Question 1

The reliability of the gross profit method depends on a good estimate of the gross profit ratio.

Accepted Answer

A) True 
 B)False

Question 2

One of the most important decisions in accounting for inventory is determining the unit costs assigned to each inventory item.

Accepted Answer

A) True 
 B)False

Question 3

Days' sales in inventory is calculated as:

Accepted Answer

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

Question 4

The inventory turnover ratio is computed by dividing average merchandise inventory by cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 5

Physical inventory counts:

Accepted Answer

A)  Are not necessary under the perpetual system. 
B)  Are necessary to measure and adjust for inventory shrinkage. 
C)  Must be taken at least once a month. 
D)  Require the use of hand-held portable computers. 
E)  Are not necessary under the cost-to benefit constraint. 
A)  Are not necessary under the perpetual system. 
B)  Are necessary to measure and adjust for inventory shrinkage. 
C)  Must be taken at least once a month. 
D)  Require the use of hand-held portable computers. 
E)  Are not necessary under the cost-to benefit constraint.

Question 6

Match between columns
                        Premises:  The number of times a company's inventory is sold during a period.
 A method for estimating an ending inventory based on the ratio of the amount of goods for sale at cost to the amount of goods for sale at retail price.
 The expected sales price of an item minus the cost of making the sale.
 An inventory pricing method that assumes the unit prices of the beginning inventory and of each purchase are weighted by the number of units of each in inventory; the calculation occurs at the time of each sale.
 The accounting principle that aims to select the less optimistic estimate when two or more estimates are about equally likely.
 Financial statements prepared for periods of less than one year.
 An inventory valuation method that assumes costs for the most recent items purchased are sold first and charged to cost of goods sold.
 An inventory valuation method that assumes that inventory items are sold in the order acquired.
 An inventory valuation method where the purchase cost of each item in ending inventory is identified and used to determine the cost assigned to inventory.
 An estimate of days needed to convert the inventory at the end of the period into receivables or cash.

Accepted Answer

The Answer of Conservatism constraint and Net realizable value and is...

Question 7

A company has inventory with a market value of $217,000 and a cost of $241,000. According to the lower of cost or market, the inventory should be written down to $217,000.

Accepted Answer

A) True 
 B)False

Question 8

The consistency concept requires a company to use the same accounting methods period after period, so that financial statements are comparable across periods.

Accepted Answer

A) True 
 B)False

Question 9

Damaged and obsolete goods:

Accepted Answer

A)  Are never included in 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 included in 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 10

The City Store reported the following amounts on their financial statements for 2012, 2013, and 2014:
 $\text { For the Year Ended December } 31$
$\begin{array}{|l|r|r|r|}
\hline& 2012 & 2013 & 2014 \
\hline \text { Cost of goods sold } & \$ 75,000 & \$ 87,000 & \$ 77,000 \
\hline \text { Net income } & 22,000 & 25,000 & 21,000 \
\hline \text { Total current assets } & 155,000 & 165,000 & 110,000 \
\hline \text { Equity } & 287,000 & 295,000 & 304,000\\hline
\end{array}$ It was discovered early in 2015 that the ending inventory on December 31, 2012, was overstated by $6,000 and the ending inventory on December 31, 2013, was understated by $2,500. The ending inventory on December 31, 2014, was correct. Ignoring income taxes, determine the correct amounts of cost of goods sold, net income, total current assets, and equity for each of the years 2012, 2013, and 2014.

Accepted Answer

The answer of The City Store reported the following amounts...

Question 11

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 12

The dollar value assigned to goods purchased will differ under the different inventory valuation methods of specific identification, FIFO, LIFO, and weighted average.

Accepted Answer

A) True 
 B)False

Question 13

Use the following information to estimate the third quarter ending inventory under the gross profit method. This company's gross profit ratio is 20%. Third quarter beginning inventory: $54,000
Net sales for third quarter: $85,000
Net purchases for third quarter: $21,000

Accepted Answer

A)  $101,000 
B)  $58,000 
C)  $35,000 
D)  $7,000 
E)  $14,000 
A)  $101,000 
B)  $58,000 
C)  $35,000 
D)  $7,000 
E)  $14,000

Question 14

Toys "R" Us had cost of goods sold of $8,321 million and ending inventory of $2,027 million. Based on this, its days' sales in inventory is equal to 89 days.

Accepted Answer

A) True 
 B)False

Question 15

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, f

Question 16

A company that uses a perpetual inventory system made the following cash purchases and sales. There was no beginning inventory.
 $\begin{array}{|l|l|}
\hline \text { January 1: } & \text { Purchased } 100 \text { units at } \$ 10 \text { per unit } \
\hline \text { February 5: } & \text { Purchased } 60 \text { units at } \$ 12 \text { per unit } \
\hline \text { March 16: } & \text { Sold } 40 \text { units for } \$ 16 \text { per unit } \
\hline
\end{array}$ Prepare the general journal entry to record the March 16 sale, assuming the weighted-average method is used.

Accepted Answer

The answer of A company that uses a perpetual inventory...

Question 17

Given the following information, determine the cost of goods sold for November 30 using the FIFO perpetual inventory method.
November 3: 15 units were purchased at $8 per unit.
November 11: 18 units were purchased at $9.50 per unit.
November 15: 15 units were sold at $45 per unit.
November 18: 30 units were purchased at $10.75 per unit.
November 30: 20 units were sold at $55 per unit.

Accepted Answer

15@8 = 120.00
HYPERLINK "mailt

Question 18

A company made the following purchases during the year:
   On December 31, there were 28 units in ending inventory. These 28 units consisted of 1 from the January 10 purchase, 2 from the March 15 purchase, 5 from the April 25 purchase, 15 from the July 30 purchase, and 5 from the October 10 purchase. Using specific identification, calculate the cost of the ending inventory.

Accepted Answer

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

Question 19

The inventory valuation method that results in the lowest taxable income in a period of inflation is:

Accepted Answer

A)  LIFO method 
B)  FIFO method 
C)  Weighted-average cost method 
D)  Specific identification method 
E)  Gross profit method 
A)  LIFO method 
B)  FIFO method 
C)  Weighted-average cost method 
D)  Specific identification method 
E)  Gross profit method

Question 20

LIFO is the preferred inventory costing method when costs are rising and managers have incentives to report higher income. When income is higher, managers may earn bonuses and have more job security and a better reputation.

Accepted Answer

A) True 
 B)False

The reliability of the gross profit method depends on a good estimate of the gross profit ratio.

One of the most important decisions in accounting for inventory is determining the unit costs assigned to each inventory item.

Days' sales in inventory is calculated as:

The inventory turnover ratio is computed by dividing average merchandise inventory by cost of goods sold.

Physical inventory counts:

A company has inventory with a market value of $217,000 and a cost of $241,000. According to the lower of cost or market, the inventory should be written down to $217,000.

The consistency concept requires a company to use the same accounting methods period after period, so that financial statements are comparable across periods.

Damaged and obsolete goods:

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

The dollar value assigned to goods purchased will differ under the different inventory valuation methods of specific identification, FIFO, LIFO, and weighted average.

Use the following information to estimate the third quarter ending inventory under the gross profit method. This company's gross profit ratio is 20%. Third quarter beginning inventory: $54,000 Net sales for third quarter: $85,000 Net purchases for third quarter: $21,000

Toys "R" Us had cost of goods sold of $8,321 million and ending inventory of $2,027 million. Based on this, its days' sales in inventory is equal to 89 days.

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

The inventory valuation method that results in the lowest taxable income in a period of inflation is:

LIFO is the preferred inventory costing method when costs are rising and managers have incentives to report higher income. When income is higher, managers may earn bonuses and have more job security and a better reputation.

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

The reliability of the gross profit method depends on a good estimate of the gross profit ratio.

One of the most important decisions in accounting for inventory is determining the unit costs assigned to each inventory item.

Days' sales in inventory is calculated as:

The inventory turnover ratio is computed by dividing average merchandise inventory by cost of goods sold.

Physical inventory counts:

A company has inventory with a market value of $217,000 and a cost of $241,000. According to the lower of cost or market, the inventory should be written down to $217,000.

The consistency concept requires a company to use the same accounting methods period after period, so that financial statements are comparable across periods.

Damaged and obsolete goods:

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

The dollar value assigned to goods purchased will differ under the different inventory valuation methods of specific identification, FIFO, LIFO, and weighted average.

Use the following information to estimate the third quarter ending inventory under the gross profit method. This company's gross profit ratio is 20%. Third quarter beginning inventory: $54,000 Net sales for third quarter: $85,000 Net purchases for third quarter: $21,000

Toys "R" Us had cost of goods sold of $8,321 million and ending inventory of $2,027 million. Based on this, its days' sales in inventory is equal to 89 days.

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

The inventory valuation method that results in the lowest taxable income in a period of inflation is:

LIFO is the preferred inventory costing method when costs are rising and managers have incentives to report higher income. When income is higher, managers may earn bonuses and have more job security and a better reputation.

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