Question 1

When a company is evaluating whether or not to use a perpetual vs.a periodic inventory system the following statement is most accurate.

Accepted Answer

A) A perpetual inventory system provides far superior information and should be used at any cost. 
B) A periodic system is inferior and should never be used if possible. 
C) The cost of the system used should be measured against the benefits it provides. 
D) Both systems are equally good. 
A) A perpetual inventory system provides far superior information and should be used at any cost. 
B) A periodic system is inferior and should never be used if possible. 
C) The cost of the system used should be measured against the benefits it provides. 
D) Both systems are equally good.

Question 2

Perpetual inventory systems provide more timely information than periodic systems.

Accepted Answer

A) True 
 B)False

Question 3

Management may use the cost formula decision tree when determining which cost formula to use.If goods are not interchangeable,management's options are

Accepted Answer

A) weighted-average. 
B) FIFO. 
C) Just-in-time. 
D) specific identification. 
A) weighted-average. 
B) FIFO. 
C) Just-in-time. 
D) specific identification.

Question 4

Which of the following cost formulas would be most appropriate for costing an inventory of liquids stored in tanks?

Accepted Answer

A) weighted-average 
B) FIFO 
C) periodic 
D) perpetual 
A) weighted-average 
B) FIFO 
C) periodic 
D) perpetual

Question 5

Companies that make products are known as retailers.

Accepted Answer

A) True 
 B)False

Question 6

Use the following information for questions below
K-tel Industries had the following activity with one of its inventory items during the current period:
$$\begin{array}{l}
\text { }\
\begin{array} { l l l l } 
&&\text {units }&\text { unit cost}\
\text { beginning}&\text {inventory }&30&\$8.00\
\text { purchase}&\text {december 5 }&8&10.5\
\text {sale }&\text {december 11 }&(40)\
\text {purchase }&\text {december 17}&60&12.00\
\text {sale  }&\text {december 26 }&(70)\
\end{array}
\end{array}$$
-Using a perpetual inventory system and the weighted-average cost formula,the cost of goods sold for the December 11 sale was closest to

Accepted Answer

A) $540. 
B) $420. 
C) $393. 
D) $370. 
A) $540. 
B) $420. 
C) $393. 
D) $370.

Question 7

Carolina Company has a normal markup of 40%.Its cost-to-sales ratio is

Accepted Answer

A) 71.4%. 
B) 67.5%. 
C) 60%. 
D) Cannot be calculated. 
A) 71.4%. 
B) 67.5%. 
C) 60%. 
D) Cannot be calculated.

Question 8

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 on an item-by-item basis 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 9

One strategy managers use to reduce the holding costs of inventory is

Accepted Answer

A) separation of duties. 
B) regular inventory counts. 
C) electronic tags. 
D) JIT delivery. 
A) separation of duties. 
B) regular inventory counts. 
C) electronic tags. 
D) JIT delivery.

Question 10

Net realizable value is also known as the

Accepted Answer

A) replacement cost. 
B) wholesale price. 
C) estimated selling price. 
D) liquidated price. 
A) replacement cost. 
B) wholesale price. 
C) estimated selling price. 
D) liquidated price.

Question 11

Use the following information for questions below
K-tel Industries had the following activity with one of its inventory items during the current period:
$$\begin{array}{l}
\text { }\
\begin{array} { l l l l } 
&&\text {units }&\text { unit cost}\
\text { beginning}&\text {inventory }&30&\$8.00\
\text { purchase}&\text {december 5 }&8&10.5\
\text {sale }&\text {december 11 }&(40)\
\text {purchase }&\text {december 17}&60&12.00\
\text {sale  }&\text {december 26 }&(70)\
\end{array}
\end{array}$$
-Using a perpetual inventory system and the FIFO cost formula,the cost of goods sold was

Accepted Answer

A) $975. 
B) $1,080. 
C) $1,175. 
D) $1,300. 
A) $975. 
B) $1,080. 
C) $1,175. 
D) $1,300.

Question 12

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 weighted-average cost formula,what is the gross margin on the November 5 sale?

Accepted Answer

A) $6,100 
B) $8,100 
C) $8,190 
D) $8,550 
A) $6,100 
B) $8,100 
C) $8,190 
D) $8,550

Question 13

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 FIFO cost formula,what is the ending inventory closest to?

Accepted Answer

A) $7,100 
B) $7,350 
C) $7,650 
D) $7,920 
A) $7,100 
B) $7,350 
C) $7,650 
D) $7,920

Question 14

Tamarack Co.prepares its estimate of LCM using the net realizable value.Inventory item 101 cost $45 and its current replacement cost is $50.The item is currently selling in the market for $55 and selling costs are estimated to be $6.Tamarack expects to earn a profit of $4 on the sale of this item.In its year-end financial statements,Tamarack Co.should value this item at

Accepted Answer

A) $50. 
B) $45. 
C) $49. 
D) $55. 
A) $50. 
B) $45. 
C) $49. 
D) $55.

Question 15

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 cost of goods sold closest to?

Accepted Answer

A) $17,085 
B) $17,000 
C) $16,915 
D) $16,575 
A) $17,085 
B) $17,000 
C) $16,915 
D) $16,575

Question 16

When a perpetual inventory system is used,

Accepted Answer

A) a physical inventory count must be taken to determine cost of goods sold. 
B) inventory shrinkage is difficult to determine. 
C) it eliminates the need for frequent inventory counts. 
D) the timeliness of data is sacrificed for lower costs of operation. 
A) a physical inventory count must be taken to determine cost of goods sold. 
B) inventory shrinkage is difficult to determine. 
C) it eliminates the need for frequent inventory counts. 
D) the timeliness of data is sacrificed for lower costs of operation.

Question 17

The gross margin estimation method estimates the cost of goods sold by

Accepted Answer

A) multiplying the sales revenue by cost-to-sales ratio. 
B) multiplying the cost of goods available by the gross margin percentage. 
C) multiplying the costs to sales ratio by purchases. 
D) multiplying the sales revenue by the inventory turnover ratio. 
A) multiplying the sales revenue by cost-to-sales ratio. 
B) multiplying the cost of goods available by the gross margin percentage. 
C) multiplying the costs to sales ratio by purchases. 
D) multiplying the sales revenue by the inventory turnover ratio.

Question 18

When applying the LCM,the following is true:

Accepted Answer

A) the inventory account remains at its original value. 
B) a contra account to inventory is used. 
C) COGS rises when ending inventory is reduced to market value. 
D) LCM can only be applied to individual items. 
A) the inventory account remains at its original value. 
B) a contra account to inventory is used. 
C) COGS rises when ending inventory is reduced to market value. 
D) LCM can only be applied to individual items.

Question 19

A major consideration for a company when selecting a supplier is

Accepted Answer

A) supplier location 
B) online presence 
C) company profitability 
D) inventory valuation 
A) supplier location 
B) online presence 
C) company profitability 
D) inventory valuation

Question 20

Propack Inc.purchases goods from a supplier FOB destination.This means that

Accepted Answer

A) while the goods are in transit Propack owns the items. 
B) the supplier has paid for the shipping. 
C) Propack has paid for the shipping. 
D) None of the above apply. 
A) while the goods are in transit Propack owns the items. 
B) the supplier has paid for the shipping. 
C) Propack has paid for the shipping. 
D) None of the above apply.

When a company is evaluating whether or not to use a perpetual vs.a periodic inventory system the following statement is most accurate.

Perpetual inventory systems provide more timely information than periodic systems.

Management may use the cost formula decision tree when determining which cost formula to use.If goods are not interchangeable,management's options are

Which of the following cost formulas would be most appropriate for costing an inventory of liquids stored in tanks?

Companies that make products are known as retailers.

Carolina Company has a normal markup of 40%.Its cost-to-sales ratio is

One strategy managers use to reduce the holding costs of inventory is

Net realizable value is also known as the

When a perpetual inventory system is used,

The gross margin estimation method estimates the cost of goods sold by

When applying the LCM,the following is true:

A major consideration for a company when selecting a supplier is

Propack Inc.purchases goods from a supplier FOB destination.This means that

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

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Exam 7: Inventory

When a company is evaluating whether or not to use a perpetual vs.a periodic inventory system the following statement is most accurate.

Perpetual inventory systems provide more timely information than periodic systems.

Management may use the cost formula decision tree when determining which cost formula to use.If goods are not interchangeable,management's options are

Which of the following cost formulas would be most appropriate for costing an inventory of liquids stored in tanks?

Companies that make products are known as retailers.

Carolina Company has a normal markup of 40%.Its cost-to-sales ratio is

One strategy managers use to reduce the holding costs of inventory is

Net realizable value is also known as the

When a perpetual inventory system is used,

The gross margin estimation method estimates the cost of goods sold by

When applying the LCM,the following is true:

A major consideration for a company when selecting a supplier is

Propack Inc.purchases goods from a supplier FOB destination.This means that

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