Question 1

The assignment of costs to cost of goods sold and to inventory using specific identification is the same for both the perpetual and periodic systems.

Accepted Answer

A) True 
 B)False

Question 2

Errors in the period-end inventory balances only have an impact on the current period's records and financial statements.

Accepted Answer

A) True 
 B)False

Question 3

The _____________________ is a measure of how quickly a merchandiser sells its merchandise inventory.

Accepted Answer

The answer of The _____________________ is a measure of how...

Question 4

When purchase costs regularly rise, the ___________________ method of inventory valuation yields the highest gross profit and net income.

Accepted Answer

first in,

Question 5

A company made the following merchandise purchases and sales during the month of July:
   There was no beginning inventory. If the company uses the first-in, first-out perpetual inventory method, what would be the cost of the ending inventory?

Accepted Answer

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

Question 6

Monthly or quarterly statements are called interim statements because they are prepared between the traditional annual statement dates.

Accepted Answer

A) True 
 B)False

Question 7

If the seller is responsible for paying freight charges, then ownership of inventory passes when goods arrive at their destination.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

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

Question 9

Given the following information, determine the cost of goods sold at December 31 using the LIFO 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)  $282.15 
B)  $332.10 
C)  $281.25 
D)  $290.70 
E)  $210.30 
A)  $282.15 
B)  $332.10 
C)  $281.25 
D)  $290.70 
E)  $210.30

Question 10

Monitor Company uses the LIFO method for valuing its ending inventory. The following financial statement information is available for their first year of operation:
 MONITOR COMPANY
Income Statement
For the year ended December 31
$\begin{array}{|l|r|}
\hline \text { Sales } & \$ 50,000 \
\hline \text { Cost of goods sold } & 23,000 \
\hline \text { Gross profit } & \$ 27,000 \
\hline \text { Expenses } & 13,000 \
\hline \text { Income before taxes } & \$ 14,000\\hline
\end{array}$ Monitor's ending inventory using the LIFO method was $8,200. Monitor's accountant determined that had they used FIFO, the ending inventory would have been $8,500.
a. Determine what the income before taxes would have been had Monitor used the FIFO method of inventory valuation instead of LIFO
b. What would be the difference in income taxes between LIFO and FIFO, assuming a 30% tax rate?

Accepted Answer

a. If ending inventory is $300 higher us

Question 11

When applying the lower of cost or market method of inventory valuation, market is defined as the ______________________.

Accepted Answer

The answer of When applying the lower of cost or...

Question 12

A company has the following per unit original costs and replacement costs for its inventory: Part A: 50 units with a cost of $5 and replacement cost of $4.50.
Part B: 75 units with a cost of $6 and replacement cost of $6.50.
Part C: 160 units with a cost of $3 and replacement cost of $2.50.
Under the lower of cost or market method, the total value of this company's ending inventory must be reported as:

Accepted Answer

A)  $1,180.00. 
B)  $1,075.00. 
C)  $1,112.50 or $1075.00, depending upon whether LCM is applied to individual items or the inventory as a whole. 
D)  $1,112.50. 
E)  $1180.00 or $1075.00, depending upon whether LCM is applied to individual items or to the inventory as a whole. 
A)  $1,180.00. 
B)  $1,075.00. 
C)  $1,112.50 or $1075.00, depending upon whether LCM is applied to individual items or the inventory as a whole. 
D)  $1,112.50. 
E)  $1180.00 or $1075.00, depending upon whether LCM is applied to individual items or to the inventory as a whole.

Question 13

The matching principle requires that the inventory valuation method follow the physical flow of inventory.

Accepted Answer

A) True 
 B)False

Question 14

Evaluate each inventory error separately and determine whether it overstates or understates cost of goods sold and net income.
 $\begin{array}{|l|l|l|}
\hline \text { Inventory Error } & \text { Cost of Goods Sold } & \text { Net Income } \
\hline \text { Understatement of beginning inventory } & & \
\hline \text { Understatement of ending inventory } & & \
\hline \text { Overstatement of beginning inventory } & & \
\hline \text { Overstatement of ending inventory } & & \
\hline
\end{array}$

Accepted Answer

The answer of Evaluate each inventory error separately and determine...

Question 15

A company had inventory on November 1 of 5 units at a cost of $20 each. On November 2, they purchased 10 units at $22 each. On November 6, they purchased 6 units at $25 each. On November 8, 8 units were sold for $55 each. Using the FIFO perpetual inventory method, what was the value of the inventory on November 8 after the sale?

Accepted Answer

A)  $304 
B)  $296 
C)  $288 
D)  $280 
E)  $276 
A)  $304 
B)  $296 
C)  $288 
D)  $280 
E)  $276

Question 16

When LIFO is used with the periodic inventory system, cost of goods sold is assigned costs from the most recent purchases at the point of each sale, rather than from the most recent purchases for the period.

Accepted Answer

A) True 
 B)False

Question 17

An understatement of the ending inventory balance will understate cost of goods sold and overstate net income.

Accepted Answer

A) True 
 B)False

Question 18

A corporation uses a FIFO perpetual inventory system. August 2, 25 units were purchased at $12 per unit.
August 5, 10 units were purchased at $13 per unit.
August 15, 12 units were sold at $25 per unit.
August 18, 15 units were purchased at $14 per unit.
What was the amount of the ending inventory for the month of August?

Accepted Answer

A)  $496.00 
B)  $486.00 
C)  $492.57 
D)  $300.00 
E)  $510.00 
A)  $496.00 
B)  $486.00 
C)  $492.57 
D)  $300.00 
E)  $510.00

Question 19

Explain how the inventory turnover ratio and the days' sales in inventory ratio are used to evaluate inventory management.

Accepted Answer

A merchandiser's ability to pay its shor

Question 20

Goods on consignment are goods shipped by their owner, called the consignee, to another party called the consignor.

Accepted Answer

A) True 
 B)False

The assignment of costs to cost of goods sold and to inventory using specific identification is the same for both the perpetual and periodic systems.

Errors in the period-end inventory balances only have an impact on the current period's records and financial statements.

The _____________________ is a measure of how quickly a merchandiser sells its merchandise inventory.

When purchase costs regularly rise, the ___________________ method of inventory valuation yields the highest gross profit and net income.

A company made the following merchandise purchases and sales during the month of July: There was no beginning inventory. If the company uses the first-in, first-out perpetual inventory method, what would be the cost of the ending inventory?

Monthly or quarterly statements are called interim statements because they are prepared between the traditional annual statement dates.

If the seller is responsible for paying freight charges, then ownership of inventory passes when goods arrive at their destination.

When applying the lower of cost or market method of inventory valuation, market is defined as the ______________________.

The matching principle requires that the inventory valuation method follow the physical flow of inventory.

When LIFO is used with the periodic inventory system, cost of goods sold is assigned costs from the most recent purchases at the point of each sale, rather than from the most recent purchases for the period.

An understatement of the ending inventory balance will understate cost of goods sold and overstate net income.

Explain how the inventory turnover ratio and the days' sales in inventory ratio are used to evaluate inventory management.

Goods on consignment are goods shipped by their owner, called the consignee, to another party called the consignor.

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 assignment of costs to cost of goods sold and to inventory using specific identification is the same for both the perpetual and periodic systems.

Errors in the period-end inventory balances only have an impact on the current period's records and financial statements.

The _____________________ is a measure of how quickly a merchandiser sells its merchandise inventory.

When purchase costs regularly rise, the ___________________ method of inventory valuation yields the highest gross profit and net income.

A company made the following merchandise purchases and sales during the month of July: There was no beginning inventory. If the company uses the first-in, first-out perpetual inventory method, what would be the cost of the ending inventory?

Monthly or quarterly statements are called interim statements because they are prepared between the traditional annual statement dates.

If the seller is responsible for paying freight charges, then ownership of inventory passes when goods arrive at their destination.

When applying the lower of cost or market method of inventory valuation, market is defined as the ______________________.

The matching principle requires that the inventory valuation method follow the physical flow of inventory.

When LIFO is used with the periodic inventory system, cost of goods sold is assigned costs from the most recent purchases at the point of each sale, rather than from the most recent purchases for the period.

An understatement of the ending inventory balance will understate cost of goods sold and overstate net income.

Explain how the inventory turnover ratio and the days' sales in inventory ratio are used to evaluate inventory management.

Goods on consignment are goods shipped by their owner, called the consignee, to another party called the consignor.

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