Question 1

The retail inventory method that estimates the lower-of-cost-or-market of ending inventory is the ________.

Accepted Answer

A)  basic retail inventory method 
B)  gross profit inventory method 
C)  LCM extract method 
D)  conventional retail inventory method 
A)  basic retail inventory method 
B)  gross profit inventory method 
C)  LCM extract method 
D)  conventional retail inventory method

Question 2

Goodee Bakery is considering a change in its inventory valuation method. Goodee Bakery currently uses the FIFO method and is considering a change to the LIFO method. Goodee Bakery started the year on January 1 with inventory at a FIFO cost of $23,500 and a LIFO cost of $21,000. The ending inventory on December 31 is $25,600 at FIFO cost and $21,300 at LIFO cost. The LIFO effect is ________.

Accepted Answer

A)  $4,300 
B)  $2,500 
C)  $6,800 
D)  $1,800 
A)  $4,300 
B)  $2,500 
C)  $6,800 
D)  $1,800

Question 3

Smith Company uses the LIFO retail inventory method for inventory costing. Smith Company has beginning inventory with a cost of $60,000 and a retail value of $180,000. During the year, the company purchases goods with a cost basis of $20,000 and a retail basis of $70,000. Sales are $70,000 at retail. Net markups are $5,000 and net markdowns are $5,000. Under the LIFO retail inventory method, which cost-to-retail ratios are used to determine the cost of ending inventory?

Accepted Answer

A)  beginning inventory 33.3%; new layer 28.57% 
B)  beginning inventory 33.3%; new layer 35.71% 
C)  beginning inventory 33.3%; new layer 33.3% 
D)  beginning inventory 33.3%; new layer 21.43% 
A)  beginning inventory 33.3%; new layer 28.57% 
B)  beginning inventory 33.3%; new layer 35.71% 
C)  beginning inventory 33.3%; new layer 33.3% 
D)  beginning inventory 33.3%; new layer 21.43%

Question 4

Maki Company has the following data available: $$\begin{array} { l c c c } 
\text { Transaction } & \text { Units Purchased } & \text { Unit Cost } & \text { Units Sold } \
\text { Beginning Inventory } & 750 & \$ 32 & \
\text { Oct. 1 Purchase } & 325 & 35 & \
\text { Oct. 10 Sale } & & & 425 \
\text { Oct. 14 Purchase } & 450 & 36 & \
\text { Oct. 20 Sale } & & & 600 \
\text { Oct. 22 Purchase } & 400 & 38 & \
\text { Oct. 29 Sale } & & & 525
\end{array}$$
 If Maki Company uses a perpetual FIFO inventory system, the cost of ending inventory on October 31 is ________.

Accepted Answer

A)  $15,200 
B)  $14,250 
C)  $51,575 
D)  $52,525 
A)  $15,200 
B)  $14,250 
C)  $51,575 
D)  $52,525

Question 5

Beck Company has inventory of $743,000 in its stores as of December 31. It also has two shipments in-transit that left the suppliers' warehouses by December 28. Both shipments are expected to arrive on January 5. The first shipment of $217,000 was sold f.o.b. destination and the second shipment of $110,000 was sold f.o.b. shipping point. Beck Company also has consigned goods of $73,000 awaiting sale with Meyer Company. What amount of inventory should Beck Company report on its balance sheet as of December 31?

Accepted Answer

A)  $743,000 
B)  $926,000 
C)  $1,070,000 
D)  $1,143,000 
A)  $743,000 
B)  $926,000 
C)  $1,070,000 
D)  $1,143,000

Question 6

A company uses the conventional retail method to estimate the cost of ending inventory for interim financial statements. Which of the following responses describe the correct treatment of markups and markdowns in the calculation of the cost-to-retail ratio?

Accepted Answer

A)  $$\begin{array} { | c | c | } 
\hline \text { Markups } & \text { Markdowns } \
\hline \text { add } & \text { subtract } \
\hline
\end{array}$$ 
B)  $$\begin{array} { | c | c | } 
\hline \text { Markups } & \text { Markdowns } \
\hline \text { add } & \text { exclude } \
\hline
\end{array}$$ 
C)  $$\begin{array} { | c | c | } 
\hline \text { Markups } & \text { Markdowns } \
\hline \text { subtract } & \text { add } \
\hline
\end{array}$$ 
D)  $$\begin{array} { | c | c | } 
\hline \text { Markups } & \text { Markdowns } \
\hline \text { exclude } & \text { exclude } \
\hline
\end{array}$$ 
A)  $$\begin{array} { | c | c | } 
\hline \text { Markups } & \text { Markdowns } \
\hline \text { add } & \text { subtract } \
\hline
\end{array}$$ 
B)  $$\begin{array} { | c | c | } 
\hline \text { Markups } & \text { Markdowns } \
\hline \text { add } & \text { exclude } \
\hline
\end{array}$$ 
C)  $$\begin{array} { | c | c | } 
\hline \text { Markups } & \text { Markdowns } \
\hline \text { subtract } & \text { add } \
\hline
\end{array}$$ 
D)  $$\begin{array} { | c | c | } 
\hline \text { Markups } & \text { Markdowns } \
\hline \text { exclude } & \text { exclude } \
\hline
\end{array}$$

Question 7

Gordon Company has the following data available: $$\begin{array} { | l | c | c | c | } 
\hline \text { Transaction } & \text { Units Purchased } & \text { Unit Cost } & \text { Units Sold } \
\hline \text { Beginning Inventory } & 300 & \$ 20 & \
\hline \text { March 1 Purchase } & 200 & \$ 12 & \
\hline \text { April 25 Sale } & & & 350 \
\hline \text { June 10 Purchase } & 380 & \$ 14 & \
\hline \text { July 20 Sale } & & & 210 \
\hline \text { October 30 Purchase } & 250 & \$ 14 & \
\hline \text { December 15 Sale } & & & 350 \
\hline
\end{array}$$
 If Gordon Company uses a perpetual FIFO inventory system, the cost of ending inventory on December 31 is ________.

Accepted Answer

A)  $18,200 
B)  $12,740 
C)  $3,080 
D)  $4,400 
A)  $18,200 
B)  $12,740 
C)  $3,080 
D)  $4,400

Question 8

Basking Company adopted the dollar-value LIFO method in 2018. At December 31, 2018, ending inventory was $104,000, with a price index of 1.00, using dollar-value LIFO. At December 31, 2019, the ending inventory using FIFO is $122,000 and the price index is 1.18. Round all dollar amounts to the nearest dollar. Basking Company's ending inventory at December 31, 2019 on a dollar-value LIFO basis is ________.

Accepted Answer

A)  $104,000 
B)  $103,390 
C)  $103,280 
D)  $122,000 
A)  $104,000 
B)  $103,390 
C)  $103,280 
D)  $122,000

Question 9

If the cost-to-retail ratio increases under the conventional retail method, the cost assigned to the retail value of ending inventory will decrease.

Accepted Answer

A) True 
 B)False

Question 10

The LIFO reserve is disclosed in the footnotes to the financial statements.

Accepted Answer

A) True 
 B)False

Question 11

If the LIFO reserve increases during the year, and inventory costs are increasing, ________.

Accepted Answer

A)  cost of goods sold will be higher under FIFO than LIFO 
B)  cost of goods sold will be higher under LIFO than FIFO 
C)  the journal entry will debit LIFO Reserve 
D)  the journal entry will credit Cost of Goods Sold 
A)  cost of goods sold will be higher under FIFO than LIFO 
B)  cost of goods sold will be higher under LIFO than FIFO 
C)  the journal entry will debit LIFO Reserve 
D)  the journal entry will credit Cost of Goods Sold

Question 12

A company uses the basic retail method to estimate the cost of ending inventory for interim financial statements. Which of the following responses describe the correct treatment of markups and markdowns in the calculation of the cost-to-retail ratio?

Accepted Answer

A)  $$\begin{array} { | c | c | } 
\hline \text { Markups } & \text { Markdowns } \
\hline \text { add } & \text { subtract } \
\hline
\end{array}$$ 
B)  $$\begin{array} { | c | c | } 
\hline \text { Markups } & \text { Markdowns } \
\hline \text { add } & \text { exclude } \
\hline
\end{array}$$ 
C)  $$\begin{array} { | c | c | } 
\hline \text { Markups } & \text { Markdowns } \
\hline \text { subtract } & \text { add } \
\hline
\end{array}$$ 
D)  $$\begin{array} { | c | c | } 
\hline \text { Markups } & \text { Markdowns } \
\hline \text { exclude } & \text { exclude } \
\hline
\end{array}$$ 
A)  $$\begin{array} { | c | c | } 
\hline \text { Markups } & \text { Markdowns } \
\hline \text { add } & \text { subtract } \
\hline
\end{array}$$ 
B)  $$\begin{array} { | c | c | } 
\hline \text { Markups } & \text { Markdowns } \
\hline \text { add } & \text { exclude } \
\hline
\end{array}$$ 
C)  $$\begin{array} { | c | c | } 
\hline \text { Markups } & \text { Markdowns } \
\hline \text { subtract } & \text { add } \
\hline
\end{array}$$ 
D)  $$\begin{array} { | c | c | } 
\hline \text { Markups } & \text { Markdowns } \
\hline \text { exclude } & \text { exclude } \
\hline
\end{array}$$

Question 13

Jamison Company sells goods to Matthews Company. When Jamison ships goods to Matthews with terms f.o.b. shipping point, ________.

Accepted Answer

A)  Jamison Company reports the goods in its inventory when the goods are in transit to Matthews Company 
B)  the title passes from Jamison Company to Matthews Company when the goods are received by Matthews Company 
C)  the title passes from Jamison Company to Matthews Company when the goods leave Jamison Company 
D)  Matthews Company does not include the goods in its inventory while the goods are in transit 
A)  Jamison Company reports the goods in its inventory when the goods are in transit to Matthews Company 
B)  the title passes from Jamison Company to Matthews Company when the goods are received by Matthews Company 
C)  the title passes from Jamison Company to Matthews Company when the goods leave Jamison Company 
D)  Matthews Company does not include the goods in its inventory while the goods are in transit

Question 14

The inventory turnover ratio equals ________.

Accepted Answer

A)  cost of goods sold divided by average inventory 
B)  sales revenue divided by average inventory 
C)  sales revenue divided by cost of goods sold 
D)  365 divided by average inventory 
A)  cost of goods sold divided by average inventory 
B)  sales revenue divided by average inventory 
C)  sales revenue divided by cost of goods sold 
D)  365 divided by average inventory

Question 15

The following information is available for the month of June for a retail store:
 $\begin{array}{|l|r|}
\hline \text { Sales } & \$ 79,000 \
\hline \text { Sales Returns } & \$ 1,000 \
\hline \text { Markups } & \$ 10,000 \
\hline \text { Markup cancellations } & \$ 1,000 \
\hline \text { Markdowns } & \$ 9,300 \
\hline \text { Purchases (at cost) } & \$ 40,000 \
\hline \text { Purchases (at retail) } & \$107,000 \
\hline \text { Purchase returns (at cost) } & \$1,200 \
\hline \text { Purchase returns (at retail) } & \$ 2,000 \
\hline \text { Beginning inventory (at cost) } & \$ 30,000\
\hline\text { Beginning inventory (at retail) }&\$46,000\
\hline

\end{array}$
 Required:
Calculate the ending inventory at cost using the basic retail method. Round ratios to four decimal places. (For example, 0.40127 = 0.4013)

Accepted Answer

None

Question 16

When inventory costs are falling, and inventory levels are stable, the LIFO method will generally result in ________.

Accepted Answer

A)  a higher gross profit than under FIFO 
B)  a lower gross profit than under FIFO 
C)  a lower inventory value than under FIFO 
D)  a higher cost of goods sold than under FIFO 
A)  a higher gross profit than under FIFO 
B)  a lower gross profit than under FIFO 
C)  a lower inventory value than under FIFO 
D)  a higher cost of goods sold than under FIFO

Question 17

On June 1, Kennedy Company purchased $8,000 of inventory on account from Sterner Company. Sterner Company offers a 5% discount if payment is received within 15 days. Kennedy Company records the purchase using the net method and the perpetual inventory system. The journal entry on June 1 by Kennedy Company includes ________.

Accepted Answer

A)  a debit to Inventory for $8,000 
B)  a credit to Accounts Payable for $8,000 
C)  a credit to Cash for $7,600 
D)  a debit to Inventory for $7,600 
A)  a debit to Inventory for $8,000 
B)  a credit to Accounts Payable for $8,000 
C)  a credit to Cash for $7,600 
D)  a debit to Inventory for $7,600

Question 18

Christian Company uses the gross method of recording purchase discounts on inventory and the perpetual inventory system. When Christian Company makes payment for the inventory within the discount period, the bookkeeper will ________.

Accepted Answer

A)  debit Accounts Payable, credit Inventory and credit Cash 
B)  debit Accounts Payable and credit Inventory 
C)  debit Inventory and credit Cash 
D)  debit Accounts Payable and credit Purchases 
A)  debit Accounts Payable, credit Inventory and credit Cash 
B)  debit Accounts Payable and credit Inventory 
C)  debit Inventory and credit Cash 
D)  debit Accounts Payable and credit Purchases

Question 19

When writing down the inventory to market value, the direct method reports a loss as a separate line item on the income statement.

Accepted Answer

A) True 
 B)False

Question 20

The moving-average method of determining inventory is used with the perpetual system of inventory.

Accepted Answer

A) True 
 B)False

The retail inventory method that estimates the lower-of-cost-or-market of ending inventory is the ________.

A company uses the conventional retail method to estimate the cost of ending inventory for interim financial statements. Which of the following responses describe the correct treatment of markups and markdowns in the calculation of the cost-to-retail ratio?

If the cost-to-retail ratio increases under the conventional retail method, the cost assigned to the retail value of ending inventory will decrease.

The LIFO reserve is disclosed in the footnotes to the financial statements.

If the LIFO reserve increases during the year, and inventory costs are increasing, ________.

A company uses the basic retail method to estimate the cost of ending inventory for interim financial statements. Which of the following responses describe the correct treatment of markups and markdowns in the calculation of the cost-to-retail ratio?

Jamison Company sells goods to Matthews Company. When Jamison ships goods to Matthews with terms f.o.b. shipping point, ________.

The inventory turnover ratio equals ________.

When inventory costs are falling, and inventory levels are stable, the LIFO method will generally result in ________.

Christian Company uses the gross method of recording purchase discounts on inventory and the perpetual inventory system. When Christian Company makes payment for the inventory within the discount period, the bookkeeper will ________.

When writing down the inventory to market value, the direct method reports a loss as a separate line item on the income statement.

The moving-average method of determining inventory is used with the perpetual system of inventory.

The Financial Reporting Environment

Financial Reporting Theory

Judgment and Applied Financial Accounting Research

Review of the Accounting Cycle

Statements of Net Income and Comprehensive Net Income

Statements of Financial Position and Cash Flows and the Annual Report

Accounting and the Time Value of Money

Revenue Recognition

Extenssion: Ol Revenue Recognition Previous Standard

Short-Term Operating Assets: Cash and Receivables

Long-Term Operating Assets: Acquisition, Cost Allocation

Long-Term Operating Assets: Departures From Historical Cost

Operating Liabilities and Contingencies

Financing Liabilities

Accounting for Stockholders Equity

Investing Assets

Accounting for Income Taxes

Accounting for Leases

Extension: Ol Accounting for Leases Current Standard

Accounting for Employee Compensation and Benefits

Earnings Per Share

Accounting Corrections and Error Analysis

The Statement of Cash Flows

Filters

Exam 10: Short-Term Operating Assets: Inventory

The retail inventory method that estimates the lower-of-cost-or-market of ending inventory is the ________.

A company uses the conventional retail method to estimate the cost of ending inventory for interim financial statements. Which of the following responses describe the correct treatment of markups and markdowns in the calculation of the cost-to-retail ratio?

If the cost-to-retail ratio increases under the conventional retail method, the cost assigned to the retail value of ending inventory will decrease.

The LIFO reserve is disclosed in the footnotes to the financial statements.

If the LIFO reserve increases during the year, and inventory costs are increasing, ________.

A company uses the basic retail method to estimate the cost of ending inventory for interim financial statements. Which of the following responses describe the correct treatment of markups and markdowns in the calculation of the cost-to-retail ratio?

Jamison Company sells goods to Matthews Company. When Jamison ships goods to Matthews with terms f.o.b. shipping point, ________.

The inventory turnover ratio equals ________.

When inventory costs are falling, and inventory levels are stable, the LIFO method will generally result in ________.

Christian Company uses the gross method of recording purchase discounts on inventory and the perpetual inventory system. When Christian Company makes payment for the inventory within the discount period, the bookkeeper will ________.

When writing down the inventory to market value, the direct method reports a loss as a separate line item on the income statement.

The moving-average method of determining inventory is used with the perpetual system of inventory.

The Financial Reporting Environment

Financial Reporting Theory

Judgment and Applied Financial Accounting Research

Review of the Accounting Cycle

Statements of Net Income and Comprehensive Net Income

Statements of Financial Position and Cash Flows and the Annual Report

Accounting and the Time Value of Money

Revenue Recognition

Extenssion: Ol Revenue Recognition Previous Standard

Short-Term Operating Assets: Cash and Receivables

Long-Term Operating Assets: Acquisition, Cost Allocation

Long-Term Operating Assets: Departures From Historical Cost

Operating Liabilities and Contingencies

Financing Liabilities

Accounting for Stockholders Equity

Investing Assets

Accounting for Income Taxes

Accounting for Leases

Extension: Ol Accounting for Leases Current Standard

Accounting for Employee Compensation and Benefits

Earnings Per Share

Accounting Corrections and Error Analysis

The Statement of Cash Flows

Filters