Question 1

Describe the internal controls that must be applied when taking a physical count of inventory.

Accepted Answer

The internal controls should include (1)

Question 2

A company made the following merchandise purchases and sales during the month of
May:
 $\begin{array}{|l|l|l|l|}
\hline \text { May 1 purchased } & 380 & \text { units at } & \$ 15 \text { each } \
\hline \text { May 5 purchased } & 270 & \text { units at } & \$ 17 \text { each } \
\hline \text { May 10 sold } & 400 & \text { units at } & \$ 50 \text { each } \
\hline \text { May 20 purchased } & 300 & \text { units at } & \$ 22 \text { each } \
\hline \text { May 25 sold } & 400 & \text { units at } & \$ 50 \text { each } \
\hline
\end{array}$ There was no beginning inventory. If the company uses the weighted-average perpetual inventory method, what would be the cost of its ending inventory?

Accepted Answer

The answer of A company made the following merchandise purchases...

Question 3

The inventory turnover ratio is calculated as:

Accepted Answer

A)  Cost of goods sold divided by average merchandise inventory. 
B)  Sales divided by cost of goods sold. 
C)  Ending inventory divided by cost of goods sold. 
D)  Cost of goods sold divided by ending inventory. 
E)  Cost of goods sold divided by ending inventory times 365. 
A)  Cost of goods sold divided by average merchandise inventory. 
B)  Sales divided by cost of goods sold. 
C)  Ending inventory divided by cost of goods sold. 
D)  Cost of goods sold divided by ending inventory. 
E)  Cost of goods sold divided by ending inventory times 365.

Question 4

On December 31, a company needed to estimate its ending inventory to prepare its fourth quarter financial statements. The following information is currently available: Inventory as of October 1: $12,500
Net sales for fourth quarter: $40,000
Net purchases for fourth quarter: $27,500
The company typically achieves a gross profit ratio of 15%. Ending Inventory under the gross profit method would be:

Accepted Answer

A)  $4,000 
B)  $6,000 
C)  $10,000 
D)  $16,000 
E)  $34,000 
A)  $4,000 
B)  $6,000 
C)  $10,000 
D)  $16,000 
E)  $34,000

Question 5

Net realizable value for damaged or obsolete goods is equal to the sales price plus the cost of making the sale.

Accepted Answer

A) True 
 B)False

Question 6

Merchandise inventory includes:

Accepted Answer

A)  All goods owned by a company and held for sale. 
B)  All goods in transit. 
C)  All goods on consignment. 
D)  Only damaged goods. 
E)  Only items that are on the shelf. 
A)  All goods owned by a company and held for sale. 
B)  All goods in transit. 
C)  All goods on consignment. 
D)  Only damaged goods. 
E)  Only items that are on the shelf.

Question 7

Toys "R" Us had cost of goods sold of $9,421 million, ending inventory of $2,089 million, and average inventory of $1,965 million. The inventory turnover equals:

Accepted Answer

A)  0.21 
B)  4.51 
C)  4.79 
D)  76.1 days 
E)  80.9 days 
A)  0.21 
B)  4.51 
C)  4.79 
D)  76.1 days 
E)  80.9 days

Question 8

What is the effect of an error in the ending inventory balance on the income statement?

Accepted Answer

An inventory error causes misstatements

Question 9

A company reported the following data:
 $\begin{array}{|l|r|r|r|}
\hline &{\text { Year 1 }} &{\text { Year 2 }} &{\text { Year 3 }} \
\hline \text { Cost of goods sold } & \$ 347,600 & \$ 379,650 & \$ 443,900 \
\hline \text { Average inventory } & 85,000 & 91,050 & 98,350\\hline
\end{array}$ Required:
1. Calculate the company's merchandise inventory turnover for each year.
2. Comment on the company's efficiency in managing its inventory.

Accepted Answer

1.
 @#IMG-DLM& 2. The company's efficien

Question 10

A company had gross profit of $134,200 on net sales of $205,000. If ending inventory was $8,000 and average inventory was $7,080, what is the company's inventory turnover?

Accepted Answer

A)  10.0 
B)  8.85 
C)  16.77 
D)  18.95 
E)  28.95 
A)  10.0 
B)  8.85 
C)  16.77 
D)  18.95 
E)  28.95

Question 11

The inventory turnover ratio:

Accepted Answer

A)  Is used to analyze profitability. 
B)  Is used to measure solvency. 
C)  Measures how quickly a company turns over its merchandise inventory. 
D)  Validates the acid-test ratio. 
E)  Calculation depends on the company's inventory valuation method. 
A)  Is used to analyze profitability. 
B)  Is used to measure solvency. 
C)  Measures how quickly a company turns over its merchandise inventory. 
D)  Validates the acid-test ratio. 
E)  Calculation depends on the company's inventory valuation method.

Question 12

Explain the effects of inventory valuation methods on the cost of ending inventory, income, and income taxes.

Accepted Answer

The specific identification method ident

Question 13

The ______________________ method of assigning costs to inventory and cost of goods sold is usually only practical for companies with expensive, custom-made inventory.

Accepted Answer

specific i

Question 14

An inventory error is sometimes said to be self-correcting because it causes an offsetting error in the next period.

Accepted Answer

A) True 
 B)False

Question 15

If damaged goods can be sold at a reduced price, they are included in inventory at their ________________________.

Accepted Answer

net realiz

Question 16

If damaged and obsolete goods cannot be sold, they are not included in inventory.

Accepted Answer

A) True 
 B)False

Question 17

In the retail inventory method of inventory valuation, the retail amount of inventory refers to the dollar amount measured by looking at the selling prices of inventory items.

Accepted Answer

A) True 
 B)False

Question 18

The lower of cost or market rule for inventory valuation must be applied to each individual unit separately and not to major categories of inventory or to the entire inventory.

Accepted Answer

A) True 
 B)False

Question 19

GAAP and IFRS differ on the rules regarding LIFO as GAAP allows LIFO to assign costs to inventory and IFRS does not.

Accepted Answer

A) True 
 B)False

Question 20

The days' sales in inventory ratio is computed by dividing ending inventory by cost of goods sold and multiplying the result by 365.

Accepted Answer

A) True 
 B)False

Describe the internal controls that must be applied when taking a physical count of inventory.

The inventory turnover ratio is calculated as:

Net realizable value for damaged or obsolete goods is equal to the sales price plus the cost of making the sale.

Merchandise inventory includes:

Toys "R" Us had cost of goods sold of $9,421 million, ending inventory of $2,089 million, and average inventory of $1,965 million. The inventory turnover equals:

What is the effect of an error in the ending inventory balance on the income statement?

A company reported the following data: Year 1 Year 2 Year 3 Cost of goods sold \ 347,600 \ 379,650 \ 443,900 Average inventory 85,000 91,050 98,350 Required: 1. Calculate the company's merchandise inventory turnover for each year. 2. Comment on the company's efficiency in managing its inventory.

A company had gross profit of $134,200 on net sales of $205,000. If ending inventory was $8,000 and average inventory was $7,080, what is the company's inventory turnover?

The inventory turnover ratio:

Explain the effects of inventory valuation methods on the cost of ending inventory, income, and income taxes.

The ______________________ method of assigning costs to inventory and cost of goods sold is usually only practical for companies with expensive, custom-made inventory.

An inventory error is sometimes said to be self-correcting because it causes an offsetting error in the next period.

If damaged goods can be sold at a reduced price, they are included in inventory at their ________________________.

If damaged and obsolete goods cannot be sold, they are not included in inventory.

In the retail inventory method of inventory valuation, the retail amount of inventory refers to the dollar amount measured by looking at the selling prices of inventory items.

The lower of cost or market rule for inventory valuation must be applied to each individual unit separately and not to major categories of inventory or to the entire inventory.

GAAP and IFRS differ on the rules regarding LIFO as GAAP allows LIFO to assign costs to inventory and IFRS does not.

The days' sales in inventory ratio is computed by dividing ending inventory by cost of goods sold and multiplying the result by 365.

Introducing Financial Accounting

Accounting for Transactions

Preparing Financial Statements

Accounting for Merchandising Operations

Accounting for Cash and Internal Controls

Accounting for Receivables

Accounting for Long-Term Assets

Accounting for Current Liabilities

Accounting for Long-Term Liabilities

Accounting for Equity

Accounting for Cash Flows

Interpreting Financial Statements

Time Value of Money

Investments and International Operations

Accounting for Partnerships

Accounting With Special Journals

Filters

Exam 5: Accounting for Inventories

Describe the internal controls that must be applied when taking a physical count of inventory.

The inventory turnover ratio is calculated as:

Net realizable value for damaged or obsolete goods is equal to the sales price plus the cost of making the sale.

Merchandise inventory includes:

Toys "R" Us had cost of goods sold of $9,421 million, ending inventory of $2,089 million, and average inventory of $1,965 million. The inventory turnover equals:

What is the effect of an error in the ending inventory balance on the income statement?

A company reported the following data: Year 1 Year 2 Year 3 Cost of goods sold \ 347,600 \ 379,650 \ 443,900 Average inventory 85,000 91,050 98,350 Required: 1. Calculate the company's merchandise inventory turnover for each year. 2. Comment on the company's efficiency in managing its inventory.

A company had gross profit of $134,200 on net sales of $205,000. If ending inventory was $8,000 and average inventory was $7,080, what is the company's inventory turnover?

The inventory turnover ratio:

Explain the effects of inventory valuation methods on the cost of ending inventory, income, and income taxes.

The ______________________ method of assigning costs to inventory and cost of goods sold is usually only practical for companies with expensive, custom-made inventory.

An inventory error is sometimes said to be self-correcting because it causes an offsetting error in the next period.

If damaged goods can be sold at a reduced price, they are included in inventory at their ________________________.

If damaged and obsolete goods cannot be sold, they are not included in inventory.

In the retail inventory method of inventory valuation, the retail amount of inventory refers to the dollar amount measured by looking at the selling prices of inventory items.

The lower of cost or market rule for inventory valuation must be applied to each individual unit separately and not to major categories of inventory or to the entire inventory.

GAAP and IFRS differ on the rules regarding LIFO as GAAP allows LIFO to assign costs to inventory and IFRS does not.

The days' sales in inventory ratio is computed by dividing ending inventory by cost of goods sold and multiplying the result by 365.

Introducing Financial Accounting

Accounting for Transactions

Preparing Financial Statements

Accounting for Merchandising Operations

Accounting for Cash and Internal Controls

Accounting for Receivables

Accounting for Long-Term Assets

Accounting for Current Liabilities

Accounting for Long-Term Liabilities

Accounting for Equity

Accounting for Cash Flows

Interpreting Financial Statements

Time Value of Money

Investments and International Operations

Accounting for Partnerships

Accounting With Special Journals

Filters