Question 1

Which of the following is true under a periodic system?

Accepted Answer

A) A COGS expense is recognized each time a sale is made. 
B) The inventory account is not updated with each purchase. 
C) Inventory shrinkage is easily identified. 
D) This system can be costly to implement. 
A) A COGS expense is recognized each time a sale is made. 
B) The inventory account is not updated with each purchase. 
C) Inventory shrinkage is easily identified. 
D) This system can be costly to implement.

Question 2

Which of the following statements best describes net realizable value when applying the LCM rule?

Accepted Answer

A) Net realizable value is the selling price less the costs necessary to sell the item. 
B) Net realizable value is the selling price plus the costs necessary to sell the item. 
C) Net realizable value is the selling price plus the normal profit margin. 
D) Net realizable value is the selling price less the normal profit margin. 
A) Net realizable value is the selling price less the costs necessary to sell the item. 
B) Net realizable value is the selling price plus the costs necessary to sell the item. 
C) Net realizable value is the selling price plus the normal profit margin. 
D) Net realizable value is the selling price less the normal profit margin.

Question 3

If prices were rising and a Canadian company wanted to report a smaller amount of profit for tax purposes,they should use the weighted-average cost formula.

Accepted Answer

A) True 
 B)False

Question 4

Ariel Co.'s gross profit margin increased from 41.5% in 2020 to 44.3% in 2021.Possible reasons may include:

Accepted Answer

A) increased shipping costs 
B) use of early payment discounts for merchandise purchases 
C) cost of obsolete product passed on to the customer 
D) reduced selling prices 
A) increased shipping costs 
B) use of early payment discounts for merchandise purchases 
C) cost of obsolete product passed on to the customer 
D) reduced selling prices

Question 5

The inventory writedown that results from the application of the LCM rule is often hidden in the

Accepted Answer

A) selling expense. 
B) inventory account. 
C) cost of goods sold. 
D) loss due to market decline of inventory. 
A) selling expense. 
B) inventory account. 
C) cost of goods sold. 
D) loss due to market decline of inventory.

Question 6

Which cost formula will produce the same results under both the periodic and perpetual inventory systems?

Accepted Answer

A) FIFO 
B) weighted-average 
C) They both produce the same results. 
D) They both produce different results. 
A) FIFO 
B) weighted-average 
C) They both produce the same results. 
D) They both produce different results.

Question 7

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 ending inventory was valued at

Accepted Answer

A) $500. 
B) $625. 
C) $720. 
D) $825. 
A) $500. 
B) $625. 
C) $720. 
D) $825.

Question 8

The gross margin ratio is equal to gross margin divided by sales revenue.

Accepted Answer

A) True 
 B)False

Question 9

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 on the November 5 sale?

Accepted Answer

A) $6,100 
B) $8,100 
C) $8,200 
D) $8,550 
A) $6,100 
B) $8,100 
C) $8,200 
D) $8,550

Question 10

An inventory of grocery items where the shelves are stocked from the back would be similar to which cost formula?

Accepted Answer

A) FIFO 
B) specific identification 
C) weighted-average 
D) none of the above 
A) FIFO 
B) specific identification 
C) weighted-average 
D) none of the above

Question 11

Periodic inventory systems provide more relevant and timely information to managers for decision making purposes than perpetual inventory systems do.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is NOT an inventory account in a manufacturing company?

Accepted Answer

A) Raw Material 
B) Work-in-Process 
C) Goods Available For Sale 
D) Finished Goods 
A) Raw Material 
B) Work-in-Process 
C) Goods Available For Sale 
D) Finished Goods

Question 13

Raw materials are the components or ingredients required to make a product.

Accepted Answer

A) True 
 B)False

Question 14

When we calculate weighted-average using the periodic system,we recalculate a new weighted-average cost per unit after every sale.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is the correct flow of costs in a manufacturing operation?

Accepted Answer

A) Raw materials to finished goods to COGS 
B) Raw materials to COGS to finished goods to work-in-process 
C) Raw materials to work-in-process to finished goods to COGS 
D) Direct materials to work-in-process to finished goods to COGS 
A) Raw materials to finished goods to COGS 
B) Raw materials to COGS to finished goods to work-in-process 
C) Raw materials to work-in-process to finished goods to COGS 
D) Direct materials to work-in-process to finished goods to COGS

Question 16

COGS is equal to the inventory purchased for a given time period.

Accepted Answer

A) True 
 B)False

Question 17

The inventory writedown incurred from applying the LCM rule to inventory is

Accepted Answer

A) not reflected on the Statement of Financial Position. 
B) an adjustment to cost of goods sold. 
C) not reflected on the Statement of Income. 
D) not considered a permanent loss. 
A) not reflected on the Statement of Financial Position. 
B) an adjustment to cost of goods sold. 
C) not reflected on the Statement of Income. 
D) not considered a permanent loss.

Question 18

Argyle Company failed to include a number of inventory items in the inventory count at the end of the last period.Assuming no other inventory errors,the effect on the current period is

Accepted Answer

A) an overstatement of gross profit. 
B) an understatement of COGS. 
C) an overstatement of ending inventory. 
D) an understatement of net income. 
A) an overstatement of gross profit. 
B) an understatement of COGS. 
C) an overstatement of ending inventory. 
D) an understatement of net income.

Question 19

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 ending inventory?

Accepted Answer

A) $11,275 
B) $11,500 
C) $11,725 
D) $12,000 
A) $11,275 
B) $11,500 
C) $11,725 
D) $12,000

Question 20

Customers become frustrated if a company does not have a product available when they order it.This is called

Accepted Answer

A) a sell out. 
B) spoilage. 
C) obsolescence. 
D) a stockout. 
A) a sell out. 
B) spoilage. 
C) obsolescence. 
D) a stockout.

Which of the following is true under a periodic system?

Which of the following statements best describes net realizable value when applying the LCM rule?

If prices were rising and a Canadian company wanted to report a smaller amount of profit for tax purposes,they should use the weighted-average cost formula.

Ariel Co.'s gross profit margin increased from 41.5% in 2020 to 44.3% in 2021.Possible reasons may include:

The inventory writedown that results from the application of the LCM rule is often hidden in the

Which cost formula will produce the same results under both the periodic and perpetual inventory systems?

The gross margin ratio is equal to gross margin divided by sales revenue.

An inventory of grocery items where the shelves are stocked from the back would be similar to which cost formula?

Periodic inventory systems provide more relevant and timely information to managers for decision making purposes than perpetual inventory systems do.

Which of the following is NOT an inventory account in a manufacturing company?

Raw materials are the components or ingredients required to make a product.

When we calculate weighted-average using the periodic system,we recalculate a new weighted-average cost per unit after every sale.

Which of the following is the correct flow of costs in a manufacturing operation?

COGS is equal to the inventory purchased for a given time period.

The inventory writedown incurred from applying the LCM rule to inventory is

Argyle Company failed to include a number of inventory items in the inventory count at the end of the last period.Assuming no other inventory errors,the effect on the current period is

Customers become frustrated if a company does not have a product available when they order it.This is called

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

Which of the following is true under a periodic system?

Which of the following statements best describes net realizable value when applying the LCM rule?

If prices were rising and a Canadian company wanted to report a smaller amount of profit for tax purposes,they should use the weighted-average cost formula.

Ariel Co.'s gross profit margin increased from 41.5% in 2020 to 44.3% in 2021.Possible reasons may include:

The inventory writedown that results from the application of the LCM rule is often hidden in the

Which cost formula will produce the same results under both the periodic and perpetual inventory systems?

The gross margin ratio is equal to gross margin divided by sales revenue.

An inventory of grocery items where the shelves are stocked from the back would be similar to which cost formula?

Periodic inventory systems provide more relevant and timely information to managers for decision making purposes than perpetual inventory systems do.

Which of the following is NOT an inventory account in a manufacturing company?

Raw materials are the components or ingredients required to make a product.

When we calculate weighted-average using the periodic system,we recalculate a new weighted-average cost per unit after every sale.

Which of the following is the correct flow of costs in a manufacturing operation?

COGS is equal to the inventory purchased for a given time period.

The inventory writedown incurred from applying the LCM rule to inventory is

Argyle Company failed to include a number of inventory items in the inventory count at the end of the last period.Assuming no other inventory errors,the effect on the current period is

Customers become frustrated if a company does not have a product available when they order it.This is called

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