Question 1

An understatement of the ending inventory in Year 1, if not corrected, will cause which of the following?

Accepted Answer

A)  The year 1 net income to be understated and Year 2 net income to be overstated. 
B)  The year 1 net income to be overstated and Year 2 net income to be overstated. 
C) The year 1 net income to be overstated and Year 2 net income will be correct. 
D) The year 1 net income to be overstated and Year 2 net income to be understateD.The understatement of the year 1 ending inventory causes the year 1 cost of goods sold to be overstated and the year 1 net income is therefore understated. The year 2 cost of goods sold is understated because beginning inventory is understated, which causes the year 2 net income to be overstated. 
A)  The year 1 net income to be understated and Year 2 net income to be overstated. 
B)  The year 1 net income to be overstated and Year 2 net income to be overstated. 
C) The year 1 net income to be overstated and Year 2 net income will be correct. 
D) The year 1 net income to be overstated and Year 2 net income to be understateD.The understatement of the year 1 ending inventory causes the year 1 cost of goods sold to be overstated and the year 1 net income is therefore understated. The year 2 cost of goods sold is understated because beginning inventory is understated, which causes the year 2 net income to be overstated.

Question 2

Which of the following would not be a component of the year-end inventory balance?

Accepted Answer

A)  Freight-in costs. 
B)  Inventory inspection costs. 
C) Inventory preparation costs. 
D) Inventory-related selling costs. 
A)  Freight-in costs. 
B)  Inventory inspection costs. 
C) Inventory preparation costs. 
D) Inventory-related selling costs.

Question 3

Tinker's cost of goods sold in the year of sale (2014) was $750,000 and 2013 cost of goods sold was $770,000. The inventory at the end of 2014 was $188,000 and $208,000 at the end of 2013. Tinker's inventory turnover during 2014 was closest to:

Accepted Answer

A)  3.79 
B)  3.99 
C) 3.84 
D) 3.89 
A)  3.79 
B)  3.99 
C) 3.84 
D) 3.89

Question 4

Which of the following costs does not become a part of inventory of a manufacturer?

Accepted Answer

A)  The cost of raw materials used. 
B)  The cost of factory overhead. 
C) The cost of rent on the factory building. 
D) Rent on corporate headquarters. 
A)  The cost of raw materials used. 
B)  The cost of factory overhead. 
C) The cost of rent on the factory building. 
D) Rent on corporate headquarters.

Question 5

Under the LIFO cost flow assumption during a period of rising costs, which of the following is false?

Accepted Answer

A)  Cost of goods sold will be lower under LIFO than under FIFO. 
B)  Net income will be lower under LIFO than under FIFO. 
C) Income tax expense will be lower under LIFO than under FIFO. 
D) Ending inventory will be lower under LIFO than under FIFO. 
A)  Cost of goods sold will be lower under LIFO than under FIFO. 
B)  Net income will be lower under LIFO than under FIFO. 
C) Income tax expense will be lower under LIFO than under FIFO. 
D) Ending inventory will be lower under LIFO than under FIFO.

Question 6

How much was ending inventory when sales revenue was $500,000, purchases were $310,000, beginning inventory was $22,000, and gross profit was $200,000.

Accepted Answer

Beginning inventory, $22,000 +

Question 7

The LIFO inventory method will result in the lowest gross profit in comparison with the FIFO method when unit costs are decreasing.

Accepted Answer

A) True 
 B)False

Question 8

The use of raw materials in the manufacturing process is reported as an operating expense on the income statement.

Accepted Answer

A) True 
 B)False

Question 9

An overstatement of the 2013 ending inventory results in an overstatement of stockholders' equity as of the end of 2014.

Accepted Answer

A) True 
 B)False

Question 10

Assume Webster Company buys bicycle helmets at a unit cost of $30 and sells them at a unit price of $52. There was no beginning inventory.
Required:
Provide the journal entries required below by entering the account code of the appropriate account and the amount for each debit and credit: $$\begin{array} { l c } 
\text { Account Name } & \text { Account Code } \
\text { Inventory } & \text { A } \
\text { Purchases } & \text { B } \
\text { Cost of goods sold } & \text { C } \
\text { Sales revenue } & \text { D } \
\text { Cash } & \text { E }
\end{array}$$

Accepted Answer

The answer of Assume Webster Company buys bicycle helmets at...

Question 11

RJ Corporation has provided the following information about one of its inventory items: $\begin{array}{clrr}\text { Date }&\text { Transaction } &\text { Number of Units }&\text { Cost per Unit }\\hline
1 / 1 & \text { Beginning Inventory } & 400 & \$ 3,200 \
6 / 6 & \text { Purchase } & 800 & \$ 3,600 \
9 / 10 & \text { Purchase } & 1,200 & \$ 4,000 \
11 / 15 & \text { Purchase } & 800 & \$ 4,200
\end{array}$ During the year, RJ sold 3,000 units. What was cost of goods sold using the LIFO cost flow assumption under a periodic inventory system?

Accepted Answer

A)  $11,680,000. 
B)  $11,590,000. 
C) $11,480,000. 
D) $11,550,000. 
A)  $11,680,000. 
B)  $11,590,000. 
C) $11,480,000. 
D) $11,550,000.

Question 12

On March 15, 2014, Ryan Company purchased $10,000 of merchandise on credit subject to terms of 2/10, n/30. Ryan Company records its purchases using the gross amount. The periodic inventory system is used. Which of the following journal entries is correct when Ryan Company pays for these goods on March 20, 2014?

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 13

The following income statement is complete except for a few missing titles (bold lines on the left), and amounts (dotted lines on the right).
Required:
Prepare a complete income statement using the format and amounts provided. Fill in all items that are missing titles and amounts (ignore income taxes).

Accepted Answer

The answer of The following income statement is complete except...

Question 14

At the end of 2014, a $5,000 understatement was discovered in the amount of the 2014 ending inventory as reflected in the inventory records. What were the 2014 effects of the $5,000 inventory error (before correction)?

Accepted Answer

A)  Assets were understated by $5,000 and pretax income was understated by $5,000. 
B)  Assets were understated by $5,000 and pretax income was overstated by $5,000. 
C) Cost of goods sold was understated by $5,000 and pretax income was understated by $5,000. 
D) Cost of goods sold was overstated by $5,000 and pretax income was overstated by $5,000. 
A)  Assets were understated by $5,000 and pretax income was understated by $5,000. 
B)  Assets were understated by $5,000 and pretax income was overstated by $5,000. 
C) Cost of goods sold was understated by $5,000 and pretax income was understated by $5,000. 
D) Cost of goods sold was overstated by $5,000 and pretax income was overstated by $5,000.

Question 15

Sideline Company reported net income for 2013 of $70,000 and in 2014 of $84,000 (both after income taxes at a 30% rate). It was discovered in 2014 that the ending inventory for 2013 was understated by $2,000 (before any income tax effect).
Required:
Calculate the correct net income (after income tax of 30%) for 2013 and 2014

Accepted Answer

2013: $70,000 + ($2,

Question 16

Which of the following statements is correct when inventory unit costs are decreasing?

Accepted Answer

A)  LIFO will result in lower net income and a higher inventory valuation than will FIFO. 
B)  LIFO will result in higher net income and a higher inventory valuation than will FIFO. 
C) FIFO will result in higher net income and a higher inventory valuation than will LIFO. 
D) FIFO will result in higher net income and a lower inventory valuation than will LIFO. 
A)  LIFO will result in lower net income and a higher inventory valuation than will FIFO. 
B)  LIFO will result in higher net income and a higher inventory valuation than will FIFO. 
C) FIFO will result in higher net income and a higher inventory valuation than will LIFO. 
D) FIFO will result in higher net income and a lower inventory valuation than will LIFO.

Question 17

The journal entry to write-down inventory under the lower of cost or market (LCM) rule results in a debit to cost of goods sold and a credit to inventory.

Accepted Answer

A) True 
 B)False

Question 18

A company provided the following data: sales, $500,000; beginning inventory, $40,000; ending inventory, $45,000; and gross profit, $150,000. What was the amount of inventory purchased during the year?

Accepted Answer

A)  $385,000. 
B)  $355,000. 
C) $345,000. 
D) $145,000. 
A)  $385,000. 
B)  $355,000. 
C) $345,000. 
D) $145,000.

Question 19

Direct material costs are a component of the cost of the work-in process inventory.

Accepted Answer

A) True 
 B)False

Question 20

The LIFO Reserve represents the excess of FIFO inventory costs over LIFO inventory costs.

Accepted Answer

A) True 
 B)False

An understatement of the ending inventory in Year 1, if not corrected, will cause which of the following?

Which of the following would not be a component of the year-end inventory balance?

Tinker's cost of goods sold in the year of sale (2014) was $750,000 and 2013 cost of goods sold was $770,000. The inventory at the end of 2014 was $188,000 and $208,000 at the end of 2013. Tinker's inventory turnover during 2014 was closest to:

Which of the following costs does not become a part of inventory of a manufacturer?

Under the LIFO cost flow assumption during a period of rising costs, which of the following is false?

How much was ending inventory when sales revenue was $500,000, purchases were $310,000, beginning inventory was $22,000, and gross profit was $200,000.

The LIFO inventory method will result in the lowest gross profit in comparison with the FIFO method when unit costs are decreasing.

The use of raw materials in the manufacturing process is reported as an operating expense on the income statement.

An overstatement of the 2013 ending inventory results in an overstatement of stockholders' equity as of the end of 2014.

At the end of 2014, a $5,000 understatement was discovered in the amount of the 2014 ending inventory as reflected in the inventory records. What were the 2014 effects of the $5,000 inventory error (before correction)?

Which of the following statements is correct when inventory unit costs are decreasing?

The journal entry to write-down inventory under the lower of cost or market (LCM) rule results in a debit to cost of goods sold and a credit to inventory.

A company provided the following data: sales, $500,000; beginning inventory, $40,000; ending inventory, $45,000; and gross profit, $150,000. What was the amount of inventory purchased during the year?

Direct material costs are a component of the cost of the work-in process inventory.

The LIFO Reserve represents the excess of FIFO inventory costs over LIFO inventory costs.

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

An understatement of the ending inventory in Year 1, if not corrected, will cause which of the following?

Which of the following would not be a component of the year-end inventory balance?

Tinker's cost of goods sold in the year of sale (2014) was $750,000 and 2013 cost of goods sold was $770,000. The inventory at the end of 2014 was $188,000 and $208,000 at the end of 2013. Tinker's inventory turnover during 2014 was closest to:

Which of the following costs does not become a part of inventory of a manufacturer?

Under the LIFO cost flow assumption during a period of rising costs, which of the following is false?

How much was ending inventory when sales revenue was $500,000, purchases were $310,000, beginning inventory was $22,000, and gross profit was $200,000.

The LIFO inventory method will result in the lowest gross profit in comparison with the FIFO method when unit costs are decreasing.

The use of raw materials in the manufacturing process is reported as an operating expense on the income statement.

An overstatement of the 2013 ending inventory results in an overstatement of stockholders' equity as of the end of 2014.

At the end of 2014, a $5,000 understatement was discovered in the amount of the 2014 ending inventory as reflected in the inventory records. What were the 2014 effects of the $5,000 inventory error (before correction)?

Which of the following statements is correct when inventory unit costs are decreasing?

The journal entry to write-down inventory under the lower of cost or market (LCM) rule results in a debit to cost of goods sold and a credit to inventory.

A company provided the following data: sales, $500,000; beginning inventory, $40,000; ending inventory, $45,000; and gross profit, $150,000. What was the amount of inventory purchased during the year?

Direct material costs are a component of the cost of the work-in process inventory.

The LIFO Reserve represents the excess of FIFO inventory costs over LIFO inventory costs.

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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