Question 1

The cost formula used by a firm to value inventory must match the physical flow of units through the firm.

Accepted Answer

A) True 
 B)False

Question 2

Use of the FIFO cost formula means that

Accepted Answer

A) the perpetual costing system is used. 
B) the ending inventory contains the oldest costs. 
C) the periodic costing system is used. 
D) the ending inventory contains the most recent costs. 
A) the perpetual costing system is used. 
B) the ending inventory contains the oldest costs. 
C) the periodic costing system is used. 
D) the ending inventory contains the most recent costs.

Question 3

Which of the following statements about the weighted-average cost formula is true?

Accepted Answer

A) If prices are rising,companies prefer it because it lowers their tax liability. 
B) It is the most popular method in Canada. 
C) In times of rising prices,weighted-average will produce a higher net income than FIFO. 
D) In time of rising prices,weighted-average produces an inventory cost per unit that is higher than the cost per unit of cost of goods sold. 
A) If prices are rising,companies prefer it because it lowers their tax liability. 
B) It is the most popular method in Canada. 
C) In times of rising prices,weighted-average will produce a higher net income than FIFO. 
D) In time of rising prices,weighted-average produces an inventory cost per unit that is higher than the cost per unit of cost of goods sold.

Question 4

Physical inventory counts are

Accepted Answer

A) only necessary for periodic systems. 
B) only necessary for perpetual systems. 
C) necessary for periodic and perpetual systems as part of internal control. 
D) not necessary at all if a company has an appropriate accounting system. 
A) only necessary for periodic systems. 
B) only necessary for perpetual systems. 
C) necessary for periodic and perpetual systems as part of internal control. 
D) not necessary at all if a company has an appropriate accounting system.

Question 5

Effective inventory management would have one person place the order for new inventory,a second person check it against the purchase order when it arrives,and a third person record the receipt of inventory in the accounting records.The purpose of this system is

Accepted Answer

A) to reduce spoilage. 
B) to reduce storage costs. 
C) to guard against stockouts. 
D) to guard against internal theft and collusion. 
A) to reduce spoilage. 
B) to reduce storage costs. 
C) to guard against stockouts. 
D) to guard against internal theft and collusion.

Question 6

The following amounts are always known under which inventory costing system?
  Current inventory       Cost of goods sold          Inventory shrinkage

Accepted Answer

A) Periodic                Periodic                            Perpetual 
B) Perpetual            &nbsp   Perpetual                          Periodic 
C) Perpetual              Perpetual                           Perpetual 
D) Periodic               Periodic                            Periodic 
A) Periodic                Periodic                            Perpetual 
B) Perpetual            &nbsp   Perpetual                          Periodic 
C) Perpetual              Perpetual                           Perpetual 
D) Periodic               Periodic                            Periodic

Question 7

Very high turnovers

Accepted Answer

A) are always the goal of management. 
B) may create stockouts. 
C) are a measurement of profitability. 
D) are unaffected by inventory writedowns. 
A) are always the goal of management. 
B) may create stockouts. 
C) are a measurement of profitability. 
D) are unaffected by inventory writedowns.

Question 8

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 cost of goods sold closest to?

Accepted Answer

A) $25,700 
B) $25,500 
C) $25,200 
D) $25,930 
A) $25,700 
B) $25,500 
C) $25,200 
D) $25,930

Question 9

Inventory turnover and days to sell inventory

Accepted Answer

A) are different names for the same metric. 
B) are inversely related. 
C) are interpreted to be as the higher the better. 
D) none of the above 
A) are different names for the same metric. 
B) are inversely related. 
C) are interpreted to be as the higher the better. 
D) none of the above

Question 10

Which of the following cost formulas would be most appropriate when the inventory units are unique or costly?

Accepted Answer

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

Question 11

The major difference between the periodic and perpetual inventory systems is that inventory must be physically counted in the periodic system to determine ending inventory.

Accepted Answer

A) True 
 B)False

Question 12

The inventory turnover ratio is calculated as cost of goods sold divided by total inventory.

Accepted Answer

A) True 
 B)False

Question 13

Under the FIFO inventory formula,the cost of ending inventory and cost of goods sold will be the same under both the perpetual and periodic inventory systems.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following should be included in the cost of inventory?

Accepted Answer

A) the cost of keeping the inventory records 
B) depreciation on the inventory warehouse 
C) the salesperson's commission 
D) receiving and inspection costs 
A) the cost of keeping the inventory records 
B) depreciation on the inventory warehouse 
C) the salesperson's commission 
D) receiving and inspection costs

Question 15

In 2020 Borger Industries had beginning inventory of $106,000,purchases of $1,126,500,ending inventory of $116,000,accounts payable of $49,605,and sales of $2,147,250.Inventory turnover for 2017 was closest to

Accepted Answer

A) 9.625. 
B) 10.06. 
C) 10.15. 
D) 10.53. 
A) 9.625. 
B) 10.06. 
C) 10.15. 
D) 10.53.

Question 16

Which of the following would most likely use a periodic inventory system?

Accepted Answer

A) car dealership 
B) heavy metal distributor 
C) computer dealership 
D) local handcrafted furniture store 
A) car dealership 
B) heavy metal distributor 
C) computer dealership 
D) local handcrafted furniture store

Question 17

The Finished Goods account collects all the costs incurred as a product is being made.

Accepted Answer

A) True 
 B)False

Question 18

The cost-to-sales ratio is a method used to estimate inventory instead of performing a physical count.

Accepted Answer

A) True 
 B)False

Question 19

Perpetual inventory systems are incapable of identifying inventory shrinkage.

Accepted Answer

A) True 
 B)False

Question 20

A small local convenience store is opening in your neighborhood.Inventory is limited and keeping initial start-up costs low is a priority.What type of inventory system would you recommend?

Accepted Answer

A) perpetual 
B) periodic 
C) specific identification 
D) Company is so small one is not needed. 
A) perpetual 
B) periodic 
C) specific identification 
D) Company is so small one is not needed.

The cost formula used by a firm to value inventory must match the physical flow of units through the firm.

Use of the FIFO cost formula means that

Which of the following statements about the weighted-average cost formula is true?

Physical inventory counts are

Effective inventory management would have one person place the order for new inventory,a second person check it against the purchase order when it arrives,and a third person record the receipt of inventory in the accounting records.The purpose of this system is

The following amounts are always known under which inventory costing system? Current inventory Cost of goods sold Inventory shrinkage

Very high turnovers

Inventory turnover and days to sell inventory

Which of the following cost formulas would be most appropriate when the inventory units are unique or costly?

The major difference between the periodic and perpetual inventory systems is that inventory must be physically counted in the periodic system to determine ending inventory.

The inventory turnover ratio is calculated as cost of goods sold divided by total inventory.

Under the FIFO inventory formula,the cost of ending inventory and cost of goods sold will be the same under both the perpetual and periodic inventory systems.

Which of the following should be included in the cost of inventory?

In 2020 Borger Industries had beginning inventory of $106,000,purchases of $1,126,500,ending inventory of $116,000,accounts payable of $49,605,and sales of $2,147,250.Inventory turnover for 2017 was closest to

Which of the following would most likely use a periodic inventory system?

The Finished Goods account collects all the costs incurred as a product is being made.

The cost-to-sales ratio is a method used to estimate inventory instead of performing a physical count.

Perpetual inventory systems are incapable of identifying inventory shrinkage.

A small local convenience store is opening in your neighborhood.Inventory is limited and keeping initial start-up costs low is a priority.What type of inventory system would you recommend?

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

The cost formula used by a firm to value inventory must match the physical flow of units through the firm.

Use of the FIFO cost formula means that

Which of the following statements about the weighted-average cost formula is true?

Physical inventory counts are

Effective inventory management would have one person place the order for new inventory,a second person check it against the purchase order when it arrives,and a third person record the receipt of inventory in the accounting records.The purpose of this system is

The following amounts are always known under which inventory costing system? Current inventory Cost of goods sold Inventory shrinkage

Very high turnovers

Inventory turnover and days to sell inventory

Which of the following cost formulas would be most appropriate when the inventory units are unique or costly?

The major difference between the periodic and perpetual inventory systems is that inventory must be physically counted in the periodic system to determine ending inventory.

The inventory turnover ratio is calculated as cost of goods sold divided by total inventory.

Under the FIFO inventory formula,the cost of ending inventory and cost of goods sold will be the same under both the perpetual and periodic inventory systems.

Which of the following should be included in the cost of inventory?

In 2020 Borger Industries had beginning inventory of $106,000,purchases of $1,126,500,ending inventory of $116,000,accounts payable of $49,605,and sales of $2,147,250.Inventory turnover for 2017 was closest to

Which of the following would most likely use a periodic inventory system?

The Finished Goods account collects all the costs incurred as a product is being made.

The cost-to-sales ratio is a method used to estimate inventory instead of performing a physical count.

Perpetual inventory systems are incapable of identifying inventory shrinkage.

A small local convenience store is opening in your neighborhood.Inventory is limited and keeping initial start-up costs low is a priority.What type of inventory system would you recommend?

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