Question 1

In applying the lower of cost or market method to inventory valuation,market is defined as the current selling price.

Accepted Answer

A) True 
 B)False

Question 2

Accounting principles require that inventory be reported at the market value (cost)of replacing inventory when cost is lower than market value.

Accepted Answer

A) True 
 B)False

Question 3

All of the following statements regarding U.S.GAAP and IFRS are true except:

Accepted Answer

A) Both U.S.GAAP and IFRS include broad and similar guidance for the items and costs making up merchandise inventory. 
B) For both U.S.GAAP and IFRS,merchandise inventory includes all items that a company owns and holds for sale. 
C) Both U.S.GAAP and IFRS require companies to write down inventory when its value falls below the cost presently recorded. 
D) Both U.S.GAAP and IFRS allow reversals of write downs up to the original acquisition cost. 
E) With limited exceptions,neither U.S.GAAP nor IFRS allow inventory to be adjusted upward beyond the original cost. 
A) Both U.S.GAAP and IFRS include broad and similar guidance for the items and costs making up merchandise inventory. 
B) For both U.S.GAAP and IFRS,merchandise inventory includes all items that a company owns and holds for sale. 
C) Both U.S.GAAP and IFRS require companies to write down inventory when its value falls below the cost presently recorded. 
D) Both U.S.GAAP and IFRS allow reversals of write downs up to the original acquisition cost. 
E) With limited exceptions,neither U.S.GAAP nor IFRS allow inventory to be adjusted upward beyond the original cost.

Question 4

The FIFO inventory method assumes that costs for the latest units purchased are the first to be charged to the cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 5

Strods Company reported the following purchases and sales of its only product.Strods uses a periodic inventory system.Determine the cost assigned to cost of goods sold using FIFO.

Accepted Answer

A) $2,460 
B) $2,860 
C) $2,980 
D) $2,850 
E) $2,590 
A) $2,460 
B) $2,860 
C) $2,980 
D) $2,850 
E) $2,590

Question 6

The understatement of the beginning inventory balance causes:

Accepted Answer

A) Cost of goods sold to be understated and net income to be understated. 
B) Cost of goods sold to be understated and net income to be overstated. 
C) Cost of goods sold to be overstated and net income to be overstated. 
D) Cost of goods sold to be overstated and net income to be understated. 
E) Cost of goods sold to be overstated and net income to be correct. 
A) Cost of goods sold to be understated and net income to be understated. 
B) Cost of goods sold to be understated and net income to be overstated. 
C) Cost of goods sold to be overstated and net income to be overstated. 
D) Cost of goods sold to be overstated and net income to be understated. 
E) Cost of goods sold to be overstated and net income to be correct.

Question 7

A company's store was destroyed by an earthquake on February 10 of the current year.The only information for the current period that could be salvaged included the following:
 $$\begin{array} { | l | l | } 
\hline \text { Beginning inventory, January 1: } & \$ 44,000 \
\hline \text { Purchases to date: } & \$ 198,000 \
\hline \text { Sales to date: } & \$ 310,000 \
\hline
\end{array}$$ Historically,the company's gross profit ratio has been 30%.Estimate the value of the destroyed inventory using the gross profit method.

Accepted Answer

The answer of A company's store was destroyed by an...

Question 8

Damaged and obsolete goods that can be sold:

Accepted Answer

A) Are never counted as inventory. 
B) Are included in inventory at their full cost. 
C) Are included in inventory at their net realizable value. 
D) Should be disposed of immediately. 
E) Are assigned a value of zero. 
A) Are never counted as inventory. 
B) Are included in inventory at their full cost. 
C) Are included in inventory at their net realizable value. 
D) Should be disposed of immediately. 
E) Are assigned a value of zero.

Question 9

A company uses the retail inventory method and has the following information available concerning its most recent accounting period:
 $$\begin{array} { | l | l | l | } 
\hline & \text { At Cost } & \text { At Retail } \
\hline \text { Beginning-of-period inventory } \$ 148,600 & \$ 245,200 \
\hline \text { Net purchases } & 677,400 & 1,229,800 \
\hline \text { Sales } & & 1,200,000 \
\hline
\end{array}$$ 1.What is the cost-to-retail ratio using the retail method?
2.What is the estimated cost of the ending inventory?

Accepted Answer

The answer of A company uses the retail inventory method...

Question 10

An understatement of ending inventory will cause an understatement of assets and equity on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 11

Strods Company reported the following purchases and sales of its only product.Strods uses a perpetual inventory system.Determine the cost assigned to cost of goods sold using FIFO.

Accepted Answer

A) $2,980 
B) $2,460 
C) $2,850 
D) $2,590 
E) $5,440 
A) $2,980 
B) $2,460 
C) $2,850 
D) $2,590 
E) $5,440

Question 12

A company sells garden hoses and uses the perpetual inventory system to account for its merchandise.The beginning balance of the inventory and its transactions during September were as follows: September 1: Beginning balance of 18 units at $13 each
September 12: Purchased 30 units at $14 each
September 19: Sold 24 units at $30 selling price each
September 20: Purchased 24 units at $17 each
September 27: Sold 27 units at $30 selling price each
If the ending inventory is reported at $276,what inventory method was used?

Accepted Answer

A) LIFO method. 
B) FIFO method. 
C) Weighted average method. 
D) Specific identification method. 
E) Retail inventory method. 
A) LIFO method. 
B) FIFO method. 
C) Weighted average method. 
D) Specific identification method. 
E) Retail inventory method.

Question 13

The cost of an inventory item includes its invoice cost minus any discount,plus any added or incidental costs necessary to put it in a place and condition for sale.

Accepted Answer

A) True 
 B)False

Question 14

The expense recognition (matching)principle is used to determine how much of the cost of goods available for sale is deducted from sales and how much is carried forward as inventory.

Accepted Answer

A) True 
 B)False

Question 15

Big Box Store has operated with a 30% average gross profit ratio for a number of years.It had $100,000 in sales during the second quarter of this year.If it began the quarter with $18,000 of inventory at cost and purchased $72,000 of inventory during the quarter,its estimated ending inventory by the gross profit method is:

Accepted Answer

A) $30,000. 
B) $21,000. 
C) $20,000. 
D) $18,000. 
E) $27,000. 
A) $30,000. 
B) $21,000. 
C) $20,000. 
D) $18,000. 
E) $27,000.

Question 16

The ________ method of assigning costs to inventory and cost of goods sold assumes that the most recent purchases are sold first.

Accepted Answer

last in,fi

Question 17

The LIFO method of inventory valuation can result in a company's ending inventory being valued at less than the inventory's replacement cost because LIFO inventory leaves the oldest costs in inventory.

Accepted Answer

A) True 
 B)False

Question 18

An understatement of ending inventory will cause

Accepted Answer

A) An overstatement of assets and equity on the balance sheet. 
B) An understatement of assets and equity on the balance sheet. 
C) An overstatement of assets and an understatement of equity on the balance sheet. 
D) An understatement of assets and an overstatement of equity on the balance sheet. 
E) No effect on the balance sheet. 
A) An overstatement of assets and equity on the balance sheet. 
B) An understatement of assets and equity on the balance sheet. 
C) An overstatement of assets and an understatement of equity on the balance sheet. 
D) An understatement of assets and an overstatement of equity on the balance sheet. 
E) No effect on the balance sheet.

Question 19

Goods in transit are automatically included in inventory regardless of whether title has passed to the buyer.

Accepted Answer

A) True 
 B)False

Question 20

Consignment goods are:

Accepted Answer

A) Goods shipped by the owner to the consignee who sells the goods for the owner. 
B) Reported in the consignee's books as inventory. 
C) Goods shipped to the consignor who sells the goods for the owner. 
D) Not reported in the consignor's inventory since they do not have possession of the inventory. 
E) Always paid for by the consignee when they take possession. 
A) Goods shipped by the owner to the consignee who sells the goods for the owner. 
B) Reported in the consignee's books as inventory. 
C) Goods shipped to the consignor who sells the goods for the owner. 
D) Not reported in the consignor's inventory since they do not have possession of the inventory. 
E) Always paid for by the consignee when they take possession.

In applying the lower of cost or market method to inventory valuation,market is defined as the current selling price.

Accounting principles require that inventory be reported at the market value (cost)of replacing inventory when cost is lower than market value.

All of the following statements regarding U.S.GAAP and IFRS are true except:

The FIFO inventory method assumes that costs for the latest units purchased are the first to be charged to the cost of goods sold.

Strods Company reported the following purchases and sales of its only product.Strods uses a periodic inventory system.Determine the cost assigned to cost of goods sold using FIFO.

The understatement of the beginning inventory balance causes:

Damaged and obsolete goods that can be sold:

An understatement of ending inventory will cause an understatement of assets and equity on the balance sheet.

Strods Company reported the following purchases and sales of its only product.Strods uses a perpetual inventory system.Determine the cost assigned to cost of goods sold using FIFO.

The cost of an inventory item includes its invoice cost minus any discount,plus any added or incidental costs necessary to put it in a place and condition for sale.

The expense recognition (matching)principle is used to determine how much of the cost of goods available for sale is deducted from sales and how much is carried forward as inventory.

The ________ method of assigning costs to inventory and cost of goods sold assumes that the most recent purchases are sold first.

The LIFO method of inventory valuation can result in a company's ending inventory being valued at less than the inventory's replacement cost because LIFO inventory leaves the oldest costs in inventory.

An understatement of ending inventory will cause

Goods in transit are automatically included in inventory regardless of whether title has passed to the buyer.

Consignment goods are:

Introducing Financial Statements

Financial Statements and the Accounting System

Adjusting Accounts for Financial Statements

Reporting and Analyzing Merchandising Operations

Reporting and Analyzing Cash,fraud,and Internal Control

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Term Assets

Reporting and Analyzing Current Liabilities

Reporting and Analyzing Long-Term Liabilities

Reporting and Analyzing Equity

Reporting and Analyzing Cash Flows

Analyzing and Interpreting Financial Statements

Applying Present and Future Values

Investments

International Operations

Filters

Exam 5: Reporting and Analyzing Inventories

In applying the lower of cost or market method to inventory valuation,market is defined as the current selling price.

Accounting principles require that inventory be reported at the market value (cost)of replacing inventory when cost is lower than market value.

All of the following statements regarding U.S.GAAP and IFRS are true except:

The FIFO inventory method assumes that costs for the latest units purchased are the first to be charged to the cost of goods sold.

Strods Company reported the following purchases and sales of its only product.Strods uses a periodic inventory system.Determine the cost assigned to cost of goods sold using FIFO.

The understatement of the beginning inventory balance causes:

Damaged and obsolete goods that can be sold:

An understatement of ending inventory will cause an understatement of assets and equity on the balance sheet.

Strods Company reported the following purchases and sales of its only product.Strods uses a perpetual inventory system.Determine the cost assigned to cost of goods sold using FIFO.

The cost of an inventory item includes its invoice cost minus any discount,plus any added or incidental costs necessary to put it in a place and condition for sale.

The expense recognition (matching)principle is used to determine how much of the cost of goods available for sale is deducted from sales and how much is carried forward as inventory.

The ________ method of assigning costs to inventory and cost of goods sold assumes that the most recent purchases are sold first.

The LIFO method of inventory valuation can result in a company's ending inventory being valued at less than the inventory's replacement cost because LIFO inventory leaves the oldest costs in inventory.

An understatement of ending inventory will cause

Goods in transit are automatically included in inventory regardless of whether title has passed to the buyer.

Consignment goods are:

Introducing Financial Statements

Financial Statements and the Accounting System

Adjusting Accounts for Financial Statements

Reporting and Analyzing Merchandising Operations

Reporting and Analyzing Cash,fraud,and Internal Control

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Term Assets

Reporting and Analyzing Current Liabilities

Reporting and Analyzing Long-Term Liabilities

Reporting and Analyzing Equity

Reporting and Analyzing Cash Flows

Analyzing and Interpreting Financial Statements

Applying Present and Future Values

Investments

International Operations

Filters