Question 1

The balance in the LIFO reserve account is the difference between the beginning inventory and ending inventory measured using FIFO.

Accepted Answer

A) True 
 B)False

Question 2

The first-in, first-out inventory method assigns the most recent costs to the cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 3

Information about the New Pace Company is presented below:
 $$\begin{array} { | c | c | c | } 
\hline \text { Date } & \text { Ending Inventory } & \text { Price Index } \
\hline 12 / 31 / 2015 & \$ 160,000 & 1.00 \
\hline 12 / 31 / 2016 & \$ 231,000 & 1.05 \
\hline 12 / 31 / 2017 & \$ 216,000 & 1.20 \
\hline 12 / 31 / 2018 & \$ 247,000 & 1.30 \
\hline 12 / 31 / 2019 & \$ 308,000 & 1.40 \
\hline 12 / 31 / 2020 & \$ 248,000 & 1.42 \
\hline
\end{array}$$ 
Required:
Compute the ending inventory for 2015 through 2020 using the dollar-value LIFO method. Round to the nearest dollar.

Accepted Answer

\[\begin{array} { | l | l | l | l | } 
\

Question 4

A fire destroyed the inventory of Barber Company. The following information is available:
 $$\begin{array} { | l | r | } 
\hline \text { Beginning inventory } & \$ 50,000 \
\hline \text { Purchases } & \$ 170,000 \
\hline \text { Net Sales Revenue } & \$ 200,000 \
\hline \text { Gross Profit Percentage } & 30 \% \
\hline
\end{array}$$ 
Required:
1. Prepare a schedule to compute the amount of inventory lost in the fire using the gross profit method.
2. Prepare the required journal entry after the fire.

Accepted Answer

1.
 \[\begin{array} { | c | c | } 
\hlin

Question 5

IFRS does not allow the LIFO inventory method because ________.

Accepted Answer

A)  of the increased taxes owed under the LIFO method 
B)  the majority of companies do not actually sell the oldest items first 
C)  it is viewed as unrealistic and lacks representational faithfulness of inventory flows 
D)  the FIFO method more accurately reflects the cost of inventory 
A)  of the increased taxes owed under the LIFO method 
B)  the majority of companies do not actually sell the oldest items first 
C)  it is viewed as unrealistic and lacks representational faithfulness of inventory flows 
D)  the FIFO method more accurately reflects the cost of inventory

Question 6

An increase in the LIFO reserve is recorded as ________.

Accepted Answer

A)  a credit to Cost of Goods Sold 
B)  a debit to Cost of Goods Sold 
C)  debit to the LIFO Reserve 
D)  credit to the Inventory account 
A)  a credit to Cost of Goods Sold 
B)  a debit to Cost of Goods Sold 
C)  debit to the LIFO Reserve 
D)  credit to the Inventory account

Question 7

The total cost in dollars of ending inventory is equal to the number of units on hand multiplied by the cost per unit.

Accepted Answer

A) True 
 B)False

Question 8

Wetzel Company has the following data available: $$\begin{array} { | l | c | c | c | } 
\hline \text { Transaction } & \text { Units Purchased } & \text { Unit Cost } & \text { Units Sold } \
\hline \text { Beginning Inventory } & 500 & \$ 10 & \
\hline \text { March 1 Purchase } & 200 & \$ 12 & \
\hline \text { April 25 Sale } & & & 350 \
\hline \text { June 10 Purchase } & 300 & \$ 14 & \
\hline \text { July 20 Sale } & & & 250 \
\hline \text { October 30 Purchase } & 350 & \$ 15 & \
\hline \text { December 15 Sale } & & & 400 \
\hline
\end{array}$$
 If Wetzel Company uses a perpetual moving-average inventory system, the cost of the ending inventory on December 31 is ________. (Round average cost per unit to four decimal places and all other numbers to two decimal places.)

Accepted Answer

A)  $12,131.30 
B)  $4,718.70 
C)  $16,850.00 
D)  $5,250.00 
A)  $12,131.30 
B)  $4,718.70 
C)  $16,850.00 
D)  $5,250.00

Question 9

The following transactions occurred for MM's Jewelry Store during the month:
a. On May 1, the owner purchased 100 rings on account at $6,000 each. Credit terms were 2/10, net 30.
b. On May 2, the owner returned one ring.
c. On May 3, the owner sold three of the rings on account at $8,000 each to one customer. The credit terms were 2/10, net 30.
d. On May 9, the owner paid the debt due.
e. On May 15, the customer from May 3 paid for the rings.
Required:
Prepare the journal entries for the above transactions.
1. The store uses the perpetual inventory system and the gross method to record purchase discounts. Explanations are not required.
2. The store uses the periodic inventory system and the net method to record purchase discounts. Explanations are not required.

Accepted Answer

1.
 \[\begin{array} { | l | l | l | r |

Question 10

If costs are declining, using LIFO will result in lower cost of goods sold and a higher net income as compared to FIFO and moving-average methods.

Accepted Answer

A) True 
 B)False

Question 11

Lorna Company has the following data available: $$\begin{array} { | l | r | } 
\hline \text { Beginning inventory } & \$ 170,000 \
\hline \text { Net purchases } & \$ 500,000 \
\hline \text { Net sales } & \$ 900,000 \
\hline \text { Gross profit percentage } & 60 \% \
\hline
\end{array}$$ 
The estimated cost of the ending inventory using the gross profit method is ________.

Accepted Answer

A)  $310,000 
B)  $540,000 
C)  $360,000 
D)  $670,000 
A)  $310,000 
B)  $540,000 
C)  $360,000 
D)  $670,000

Question 12

The following information is available for the past month for a retail store: $$\begin{array} { | l | r | } 
\hline \text { Sales } & \$ 102,000 \
\hline \text { Markups } & \$ 10,000 \
\hline \text { Markdowns } & \$ 8,000 \
\hline \text { Purchases (at cost) } & \$ 38,800 \
\hline \text { Purchases (at retail) } & \$ 107,000 \
\hline \text { Beginning inventory (at cost) } & \$ 30,000 \
\hline \text { Beginning inventory (at retail) } & \$ 46,000 \
\hline
\end{array}$$
 What is the ending inventory at cost using the basic retail method? (Round cost-to-retail ratios to four decimal places.)

Accepted Answer

A)  $23,527 
B)  $29,473 
C)  $53,000 
D)  $16,000 
A)  $23,527 
B)  $29,473 
C)  $53,000 
D)  $16,000

Question 13

On June 1, Addison Company purchased $9,000 of inventory on account from Garrison Company. Garrison offers a 5% discount if payment is received within 15 days. Addison records the purchase using the gross method and the perpetual inventory system. The journal entry on June 1 by Addison Company includes ________.

Accepted Answer

A)  a debit to Inventory for $8,550 
B)  a credit to Accounts Payable for $8,550 
C)  a debit to Inventory for $9,000 
D)  a credit to Cash for $9,000 
A)  a debit to Inventory for $8,550 
B)  a credit to Accounts Payable for $8,550 
C)  a debit to Inventory for $9,000 
D)  a credit to Cash for $9,000

Question 14

On June 1, Atkinson Company purchased $7,000 of inventory on account from Donnie Company. Donnie Company offers a 5% discount if payment is received within 15 days. Atkinson Company records the purchase using the gross method and the perpetual inventory system. Atkinson Company makes the payment for the inventory on June 10. The journal entry on June 10 by Atkinson Company includes ________.

Accepted Answer

A)  a debit to Cash for $7,000 
B)  a credit to Cash for $6,650 
C)  a debit to Inventory for $350 
D)  a credit to Interest Expense for $350 
A)  a debit to Cash for $7,000 
B)  a credit to Cash for $6,650 
C)  a debit to Inventory for $350 
D)  a credit to Interest Expense for $350

Question 15

Smith-Miller Enterprises has inventory of $667,000 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 $128,000 was sold f.o.b. destination and the second shipment of $80,000 was sold f.o.b. shipping point. What amount of inventory should Smith-Miller report on its balance sheet as of December 31?

Accepted Answer

A)  $667,000 
B)  $875,000 
C)  $795,000 
D)  $747,000 
A)  $667,000 
B)  $875,000 
C)  $795,000 
D)  $747,000

The balance in the LIFO reserve account is the difference between the beginning inventory and ending inventory measured using FIFO.

The first-in, first-out inventory method assigns the most recent costs to the cost of goods sold.

IFRS does not allow the LIFO inventory method because ________.

An increase in the LIFO reserve is recorded as ________.

The total cost in dollars of ending inventory is equal to the number of units on hand multiplied by the cost per unit.

If costs are declining, using LIFO will result in lower cost of goods sold and a higher net income as compared to FIFO and moving-average methods.

Lorna Company has the following data available: Beginning inventory \ 170,000 Net purchases \ 500,000 Net sales \ 900,000 Gross profit percentage 60\% The estimated cost of the ending inventory using the gross profit method is ________.

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 balance in the LIFO reserve account is the difference between the beginning inventory and ending inventory measured using FIFO.

The first-in, first-out inventory method assigns the most recent costs to the cost of goods sold.

IFRS does not allow the LIFO inventory method because ________.

An increase in the LIFO reserve is recorded as ________.

The total cost in dollars of ending inventory is equal to the number of units on hand multiplied by the cost per unit.

If costs are declining, using LIFO will result in lower cost of goods sold and a higher net income as compared to FIFO and moving-average methods.

Lorna Company has the following data available: Beginning inventory \ 170,000 Net purchases \ 500,000 Net sales \ 900,000 Gross profit percentage 60\% The estimated cost of the ending inventory using the gross profit method is ________.

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