Question 1

FOB means "For only Buyers".

Accepted Answer

A) True 
 B)False  False

Question 2

One way to estimate the cost of goods sold is to multiply the sales revenue for the period by the inventory turnover ratio.

Accepted Answer

A) True 
 B)False  False

Question 3

Goods available for sale are found in

Accepted Answer

A) work-in-process inventory. 
B) raw materials inventory. 
C) finished goods inventory. 
D) cost of goods sold. 
A) work-in-process inventory. 
B) raw materials inventory. 
C) finished goods inventory. 
D) cost of goods sold. C

Question 4

When a periodic inventory system is used

Accepted Answer

A) inventory shrinkage is impossible to calculate. 
B) timely data is of utmost importance. 
C) cost of goods sold is always known. 
D) every inventory transaction is reflected in the inventory account. 
A) inventory shrinkage is impossible to calculate. 
B) timely data is of utmost importance. 
C) cost of goods sold is always known. 
D) every inventory transaction is reflected in the inventory account.

Question 5

Use the following information for questions below 
A company had the following inventory activity during May:
$\begin{array}{lrccc}
&\text { Units }& \text { Unit Cost } & \text { Total Cost } & \text { Unit Price } \
\hline
Beginning~ inventory&100 & \$ 20.00 & \$ 2,000 & \
Purchase: ~November~3&900 & \$ 21.00 & 18,900 & \
Sale:  \quad  November ~5&(900) & & & \$ 30.00 \
Purchase: November ~15&1,000 & \$ 21.00 & 21,000 & \
Sale: \quad  November~ 28&(900) & & & \$ 30.00
\end{array}$
-If the company uses a perpetual system and the FIFO cost formula,what is the gross margin for the month?

Accepted Answer

A) $12,100 
B) $16,200 
C) $16,300 
D) $17.100 
A) $12,100 
B) $16,200 
C) $16,300 
D) $17.100

Question 6

The longer the inventory remains unsold,the higher the risk of

Accepted Answer

A) spoilage. 
B) damage. 
C) obsolescence. 
D) all of the above. 
A) spoilage. 
B) damage. 
C) obsolescence. 
D) all of the above.

Question 7

Once the manufacturing process is complete,the product is transferred from the Work-in-Process account to Raw Materials account.

Accepted Answer

A) True 
 B)False

Question 8

If a company's inventory turnover ratio is 6.6,it takes them on average 55 days to sell their inventory.

Accepted Answer

A) True 
 B)False

Question 9

Which term describes a situation where the buyer is responsible for paying shipping and other costs incurred while goods are in transit from the seller's premise to the buyer's premises.

Accepted Answer

A) FOB shipping 
B) FOB destination 
C) FOB purchasing 
D) FOB receiving 
A) FOB shipping 
B) FOB destination 
C) FOB purchasing 
D) FOB receiving

Question 10

Use the following information for questions below
A company had the following inventory activity during April:
$$\begin{array}{l}
\text { }\
\begin{array} { l l l l l} 
&&\text {units }&\text { unit cost}&\text { total cost}\
\text { beginning}&\text {inventory }&800&\$10.00&\$8,000\
\text { purchase}&\text {april 6 }&1,400&11.00&15,400\
\text {sale }&\text {april  }&(1,500)\
\text {purchase }&\text {april  17}&900&10.50&9,450\
\text {sale  }&\text {april  24 }&(900)\
\end{array}
\end{array}$$
-If the company is using a perpetual system and the weighted-average cost formula,what is the cost of goods sold closest to?

Accepted Answer

A) $24,380 
B) $24,840 
C) $25,459 
D) $25,631 
A) $24,380 
B) $24,840 
C) $25,459 
D) $25,631

Question 11

In a manufacturing process overhead costs are added to which inventory account?

Accepted Answer

A) Raw Materials 
B) Finished Goods 
C) Work-in-Process 
D) Cost of Goods Sold 
A) Raw Materials 
B) Finished Goods 
C) Work-in-Process 
D) Cost of Goods Sold

Question 12

FOB shipping means the seller owns the inventory until it reaches the buyers premise.

Accepted Answer

A) True 
 B)False

Question 13

Use the following information for questions below
A company had the following inventory activity during June:
$\begin{array}{lrrr}
&{\text { Units }}& {\text { Unit Cost }} & {\text { Total Cost }}\\hline
&450 & \$ 9.50 & \$ 4,275\
Beginning~ inventory~ Purchases:\
~~~~~~~~~~~June ~5&1,500 & 10.00 & 15,000 \
~~~~~~~~~~~June ~13&900 & 10.25 & 9,225 \
Sales:\
~~~~~~~~~~~June~ 8&1,100 & & \
~~~~~~~~~~~June~ 24&600 & &
\end{array}$
-If the company is using a FIFO cost formula and a periodic system,what is the cost of goods sold?

Accepted Answer

A) $17,225 
B) $17,000 
C) $16,775 
D) $16,500 
A) $17,225 
B) $17,000 
C) $16,775 
D) $16,500

Question 14

All of the following are manufacturing accounts EXCEPT for

Accepted Answer

A) Cost of Goods Available for Sale. 
B) Raw Materials. 
C) Finished Goods. 
D) Work-in-Process. 
A) Cost of Goods Available for Sale. 
B) Raw Materials. 
C) Finished Goods. 
D) Work-in-Process.

Question 15

Which of the following statements about the FIFO cost formula is true?

Accepted Answer

A) The same costs per unit are assigned to the ending inventory and the cost of goods sold. 
B) Companies prefer to use FIFO because it lowers their tax liability. 
C) In times of rising prices FIFO will produce a higher net income than weighted-average. 
D) In time of rising prices FIFO produces an inventory cost per unit that is lower than the cost per unit of cost of goods sold. 
A) The same costs per unit are assigned to the ending inventory and the cost of goods sold. 
B) Companies prefer to use FIFO because it lowers their tax liability. 
C) In times of rising prices FIFO will produce a higher net income than weighted-average. 
D) In time of rising prices FIFO produces an inventory cost per unit that is lower than the cost per unit of cost of goods sold.

Question 16

Use the following information to answer questions below
Pal Distributers Inc.values its inventory on an LCM basis.The following data came from the 2020 inventory,which consisted of two items:
$\begin{array}{lrc}
&Item \# 2530&Item \# 2533\
\hline
\text { Original cost } & \$ 12,000 & \$ 15,000 \
\text { Selling price } & 15,000 & 26,000 \
\text { Estimated selling costs } & 5,000 & 10,000 \
\text { Replacement cost } & 13,000 & 15,000 \
\text { Normal profit margin } & 1,500 & 1,000
\end{array}$
-The appropriate carrying value for the entire inventory when applying the LCM rule using net realizable value to the inventory as a whole would be

Accepted Answer

A) $25,000. 
B) $26,000. 
C) $27,000. 
D) $28,000. 
A) $25,000. 
B) $26,000. 
C) $27,000. 
D) $28,000.

Question 17

Hanuv Corporation counts its ending inventory incorrectly in year 1,assuming no other inventory errors in future period,

Accepted Answer

A) the impact of the error effects the inventory account only. 
B) the error effects profitability,net income and retained earnings for year 1 only. 
C) the error extends in to future years indefinitely. 
D) the error will self-correct by the end of year 2. 
A) the impact of the error effects the inventory account only. 
B) the error effects profitability,net income and retained earnings for year 1 only. 
C) the error extends in to future years indefinitely. 
D) the error will self-correct by the end of year 2.

Question 18

In order to ensure that the inventory values presented on the statement of financial position at year end reflect the true economic benefits of the inventory,the company may need to

Accepted Answer

A) have an inventory fire sale. 
B) use a perpetual inventory system. 
C) use a JIT system. 
D) prepare an inventory writedown. 
A) have an inventory fire sale. 
B) use a perpetual inventory system. 
C) use a JIT system. 
D) prepare an inventory writedown.

Question 19

Aubergine Industries had beginning inventory of $10,000 and purchased $75,000 of merchandise during 2020.The company had sales of $90,000 and has traditionally had a cost-to-sales ratio of 75%.Using the gross margin estimation method,the company estimates its ending inventory to be

Accepted Answer

A) $67,500. 
B) $65,000. 
C) $17,500. 
D) $22,500. 
A) $67,500. 
B) $65,000. 
C) $17,500. 
D) $22,500.

Question 20

Use the following information for questions below
A company had the following inventory activity during June:
$\begin{array}{lrrr}
&{\text { Units }}& {\text { Unit Cost }} & {\text { Total Cost }}\\hline
&450 & \$ 9.50 & \$ 4,275\
Beginning~ inventory~ Purchases:\
~~~~~~~~~~~June ~5&1,500 & 10.00 & 15,000 \
~~~~~~~~~~~June ~13&900 & 10.25 & 9,225 \
Sales:\
~~~~~~~~~~~June~ 8&1,100 & & \
~~~~~~~~~~~June~ 24&600 & &
\end{array}$
-If the company is using a weighted-average cost formula and a periodic system,what is the ending inventory closest to?

Accepted Answer

A) $11,925 
B) $11,415 
C) $11,500 
D) $11,585 
A) $11,925 
B) $11,415 
C) $11,500 
D) $11,585

FOB means "For only Buyers".

One way to estimate the cost of goods sold is to multiply the sales revenue for the period by the inventory turnover ratio.

Goods available for sale are found in

When a periodic inventory system is used

The longer the inventory remains unsold,the higher the risk of

Once the manufacturing process is complete,the product is transferred from the Work-in-Process account to Raw Materials account.

If a company's inventory turnover ratio is 6.6,it takes them on average 55 days to sell their inventory.

Which term describes a situation where the buyer is responsible for paying shipping and other costs incurred while goods are in transit from the seller's premise to the buyer's premises.

In a manufacturing process overhead costs are added to which inventory account?

FOB shipping means the seller owns the inventory until it reaches the buyers premise.

All of the following are manufacturing accounts EXCEPT for

Which of the following statements about the FIFO cost formula is true?

Hanuv Corporation counts its ending inventory incorrectly in year 1,assuming no other inventory errors in future period,

In order to ensure that the inventory values presented on the statement of financial position at year end reflect the true economic benefits of the inventory,the company may need to

Aubergine Industries had beginning inventory of $10,000 and purchased $75,000 of merchandise during 2020.The company had sales of $90,000 and has traditionally had a cost-to-sales ratio of 75%.Using the gross margin estimation method,the company estimates its ending inventory to be

Overview of Corporate Financial Reporting

Analyzing Transaction and Their Effect on Financial Statement

Double-Entry Accounting and the Accounting Cycle

Revenue Recognition and the Statement of Income

The Statement of Cash Flows

Cash and Accounts

Long-Term Assets

Current Liabilities

Long-Term Liabilities

Shareholders Equity

Financial Statement Analysis

Filters

Exam 7: Inventory

FOB means "For only Buyers".

One way to estimate the cost of goods sold is to multiply the sales revenue for the period by the inventory turnover ratio.

Goods available for sale are found in

When a periodic inventory system is used

The longer the inventory remains unsold,the higher the risk of

Once the manufacturing process is complete,the product is transferred from the Work-in-Process account to Raw Materials account.

If a company's inventory turnover ratio is 6.6,it takes them on average 55 days to sell their inventory.

Which term describes a situation where the buyer is responsible for paying shipping and other costs incurred while goods are in transit from the seller's premise to the buyer's premises.

In a manufacturing process overhead costs are added to which inventory account?

FOB shipping means the seller owns the inventory until it reaches the buyers premise.

All of the following are manufacturing accounts EXCEPT for

Which of the following statements about the FIFO cost formula is true?

Hanuv Corporation counts its ending inventory incorrectly in year 1,assuming no other inventory errors in future period,

In order to ensure that the inventory values presented on the statement of financial position at year end reflect the true economic benefits of the inventory,the company may need to

Aubergine Industries had beginning inventory of $10,000 and purchased $75,000 of merchandise during 2020.The company had sales of $90,000 and has traditionally had a cost-to-sales ratio of 75%.Using the gross margin estimation method,the company estimates its ending inventory to be

Overview of Corporate Financial Reporting

Analyzing Transaction and Their Effect on Financial Statement

Double-Entry Accounting and the Accounting Cycle

Revenue Recognition and the Statement of Income

The Statement of Cash Flows

Cash and Accounts

Long-Term Assets

Current Liabilities

Long-Term Liabilities

Shareholders Equity

Financial Statement Analysis

Filters