Question 1

Generally,which inventory costing method approximates most closely the current cost for each of the following?

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 2

Use the information above to answer the following question.If the company uses the weighted average method,the cost of its ending inventory is closest to:

Accepted Answer

A) $38. 
B) $48. 
C) $67. 
D) $75. 
A) $38. 
B) $48. 
C) $67. 
D) $75.

Question 3

The lower the inventory turnover ratio,the more efficiently the company manages its inventory,all other things being equal.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is not true about an auto manufacturer's inventory?

Accepted Answer

A) Tires,batteries,glass,paint,headlamp bulbs,and electric wiring would be included in raw materials inventory. 
B) Incomplete cars that are still being processed would be included in work-in-process inventory. 
C) Finished cars ready to be shipped to dealers would be included in finished goods inventory. 
D) Cars that have been sold to dealers would be included in finished goods inventory. 
A) Tires,batteries,glass,paint,headlamp bulbs,and electric wiring would be included in raw materials inventory. 
B) Incomplete cars that are still being processed would be included in work-in-process inventory. 
C) Finished cars ready to be shipped to dealers would be included in finished goods inventory. 
D) Cars that have been sold to dealers would be included in finished goods inventory.

Question 5

Use the information above to answer the following question.What is the amount of cost of goods available for sale?

Accepted Answer

A) $11,250 
B) $17,500 
C) $5,000 
D) $13,750 
A) $11,250 
B) $17,500 
C) $5,000 
D) $13,750

Question 6

A retailer using a periodic inventory system returned $3,000 of defective merchandise which was purchased on account from one of its wholesale suppliers.The entry to record this transaction on the retailer's books would include a debit to

Accepted Answer

A) Accounts receivable. 
B) Cost of goods sold. 
C) Accounts payable. 
D) Inventory. 
A) Accounts receivable. 
B) Cost of goods sold. 
C) Accounts payable. 
D) Inventory.

Question 7

Which of the following is a valid reason for a company to forgo a discount on a purchase made under terms 2/10,n/30?

Accepted Answer

A) The company does not have the cash and would have to borrow funds to pay the invoice within the discount period. 
B) The interest rate the company can earn on investments exceeds the annualized discount rate. 
C) The company plans to return some of the merchandise before the end of the credit period. 
D) Other suppliers offer a 1% discount for prompt payment. 
A) The company does not have the cash and would have to borrow funds to pay the invoice within the discount period. 
B) The interest rate the company can earn on investments exceeds the annualized discount rate. 
C) The company plans to return some of the merchandise before the end of the credit period. 
D) Other suppliers offer a 1% discount for prompt payment.

Question 8

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

Dr,Cr,Dr,C

Question 9

What is the amount of the discount to be taken by a company that purchases inventory for $10,000 with terms 2/10,n/30,returns $2,000 of the inventory purchased,receives an allowance for defective merchandise of $100,and pays the amount due within the discount period?

Accepted Answer

A) $200 
B) $158 
C) $160 
D) $198 
A) $200 
B) $158 
C) $160 
D) $198

Question 10

An increasing balance in the inventory account and a faster inventory turnover ratio would imply that the inventory build-up is occurring because:

Accepted Answer

A) goods are not selling as fast as anticipated. 
B) the company is expecting to sell more in the future. 
C) goods are selling but it is taking longer to collect payment. 
D) the economy is slowing down. 
A) goods are not selling as fast as anticipated. 
B) the company is expecting to sell more in the future. 
C) goods are selling but it is taking longer to collect payment. 
D) the economy is slowing down.

Question 11

Which of the following effects would occur as a result of a purchase of merchandise for cash in a perpetual inventory system?

Accepted Answer

A) Total assets increase. 
B) Total assets are unchanged. 
C) Total liabilities increase. 
D) Total stockholders' equity decreases. 
A) Total assets increase. 
B) Total assets are unchanged. 
C) Total liabilities increase. 
D) Total stockholders' equity decreases.

Question 12

Inaccurately counted inventory levels reduce a company's net income,either by increasing cost or reducing revenue.

Accepted Answer

A) True 
 B)False

Question 13

Manufacturers have three types of inventory: raw materials,work in process,and finished goods,whereas merchandisers have only raw materials inventory.

Accepted Answer

A) True 
 B)False

Question 14

The following company buys and sells identical collectors' coin sets.The company uses LIFO.In the first two columns below,each coin set is identified by its letter and its cost.The third column indicates when coin sets were sold.
For each inventory costing method given below,fill in the blanks to indicate the letter of the coin set which will be used to calculate either cost of goods sold or the cost of ending inventory.   PERIODIC INVENTORY: Inventory is taken on December 31,2014.   This example shows the cost of the coin sets increasing over time.Using the symbols ">" (greater than)," = " (equals),or "<" (less than),complete the following comparisons by filling in the blanks in the statements below.
Using LIFO with increasing costs,cost of goods sold under periodic inventory _____ cost of goods sold under perpetual inventory.
Using LIFO with increasing costs,ending inventory under periodic inventory _____ ending inventory under perpetual inventory.
Using LIFO with increasing costs,net income under periodic inventory _____ net income under perpetual inventory.

Accepted Answer

PERIODIC INVENTORY: Inventory is taken o

Question 15

Which of the following statements is true?

Accepted Answer

A) When unit costs are steadily rising or falling,the weighted average cost method yields a cost of goods sold between that of FIFO and LIFO. 
B) FIFO will lead to the highest net income if unit costs are falling. 
C) LIFO will always yield a smaller net income than FIFO. 
D) Specific identification is the most practical,but least accurate,measure of cost and net income. 
A) When unit costs are steadily rising or falling,the weighted average cost method yields a cost of goods sold between that of FIFO and LIFO. 
B) FIFO will lead to the highest net income if unit costs are falling. 
C) LIFO will always yield a smaller net income than FIFO. 
D) Specific identification is the most practical,but least accurate,measure of cost and net income.

Question 16

Use the information above to answer the following question.What is the amount of Cost of Goods Sold?

Accepted Answer

A) $650,000 
B) $720,000 
C) $150,000 
D) $70,000 
A) $650,000 
B) $720,000 
C) $150,000 
D) $70,000

Question 17

Which of the following would be in the work-in-process inventory of a company making cheese?

Accepted Answer

A) Milk and cream used to make the cheese. 
B) Cheese that has been made but is curing before being ready to sell. 
C) Cured cheese that is waiting to be shipped to retailers. 
D) Cured cheese that has been sold to retailers. 
A) Milk and cream used to make the cheese. 
B) Cheese that has been made but is curing before being ready to sell. 
C) Cured cheese that is waiting to be shipped to retailers. 
D) Cured cheese that has been sold to retailers.

Question 18

If inventory is sold with terms of FOB destination,goods in transit belong to the seller.

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

A) $3,000. 
B) $2,950. 
C) $3,200. 
D) $3,033. 
A) $3,000. 
B) $2,950. 
C) $3,200. 
D) $3,033.

Question 20

Last year bell-bottom jeans were fashionable and this year boot cut jeans are in style.A retail company's inventory has 375 bell-bottom jeans that cost $17 each and could be replaced for $15.The inventory also includes 1,000 boot cut jeans that cost $16 each and could be replaced for $19.Explain why this situation requires an adjustment to the accounting records,prepare the journal entry that would be used to make the adjustment,and show the effects of the adjustment on the accounting equation.

Accepted Answer

The company needs to make a lo

Generally,which inventory costing method approximates most closely the current cost for each of the following?

Use the information above to answer the following question.If the company uses the weighted average method,the cost of its ending inventory is closest to:

The lower the inventory turnover ratio,the more efficiently the company manages its inventory,all other things being equal.

Which of the following is not true about an auto manufacturer's inventory?

Use the information above to answer the following question.What is the amount of cost of goods available for sale?

A retailer using a periodic inventory system returned $3,000 of defective merchandise which was purchased on account from one of its wholesale suppliers.The entry to record this transaction on the retailer's books would include a debit to

Which of the following is a valid reason for a company to forgo a discount on a purchase made under terms 2/10,n/30?

What is the amount of the discount to be taken by a company that purchases inventory for $10,000 with terms 2/10,n/30,returns $2,000 of the inventory purchased,receives an allowance for defective merchandise of $100,and pays the amount due within the discount period?

An increasing balance in the inventory account and a faster inventory turnover ratio would imply that the inventory build-up is occurring because:

Which of the following effects would occur as a result of a purchase of merchandise for cash in a perpetual inventory system?

Inaccurately counted inventory levels reduce a company's net income,either by increasing cost or reducing revenue.

Manufacturers have three types of inventory: raw materials,work in process,and finished goods,whereas merchandisers have only raw materials inventory.

Which of the following statements is true?

Use the information above to answer the following question.What is the amount of Cost of Goods Sold?

Which of the following would be in the work-in-process inventory of a company making cheese?

If inventory is sold with terms of FOB destination,goods in transit belong to the seller.

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

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

Generally,which inventory costing method approximates most closely the current cost for each of the following?

Use the information above to answer the following question.If the company uses the weighted average method,the cost of its ending inventory is closest to:

The lower the inventory turnover ratio,the more efficiently the company manages its inventory,all other things being equal.

Which of the following is not true about an auto manufacturer's inventory?

Use the information above to answer the following question.What is the amount of cost of goods available for sale?

A retailer using a periodic inventory system returned $3,000 of defective merchandise which was purchased on account from one of its wholesale suppliers.The entry to record this transaction on the retailer's books would include a debit to

Which of the following is a valid reason for a company to forgo a discount on a purchase made under terms 2/10,n/30?

What is the amount of the discount to be taken by a company that purchases inventory for $10,000 with terms 2/10,n/30,returns $2,000 of the inventory purchased,receives an allowance for defective merchandise of $100,and pays the amount due within the discount period?

An increasing balance in the inventory account and a faster inventory turnover ratio would imply that the inventory build-up is occurring because:

Which of the following effects would occur as a result of a purchase of merchandise for cash in a perpetual inventory system?

Inaccurately counted inventory levels reduce a company's net income,either by increasing cost or reducing revenue.

Manufacturers have three types of inventory: raw materials,work in process,and finished goods,whereas merchandisers have only raw materials inventory.

Which of the following statements is true?

Use the information above to answer the following question.What is the amount of Cost of Goods Sold?

Which of the following would be in the work-in-process inventory of a company making cheese?

If inventory is sold with terms of FOB destination,goods in transit belong to the seller.

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

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