Question 1

An error in the period-end inventory causes an offsetting error in the next period and therefore:

Accepted Answer

A)  Managers can ignore the error. 
B)  It is sometimes said to be self-correcting. 
C)  It affects only income statement accounts. 
D)  If affects only balance sheet accounts. 
E)  Is immaterial for managerial decision making. 
A)  Managers can ignore the error. 
B)  It is sometimes said to be self-correcting. 
C)  It affects only income statement accounts. 
D)  If affects only balance sheet accounts. 
E)  Is immaterial for managerial decision making.

Question 2

The cost of an inventory item includes its invoice cost and any added or incidental costs necessary to make it saleable less any discount.

Accepted Answer

A) True 
 B)False

Question 3

The reasoning behind the retail inventory method is that if an accurate estimate of the cost-to-retail ratio is made, it can be multiplied by the ending inventory at retail to estimate ending inventory at cost.

Accepted Answer

A) True 
 B)False

Question 4

On June 30 a company needed to estimate its ending inventory to prepare its second quarter financial statements. The following information is available: Beginning inventory, April 1: $6,000
Net sales: $70,000
Net purchases: $36,000
The company's gross margin ratio is 12%. Using the gross profit method, the cost of goods sold would be:

Accepted Answer

A)  $8,400 
B)  $34,000 
C)  $61,600 
D)  $40,000 
E)  $35,200 
A)  $8,400 
B)  $34,000 
C)  $61,600 
D)  $40,000 
E)  $35,200

Question 5

A company reported the following data:
 $\begin{array}{|l|r|r|r|}
\hline &{\text { Year 1 }} &{\text { Year 2 }} &{\text { Year 3 }} \
\hline \text { Cost of goods sold } & \$ 238,000 & \$ 375,000 & \$ 495,000 \
\hline \text { Ending inventory } & 120,000 & 150,000 & 180,000 \
\hline
\end{array}$ Required:
1. Calculate the days' sales in inventory for each year.
2. Comment on the trend in inventory management.

Accepted Answer

1.
 @#IMG-DLM& 2. The company has a trend of decre

Question 6

There is no simple rule for inventory turnover, except that a high ratio is preferable provided inventory is adequate to meet demand.

Accepted Answer

A) True 
 B)False

Question 7

During January, a company that uses a perpetual inventory system had beginning inventory, purchases, and sales as follows. What was the weighted-average cost of the company's January 31 inventory?

Accepted Answer

@#IMG-DLM& * $1,480/140 units

Question 8

The inventory valuation method that identifies the invoice cost of each item in ending inventory to determine the cost assigned to that inventory is the:

Accepted Answer

A)  Weighted-average inventory method, 
B)  First-in, first-out method, 
C)  Last-in, first-out method, 
D)  Specific identification method, 
E)  Retail inventory method, 
A)  Weighted-average inventory method, 
B)  First-in, first-out method, 
C)  Last-in, first-out method, 
D)  Specific identification method, 
E)  Retail inventory method,

Question 9

Given the following items and costs as of the balance sheet date, determine the value of Faltron Company's merchandise inventory. - $1,000 goods sold by Faltron to another company. The goods are in transit and shipping terms are FOB destination.
- $2,000 goods sold by another company to Faltron. The goods are in transit and shipping terms are FOB destination.
- $3,000 owned by Faltron but in the possession of another company, the consignee.
- Damaged goods owned by Faltron that originally cost $4,000 but now have a $500 net realizable value.

Accepted Answer

A)  $10,000 
B)  $6,500 
C)  $5,500 
D)  $5,000 
E)  $4,500 
A)  $10,000 
B)  $6,500 
C)  $5,500 
D)  $5,000 
E)  $4,500

Question 10

The assignment of costs to the cost of goods sold and to inventory under FIFO is the same for both the perpetual and periodic inventory systems.

Accepted Answer

A) True 
 B)False

Question 11

A company has inventory of 10 units at a cost of $10 each on June 1. On June 3, they purchased 20 units at $12 each. 12 units are sold on June 5. Using the FIFO periodic inventory method, what is the cost of the 12 units that were sold?

Accepted Answer

A)  $120 
B)  $124 
C)  $128 
D)  $130 
E)  $140 
A)  $120 
B)  $124 
C)  $128 
D)  $130 
E)  $140

Question 12

Explain why the lower of cost or market rule is used to value inventory.

Accepted Answer

The concept of conservatism requires tha

Question 13

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 14

According to IRS requirements, companies are allowed to use FIFO for financial reporting and LIFO for tax reporting.

Accepted Answer

A) True 
 B)False

Question 15

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 LIFO periodic inventory method, what would be the cost of the ending inventory?

Accepted Answer

@#IMG-DLM& Cost of ending inve

Question 16

The four methods of inventory valuation are SIFO, FIFO, LIFO, and average cost.

Accepted Answer

A) True 
 B)False

Question 17

In applying the lower of cost or market method to inventory valuation, market is defined as:

Accepted Answer

A)  Historical cost 
B)  Current replacement cost 
C)  Current sales price 
D)  FIFO 
E)  LIFO 
A)  Historical cost 
B)  Current replacement cost 
C)  Current sales price 
D)  FIFO 
E)  LIFO

Question 18

A company's cost of goods sold was $15,500 and its average merchandise inventory was $4,500. Its inventory turnover equals 3.4.

Accepted Answer

A) True 
 B)False

Question 19

Given the following information, determine the cost of goods sold at December 31 using the weighted-average perpetual inventory method. December 2: 5 units were purchased at $7 per unit.
December 9: 10 units were purchased at $9.40 per unit.
December 11: 12 units were sold at $35 per unit.
December 15: 20 units were purchased at $10.15 per unit.
December 22: 18 units were sold at $35 per unit.

Accepted Answer

A)  $282.30 
B)  $332.10 
C)  $281.25 
D)  $290.70 
E)  $210.30 
A)  $282.30 
B)  $332.10 
C)  $281.25 
D)  $290.70 
E)  $210.30

Question 20

Acme-Jones Corporation uses a weighted-average perpetual inventory system. August 2, 10 units were purchased at $12 per unit.
August 18, 15 units were purchased at $14 per unit.
August 29, 12 units were sold.
What was the amount of the cost of goods sold for this sale?

Accepted Answer

A)  $148.00 
B)  $150.50 
C)  $158.40 
D)  $210.00 
E)  $330.00 
A)  $148.00 
B)  $150.50 
C)  $158.40 
D)  $210.00 
E)  $330.00

An error in the period-end inventory causes an offsetting error in the next period and therefore:

The cost of an inventory item includes its invoice cost and any added or incidental costs necessary to make it saleable less any discount.

The reasoning behind the retail inventory method is that if an accurate estimate of the cost-to-retail ratio is made, it can be multiplied by the ending inventory at retail to estimate ending inventory at cost.

A company reported the following data: Year 1 Year 2 Year 3 Cost of goods sold \ 238,000 \ 375,000 \ 495,000 Ending inventory 120,000 150,000 180,000 Required: 1. Calculate the days' sales in inventory for each year. 2. Comment on the trend in inventory management.

There is no simple rule for inventory turnover, except that a high ratio is preferable provided inventory is adequate to meet demand.

During January, a company that uses a perpetual inventory system had beginning inventory, purchases, and sales as follows. What was the weighted-average cost of the company's January 31 inventory?

The inventory valuation method that identifies the invoice cost of each item in ending inventory to determine the cost assigned to that inventory is the:

The assignment of costs to the cost of goods sold and to inventory under FIFO is the same for both the perpetual and periodic inventory systems.

A company has inventory of 10 units at a cost of $10 each on June 1. On June 3, they purchased 20 units at $12 each. 12 units are sold on June 5. Using the FIFO periodic inventory method, what is the cost of the 12 units that were sold?

Explain why the lower of cost or market rule is used to value inventory.

The understatement of the beginning inventory balance causes:

According to IRS requirements, companies are allowed to use FIFO for financial reporting and LIFO for tax reporting.

The four methods of inventory valuation are SIFO, FIFO, LIFO, and average cost.

In applying the lower of cost or market method to inventory valuation, market is defined as:

A company's cost of goods sold was $15,500 and its average merchandise inventory was $4,500. Its inventory turnover equals 3.4.

Acme-Jones Corporation uses a weighted-average perpetual inventory system. August 2, 10 units were purchased at $12 per unit. August 18, 15 units were purchased at $14 per unit. August 29, 12 units were sold. What was the amount of the cost of goods sold for this sale?

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

An error in the period-end inventory causes an offsetting error in the next period and therefore:

The cost of an inventory item includes its invoice cost and any added or incidental costs necessary to make it saleable less any discount.

The reasoning behind the retail inventory method is that if an accurate estimate of the cost-to-retail ratio is made, it can be multiplied by the ending inventory at retail to estimate ending inventory at cost.

A company reported the following data: Year 1 Year 2 Year 3 Cost of goods sold \ 238,000 \ 375,000 \ 495,000 Ending inventory 120,000 150,000 180,000 Required: 1. Calculate the days' sales in inventory for each year. 2. Comment on the trend in inventory management.

There is no simple rule for inventory turnover, except that a high ratio is preferable provided inventory is adequate to meet demand.

During January, a company that uses a perpetual inventory system had beginning inventory, purchases, and sales as follows. What was the weighted-average cost of the company's January 31 inventory?

The inventory valuation method that identifies the invoice cost of each item in ending inventory to determine the cost assigned to that inventory is the:

The assignment of costs to the cost of goods sold and to inventory under FIFO is the same for both the perpetual and periodic inventory systems.

A company has inventory of 10 units at a cost of $10 each on June 1. On June 3, they purchased 20 units at $12 each. 12 units are sold on June 5. Using the FIFO periodic inventory method, what is the cost of the 12 units that were sold?

Explain why the lower of cost or market rule is used to value inventory.

The understatement of the beginning inventory balance causes:

According to IRS requirements, companies are allowed to use FIFO for financial reporting and LIFO for tax reporting.

The four methods of inventory valuation are SIFO, FIFO, LIFO, and average cost.

In applying the lower of cost or market method to inventory valuation, market is defined as:

A company's cost of goods sold was $15,500 and its average merchandise inventory was $4,500. Its inventory turnover equals 3.4.

Acme-Jones Corporation uses a weighted-average perpetual inventory system. August 2, 10 units were purchased at $12 per unit. August 18, 15 units were purchased at $14 per unit. August 29, 12 units were sold. What was the amount of the cost of goods sold for this sale?

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