Question 1

Which of the following statements is true?

Accepted Answer

A) Valuing inventory under LIFO may produce different results depending on whether a perpetual or periodic inventory system is used. 
B) Valuing inventory under the weighted average cost method always produces the same results using either a perpetual or periodic inventory system. 
C) Valuing inventory under FIFO may produce different results depending on whether a perpetual or periodic inventory system is used. 
D) Using the specific identification method will produce different results depending on whether perpetual or periodic inventory system is used. 
A) Valuing inventory under LIFO may produce different results depending on whether a perpetual or periodic inventory system is used. 
B) Valuing inventory under the weighted average cost method always produces the same results using either a perpetual or periodic inventory system. 
C) Valuing inventory under FIFO may produce different results depending on whether a perpetual or periodic inventory system is used. 
D) Using the specific identification method will produce different results depending on whether perpetual or periodic inventory system is used.

Question 2

The LIFO inventory costing method assumes that the cost of the units most recently purchased is:

Accepted Answer

A) the last to be assigned to cost of goods sold. 
B) the first to be assigned to ending inventory. 
C) the first to be assigned to cost of goods sold. 
D) the last to be assigned to units available for sale. 
A) the last to be assigned to cost of goods sold. 
B) the first to be assigned to ending inventory. 
C) the first to be assigned to cost of goods sold. 
D) the last to be assigned to units available for sale.

Question 3

Use the information above to answer the following question.The journal entry necessary at the end of the period to adjust cost of goods sold for the ending inventory still on hand will include which of the following?

Accepted Answer

A) Debit Inventory,$6,250. 
B) Credit Cost of goods sold,$11,250. 
C) Credit Purchases,$10,200. 
D) Credit Inventory,$5,000. 
A) Debit Inventory,$6,250. 
B) Credit Cost of goods sold,$11,250. 
C) Credit Purchases,$10,200. 
D) Credit Inventory,$5,000.

Question 4

Use the information above to answer the following question.What is the inventory turnover for 2014?

Accepted Answer

A) 3.87 
B) 4 
C) 4.14 
D) 2 
A) 3.87 
B) 4 
C) 4.14 
D) 2

Question 5

Specific identification is the best inventory costing method because it is least subject to manipulation by unscrupulous managers.

Accepted Answer

A) True 
 B)False

Question 6

A new textbook is published in the spring of 2014.Your campus bookstore buys 400 copies at $70 each in June,an additional 1,000 copies in August at $72 each,and 600 copies in December at $75 each.At the end of December 2014,the bookstore has sold 1,900 copies of the text.
Calculate the cost of goods sold and the cost of ending inventory:
a)under the weighted average cost method.
b)under the FIFO method.
c)under the LIFO method.
Using your calculations as a guide,explain how different inventory costing methods affect the numerator and denominator of the inventory turnover ratio when unit costs are increasing.Conclude your explanation by identifying the method that produces the highest (and lowest)inventory turnover ratio.

Accepted Answer

a) @#IMG-DLM& @#IMG-DLM& During a period of rising costs,FIF

Question 7

Use the information above to answer the following question.If BetterBuy uses the weighted average method,its cost of goods sold will be:

Accepted Answer

A) $2,900. 
B) $2,950. 
C) $3,040. 
D) $3,033. 
A) $2,900. 
B) $2,950. 
C) $3,040. 
D) $3,033.

Question 8

Because LIFO uses older costs for inventory,in times of rising prices:

Accepted Answer

A) LIFO results in a higher book value of inventory and lower inventory turnover ratio than FIFO. 
B) LIFO results in a lower book value of inventory and lower inventory turnover ratio than FIFO. 
C) LIFO results in a higher book value of inventory and higher inventory turnover ratio than FIFO. 
D) LIFO results in a lower book value of inventory and higher inventory turnover ratio than FIFO. 
A) LIFO results in a higher book value of inventory and lower inventory turnover ratio than FIFO. 
B) LIFO results in a lower book value of inventory and lower inventory turnover ratio than FIFO. 
C) LIFO results in a higher book value of inventory and higher inventory turnover ratio than FIFO. 
D) LIFO results in a lower book value of inventory and higher inventory turnover ratio than FIFO.

Question 9

Indicate whether the inventory account is debited (Dr),credited (Cr),or neither (N)when using a perpetual inventory system to record each of the following transactions:
_____ The company purchases $3,000 of goods intending to sell them to customers.
_____ The company returns $200 of damaged goods to the supplier.
_____ The company pays a shipping firm $685 to ship an order of goods from the supplier to the company.
_____ The company receives a purchase discount for prompt payment to a supplier.
_____ Customers return $550 of goods in excellent condition to the company.
_____ The company sells $4,600 of goods to consumers.
_____ The company purchases $1,600 of supplies intending to use them internally.
_____ The company gives a sales discount for prompt payment to customers.
_____ The company does a physical count and finds three items missing due to shrinkage.

Accepted Answer

Chapter 07 Inventori

Question 10

During 2013,Shockglass Company recorded inventory purchases of $45,000 and cost of goods sold of $50,000.If inventory at the beginning of the year was $15,000,the ending inventory balance must have been:

Accepted Answer

A) $10,000. 
B) $25,000. 
C) $26,000. 
D) $27,000. 
A) $10,000. 
B) $25,000. 
C) $26,000. 
D) $27,000.

Question 11

Which of the following statements regarding the lower of cost or market rule is not true?

Accepted Answer

A) The lower of cost or market rule sometimes causes the book value of inventory to be written down below cost,but will never cause the book value of inventory to be increased above cost. 
B) The amount of inventory write-down is an expense which most companies report as cost of goods sold. 
C) Lower of cost or market is an inventory cost method used to determine cost of goods sold and ending inventory. 
D) The lower of cost or market rule is based on the conservatism concept. 
A) The lower of cost or market rule sometimes causes the book value of inventory to be written down below cost,but will never cause the book value of inventory to be increased above cost. 
B) The amount of inventory write-down is an expense which most companies report as cost of goods sold. 
C) Lower of cost or market is an inventory cost method used to determine cost of goods sold and ending inventory. 
D) The lower of cost or market rule is based on the conservatism concept.

Question 12

If merchandise is purchased on terms 1/10,n/30 and paid for in 7 days,the purchase discounts account would be credited at date of payment when a perpetual inventory system is used.

Accepted Answer

A) True 
 B)False

Question 13

Use the information above to answer the following question.How long on average does it take to sell something from inventory after it is purchased?

Accepted Answer

A) 12.5 days 
B) 24.8 days 
C) 29.2 days 
D) 165.9 days 
A) 12.5 days 
B) 24.8 days 
C) 29.2 days 
D) 165.9 days

Question 14

An adjustment to ending inventory under the lower of cost or market (LCM)rule would be most likely to be recorded by a company that sells:

Accepted Answer

A) Plastic storage containers. 
B) Paper clips. 
C) Body lotion. 
D) Designer clothes. 
A) Plastic storage containers. 
B) Paper clips. 
C) Body lotion. 
D) Designer clothes.

Question 15

Use the information above to answer the following question.The journal entry necessary at the end of the period to transfer beginning inventory and net purchases to cost of goods sold will include which of the following?

Accepted Answer

A) Credit Inventory,$6,250. 
B) Debit Purchases,$11,250. 
C) Debit Inventory,$6,250. 
D) Debit Cost of goods sold,$11,250. 
A) Credit Inventory,$6,250. 
B) Debit Purchases,$11,250. 
C) Debit Inventory,$6,250. 
D) Debit Cost of goods sold,$11,250.

Question 16

Which inventory costing method generally results in the most recent costs being assigned to ending inventory?

Accepted Answer

A) LIFO. 
B) FIFO. 
C) Weighted average cost. 
D) Simple average cost. 
A) LIFO. 
B) FIFO. 
C) Weighted average cost. 
D) Simple average cost.

Question 17

Use the information above to answer the following question.If the company uses the LIFO costing method,what is the cost of its ending inventory?

Accepted Answer

A) $1,365. 
B) $1,494. 
C) $1,620. 
D) $2,835. 
A) $1,365. 
B) $1,494. 
C) $1,620. 
D) $2,835.

Question 18

Which of the following activities would not affect the inventory account for a company that uses the perpetual inventory system?

Accepted Answer

A) Purchases 
B) Purchase returns 
C) Advertising 
D) Freight-in 
A) Purchases 
B) Purchase returns 
C) Advertising 
D) Freight-in

Question 19

A company using a perpetual inventory system made the following entry:
A.A purchase of inventory at a discount.
B.A return of inventory for credit.
C.A sale of inventory on account.
D.A payment within the discount period for inventory previously purchased on credit.

Accepted Answer

@#IMG-DLM& What does this entry reflect?
A.
A purc

Question 20

The Acme Corporation buys 300 units of merchandise in January at $5 each.Acme buys 500 units at $4 each in February and 200 units at $6 each in March.Acme sells 150 units during this quarter.Acme uses a periodic inventory system and had no beginning inventory.What is its cost of goods sold for the quarter using the LIFO method?

Accepted Answer

A) $600 
B) $934 
C) $750 
D) $900 
A) $600 
B) $934 
C) $750 
D) $900

Which of the following statements is true?

The LIFO inventory costing method assumes that the cost of the units most recently purchased is:

Use the information above to answer the following question.The journal entry necessary at the end of the period to adjust cost of goods sold for the ending inventory still on hand will include which of the following?

Use the information above to answer the following question.What is the inventory turnover for 2014?

Specific identification is the best inventory costing method because it is least subject to manipulation by unscrupulous managers.

Use the information above to answer the following question.If BetterBuy uses the weighted average method,its cost of goods sold will be:

Because LIFO uses older costs for inventory,in times of rising prices:

During 2013,Shockglass Company recorded inventory purchases of $45,000 and cost of goods sold of $50,000.If inventory at the beginning of the year was $15,000,the ending inventory balance must have been:

Which of the following statements regarding the lower of cost or market rule is not true?

If merchandise is purchased on terms 1/10,n/30 and paid for in 7 days,the purchase discounts account would be credited at date of payment when a perpetual inventory system is used.

Use the information above to answer the following question.How long on average does it take to sell something from inventory after it is purchased?

An adjustment to ending inventory under the lower of cost or market (LCM)rule would be most likely to be recorded by a company that sells:

Use the information above to answer the following question.The journal entry necessary at the end of the period to transfer beginning inventory and net purchases to cost of goods sold will include which of the following?

Which inventory costing method generally results in the most recent costs being assigned to ending inventory?

Use the information above to answer the following question.If the company uses the LIFO costing method,what is the cost of its ending inventory?

Which of the following activities would not affect the inventory account for a company that uses the perpetual inventory system?

A company using a perpetual inventory system made the following entry: A.A purchase of inventory at a discount. B.A return of inventory for credit. C.A sale of inventory on account. D.A payment within the discount period for inventory previously purchased on credit.

Business Decisions and Financial Accounting

The Balance Sheet

The Income Statement

Adjustments, Financial Statements, and Financial Results

Financial Reporting and Analysis

Internal Control, Cash, and Merchandise Sales

Receivables, Bad Debt Expense, and Interest Revenue

Long-Lived Tangible and Intangible Assets

Liabilities

Stockholders Equity

Statement of Cash Flows

Measuring and Evaluating Financial Performance

Filters

Exam 7: Inventories and Cost of Goods Sold

Which of the following statements is true?

The LIFO inventory costing method assumes that the cost of the units most recently purchased is:

Use the information above to answer the following question.The journal entry necessary at the end of the period to adjust cost of goods sold for the ending inventory still on hand will include which of the following?

Use the information above to answer the following question.What is the inventory turnover for 2014?

Specific identification is the best inventory costing method because it is least subject to manipulation by unscrupulous managers.

Use the information above to answer the following question.If BetterBuy uses the weighted average method,its cost of goods sold will be:

Because LIFO uses older costs for inventory,in times of rising prices:

During 2013,Shockglass Company recorded inventory purchases of $45,000 and cost of goods sold of $50,000.If inventory at the beginning of the year was $15,000,the ending inventory balance must have been:

Which of the following statements regarding the lower of cost or market rule is not true?

If merchandise is purchased on terms 1/10,n/30 and paid for in 7 days,the purchase discounts account would be credited at date of payment when a perpetual inventory system is used.

Use the information above to answer the following question.How long on average does it take to sell something from inventory after it is purchased?

An adjustment to ending inventory under the lower of cost or market (LCM)rule would be most likely to be recorded by a company that sells:

Use the information above to answer the following question.The journal entry necessary at the end of the period to transfer beginning inventory and net purchases to cost of goods sold will include which of the following?

Which inventory costing method generally results in the most recent costs being assigned to ending inventory?

Use the information above to answer the following question.If the company uses the LIFO costing method,what is the cost of its ending inventory?

Which of the following activities would not affect the inventory account for a company that uses the perpetual inventory system?

A company using a perpetual inventory system made the following entry: A.A purchase of inventory at a discount. B.A return of inventory for credit. C.A sale of inventory on account. D.A payment within the discount period for inventory previously purchased on credit.

Business Decisions and Financial Accounting

The Balance Sheet

The Income Statement

Adjustments, Financial Statements, and Financial Results

Financial Reporting and Analysis

Internal Control, Cash, and Merchandise Sales

Receivables, Bad Debt Expense, and Interest Revenue

Long-Lived Tangible and Intangible Assets

Liabilities

Stockholders Equity

Statement of Cash Flows

Measuring and Evaluating Financial Performance

Filters