________ LAST NAME FIRST NAME
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Sodor purchased merchandise on account for $5,000. The credit terms are 2/10, n/30. Jane has talked with the company's banker and knows that she could earn 9% on any money invested in the company's savings account.

(a) Should Jane pay the invoice within the discount period or should she keep the $5,000 in the savings account and pay at the end of the credit period (i.e. after 30 days)? Support your recommendation with a calculation showing which action would be best.
(b) If Jane forgoes the discount, it may be viewed as paying an interest rate of 2% for the use of $5,000 for 20 days. Calculate the annual rate of interest that this is equivalent to.

Part C (11 marks)

Match the items below by entering the appropriate code letter in the space provided.

A. Merchandise inventory G. Last-in, first-out (LIFO) B. Cost H. Average cost C. FOB shipping point I. Perpetual D. FOB destination J. Inventory turnover E. Specific identification method K. Periodic F. First-in, first-out (FIFO)

1. Each of the inventory cost formulas used in a perpetual inventory system may be used in a(n) _____________ inventory system.

2. The method tracks the actual physical flow for each

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