Question 1

Which of the following costs is not included as inventory on the balance sheet?

Accepted Answer

A)  Raw materials to be used in the manufacturing process. 
B)  Work in process. 
C) Finished goods. 
D) Freight-out costs for finished goods sent to retailers. 
A)  Raw materials to be used in the manufacturing process. 
B)  Work in process. 
C) Finished goods. 
D) Freight-out costs for finished goods sent to retailers.

Question 2

Lauer Corporation uses the periodic inventory system and has provided the following information about one of its laptop computers: $\begin{array}{clrr}\text { Date }&\text { Transaction } &\text { Number of Units }&\text { Cost per Unit }\\hline
1 / 1 & \text { Beginning Inventory } & 100 & \$ 800 \
5 / 5 & \text { Purchase } & 200 & \$ 900 \
8 / 10 & \text { Purchase } & 300 & \$ 1,000 \
10 / 15 & \text { Purchase } & 200 & \$ 1,100
\end{array}$ During the year, Lauer sold 750 laptop computers. What was cost of goods sold using the LIFO cost flow assumption?

Accepted Answer

A)  $725,000. 
B)  $740,000. 
C) $735,000. 
D) $720,000. 
A)  $725,000. 
B)  $740,000. 
C) $735,000. 
D) $720,000.

Question 3

During periods of decreasing unit costs, use of the LIFO inventory method will result in a higher amount of ending inventory than will the use of the FIFO inventory method.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following statements is incorrect for a manufacturing entity?

Accepted Answer

A)  Inventory is transferred from work in process to finished goods. 
B)  Raw materials used are transferred to work in process. 
C) Finished goods inventory eventually becomes cost of goods sold. 
D) Cost of goods sold is recognized when the manufacturing process is complete. 
A)  Inventory is transferred from work in process to finished goods. 
B)  Raw materials used are transferred to work in process. 
C) Finished goods inventory eventually becomes cost of goods sold. 
D) Cost of goods sold is recognized when the manufacturing process is complete.

Question 5

A company using the periodic inventory system correctly recorded a purchase of merchandise, but the merchandise was not included in the physical inventory count at the end of the accounting period. The error caused which of the following?

Accepted Answer

A)  An understatement of both net income and inventory. 
B)  An overstatement of inventory, purchases, and accounts payable. 
C) An understatement of inventory, purchases, and accounts payable. 
D) An overstatement of net income and inventory. 
A)  An understatement of both net income and inventory. 
B)  An overstatement of inventory, purchases, and accounts payable. 
C) An understatement of inventory, purchases, and accounts payable. 
D) An overstatement of net income and inventory.

Question 6

Hopkins Company reported the following information related to inventory and sales: $$\begin{array} { l l r } 
& \underline { \text { Units } } & \underline {\text { Unit Cost }} \
\text { Beginning inventory } & 1,000 & \$ 20 \
\text { Purchase No. } 1 & 7,000 & 22 \
\text { Purchase No. } 2 & 2,000 & 23
\end{array}$$ Sales-8,000 units at $35 per unit.
Required:
Compute the following amounts assuming a periodic inventory system:

Accepted Answer

The answer of Hopkins Company reported the following information related...

Question 7

Which of the following is correct when, in the same year, beginning inventory is overstated by $1,300 and ending inventory is understated by $700?

Accepted Answer

A)  Net income is understated by $600. 
B)  Net income is understated by $2,000. 
C) Net income is overstated by $600. 
D) Net income is overstated by $2,000. 
A)  Net income is understated by $600. 
B)  Net income is understated by $2,000. 
C) Net income is overstated by $600. 
D) Net income is overstated by $2,000.

Question 8

The records of Atlantis Company reflected the following for the month of February: $$\begin{array} { l l c c } 
\text { Date } &{ \text { Transaction } } & \text { Number of Units } & \text { Unit Cost } \
2 / 1 & \text { Beginning inventory } & 600 & \$ 3 \
2 / 2 & \text { Purchase No.1 } & 500 & \$ 4 \
2 / 5 & \text { Sale No. 1 } & 700 & \
2 / 12 & \text { Purchase No. 2 } & 600 & \$ 5 \
2 / 15 & \text { Sale No. 2 } & 700 & \
2 / 23 & \text { Purchase No. 3 } & 900 & \$ 6 \
2 / 28 & \text { Ending inventory } & ? &
\end{array}$$ Required:
Determine the amount of ending inventory and cost of goods sold using the following periodic system inventory costing methods:

Accepted Answer

Goods available for

Question 9

Which of the following statements is incorrect when inventory unit costs are increasing?

Accepted Answer

A)  LIFO's cost of goods sold will be the largest among the inventory costing methods. 
B)  LIFO's income tax will be the lowest among the inventory costing methods. 
C) Ending inventory using the average cost method will be larger than the ending inventory when the LIFO method is used. 
D) Cost of goods sold using the average cost method will be less than cost of goods sold when the FIFO method is useD.FIFO has the lowest cost of goods sold during a period of increasing unit costs. 
A)  LIFO's cost of goods sold will be the largest among the inventory costing methods. 
B)  LIFO's income tax will be the lowest among the inventory costing methods. 
C) Ending inventory using the average cost method will be larger than the ending inventory when the LIFO method is used. 
D) Cost of goods sold using the average cost method will be less than cost of goods sold when the FIFO method is useD.FIFO has the lowest cost of goods sold during a period of increasing unit costs.

Question 10

Required:
A. Compute the missing amounts in the income statement under three different inventory costing methods: (Ignore income taxes.)
   
B. Explain the results of the weighted-average inventory costing method compared to the FIFO and LIFO costing methods during a period of increasing unit costs.

Accepted Answer

A. @#IMG-DLM& Computations: A. 2,000 units × $12 =

Question 11

The lower of cost or market (LCM) rule is used due to the conservatism constraint, and therefore an inventory calculation may result in a departure from the historical cost principle.

Accepted Answer

A) True 
 B)False

Question 12

Lauer Corporation uses the periodic inventory system and has provided the following information about one of its laptop computers: $\begin{array}{clrr}\text { Date }&\text { Transaction } &\text { Number of Units }&\text { Cost per Unit }\\hline
1 / 1 & \text { Beginning Inventory } & 100 & \$ 800 \
5 / 5 & \text { Purchase } & 200 & \$ 900 \
8 / 10 & \text { Purchase } & 300 & \$ 1,000 \
10 / 15 & \text { Purchase } & 200 & \$ 1,100
\end{array}$ During the year, Lauer sold 750 laptop computers. What was cost of goods sold using the FIFO cost flow assumption?

Accepted Answer

A)  $725,000. 
B)  $740,000. 
C) $735,000. 
D) $720,000. 
A)  $725,000. 
B)  $740,000. 
C) $735,000. 
D) $720,000.

Question 13

On December 31, 2014, Cruise Company has 10,000 units of an inventory item, which cost $40 per unit when purchased on June 15, 2014. The selling price was $60 per unit. On December 30, 2014, the replacement cost was $36 per unit. At what amount should the 10,000 units of inventory be reported at on the December 31, 2014 balance sheet?

Accepted Answer

A)  $200,000. 
B)  $240,000. 
C) $360,000. 
D) $400,000. 
A)  $200,000. 
B)  $240,000. 
C) $360,000. 
D) $400,000.

Question 14

An understatement of ending inventory results in an overstatement of net income.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following costs will not affect cost of goods sold?

Accepted Answer

A)  Inventory inspection costs. 
B)  Inventory preparation costs. 
C) Inventory-related selling costs. 
D) Freight charges incurred to bring inventory to the warehouse. 
A)  Inventory inspection costs. 
B)  Inventory preparation costs. 
C) Inventory-related selling costs. 
D) Freight charges incurred to bring inventory to the warehouse.

Question 16

Which of the following statements is correct with respect to the determination of cash flows from operating activities?

Accepted Answer

A)  A decrease in inventory is subtracted from net income. 
B)  An increase in accounts payable is subtracted from net income. 
C) An increase in inventory is subtracted from net income. 
D) A decrease in accounts payable is added to net income. 
A)  A decrease in inventory is subtracted from net income. 
B)  An increase in accounts payable is subtracted from net income. 
C) An increase in inventory is subtracted from net income. 
D) A decrease in accounts payable is added to net income.

Question 17

QV-TV, Inc. provided the following items in its notes to the financial statements for the year-end 2014: Cost of goods sold was $22 billion under FIFO costing and the inventory value under FIFO costing was $2.1 billion. The LIFO Reserve for year-end 2013 was $0.6 billion and at year-end 2014 it had increased to $0.8 billion. What is the LIFO inventory value at year-end 2014?

Accepted Answer

A)  $1.9 billion. 
B)  $2.9 billion. 
C) $2.3 billion. 
D) $1.3 billion. 
A)  $1.9 billion. 
B)  $2.9 billion. 
C) $2.3 billion. 
D) $1.3 billion.

Question 18

Cassie Corporation has provided the following information for its most recent month of operation: sales $32,000, beginning inventory $8,000, purchases $16,000 and gross profit $20,000. How much was Cassie's ending inventory?

Accepted Answer

A)  $4,000. 
B)  $8,000. 
C) $6,000. 
D) $12,000. 
A)  $4,000. 
B)  $8,000. 
C) $6,000. 
D) $12,000.

Question 19

Wilmington Company reported pretax income of $25,000 during 2013 and $30,000 during 2014. Later it was discovered that the ending inventory for 2013 was understated by $2,000 (and not corrected in 2013). What is the correct pretax income for each year? $\begin{array}{lll}&2013&2014\
\text { A. } & \$ 23,000 & \$ 32,000 \
\text { B. } & \$ 27,000 & \$ 32,000 \
\text { C. } & \$ 27,000 & \$ 28,000 \
\text { D. } & \$ 23,000 & \$ 28,000
\end{array}$

Accepted Answer

A)  Option A 
B)  Option B 
C) Option C 
D) Option D 
A)  Option A 
B)  Option B 
C) Option C 
D) Option D

Question 20

Which of the following statements does not accurately describe the effects of a write-down of inventory on December 31, 2014 using the lower of cost or market (LCM) valuation method?

Accepted Answer

A)  The 2013 gross profit decreases. 
B)  The 2014 cost of goods sold is effectively decreased if the inventory was sold during 2014. 
C) The 2013 ending inventory is decreased. 
D) The 2014 gross profit is not affected when the inventory was sold during 2014. 
A)  The 2013 gross profit decreases. 
B)  The 2014 cost of goods sold is effectively decreased if the inventory was sold during 2014. 
C) The 2013 ending inventory is decreased. 
D) The 2014 gross profit is not affected when the inventory was sold during 2014.

Which of the following costs is not included as inventory on the balance sheet?

During periods of decreasing unit costs, use of the LIFO inventory method will result in a higher amount of ending inventory than will the use of the FIFO inventory method.

Which of the following statements is incorrect for a manufacturing entity?

A company using the periodic inventory system correctly recorded a purchase of merchandise, but the merchandise was not included in the physical inventory count at the end of the accounting period. The error caused which of the following?

Which of the following is correct when, in the same year, beginning inventory is overstated by $1,300 and ending inventory is understated by $700?

Which of the following statements is incorrect when inventory unit costs are increasing?

Required: A. Compute the missing amounts in the income statement under three different inventory costing methods: (Ignore income taxes.) B. Explain the results of the weighted-average inventory costing method compared to the FIFO and LIFO costing methods during a period of increasing unit costs.

The lower of cost or market (LCM) rule is used due to the conservatism constraint, and therefore an inventory calculation may result in a departure from the historical cost principle.

An understatement of ending inventory results in an overstatement of net income.

Which of the following costs will not affect cost of goods sold?

Which of the following statements is correct with respect to the determination of cash flows from operating activities?

Cassie Corporation has provided the following information for its most recent month of operation: sales $32,000, beginning inventory $8,000, purchases $16,000 and gross profit $20,000. How much was Cassie's ending inventory?

Which of the following statements does not accurately describe the effects of a write-down of inventory on December 31, 2014 using the lower of cost or market (LCM) valuation method?

Financial Statements and Business Decisions

Investing and Financing Decisions and the Accounting System

Operating Decisions and the Accounting System

Adjustments, Financial Statements, and the Quality of Earnings

Communicating and Interpreting Accounting Information

Reporting and Interpreting Sales Revenue, Receivables, and Cash

Reporting and Interpreting Property, Plant, and Equipment; Intangibles; and Natural Resources

Reporting and Interpreting Liabilities

Reporting and Interpreting Bonds

Reporting and Interpreting Owners Equity

Statement of Cash Flows

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Exam 7: Reporting and Interpreting Cost of Goods Sold and Inventory

Which of the following costs is not included as inventory on the balance sheet?

During periods of decreasing unit costs, use of the LIFO inventory method will result in a higher amount of ending inventory than will the use of the FIFO inventory method.

Which of the following statements is incorrect for a manufacturing entity?

A company using the periodic inventory system correctly recorded a purchase of merchandise, but the merchandise was not included in the physical inventory count at the end of the accounting period. The error caused which of the following?

Hopkins Company reported the following information related to inventory and sales: Beginning inventory 1,000 \ 20 Purchase No. 1 7,000 22 Purchase No. 2 2,000 23 Sales-8,000 units at $35 per unit. Required: Compute the following amounts assuming a periodic inventory system:

Which of the following is correct when, in the same year, beginning inventory is overstated by $1,300 and ending inventory is understated by $700?

Which of the following statements is incorrect when inventory unit costs are increasing?

Required: A. Compute the missing amounts in the income statement under three different inventory costing methods: (Ignore income taxes.) B. Explain the results of the weighted-average inventory costing method compared to the FIFO and LIFO costing methods during a period of increasing unit costs.

The lower of cost or market (LCM) rule is used due to the conservatism constraint, and therefore an inventory calculation may result in a departure from the historical cost principle.

An understatement of ending inventory results in an overstatement of net income.

Which of the following costs will not affect cost of goods sold?

Which of the following statements is correct with respect to the determination of cash flows from operating activities?

Cassie Corporation has provided the following information for its most recent month of operation: sales $32,000, beginning inventory $8,000, purchases $16,000 and gross profit $20,000. How much was Cassie's ending inventory?

Which of the following statements does not accurately describe the effects of a write-down of inventory on December 31, 2014 using the lower of cost or market (LCM) valuation method?

Financial Statements and Business Decisions

Investing and Financing Decisions and the Accounting System

Operating Decisions and the Accounting System

Adjustments, Financial Statements, and the Quality of Earnings

Communicating and Interpreting Accounting Information

Reporting and Interpreting Sales Revenue, Receivables, and Cash

Reporting and Interpreting Property, Plant, and Equipment; Intangibles; and Natural Resources

Reporting and Interpreting Liabilities

Reporting and Interpreting Bonds

Reporting and Interpreting Owners Equity

Statement of Cash Flows

Analyzing Financial Statements

Reporting and Interpreting Investments in Other Corporations

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