Question 1

All of the following are typical manufacturing costs except:

Accepted Answer

A) raw materials. 
B) direct labour. 
C) freight out 
D) freight in 
A) raw materials. 
B) direct labour. 
C) freight out 
D) freight in

Question 2

Which of the following statements best describes net realizable value when applying the LCM rule?

Accepted Answer

A) Net realizable value is the selling price less the costs necessary to sell the item. 
B) Net realizable value is the selling price plus the costs necessary to sell the item. 
C) Net realizable value is the selling price plus the normal profit margin. 
D) Net realizable value is the selling price less the normal profit margin. 
A) Net realizable value is the selling price less the costs necessary to sell the item. 
B) Net realizable value is the selling price plus the costs necessary to sell the item. 
C) Net realizable value is the selling price plus the normal profit margin. 
D) Net realizable value is the selling price less the normal profit margin.

Question 3

Inventory sold as a result of liquidation or bankruptcy is:

Accepted Answer

A) reflective of the market value 
B) subject to normal valuation and accounting procedures 
C) in violation of the matching principle 
D) in violation of the going concern principle 
A) reflective of the market value 
B) subject to normal valuation and accounting procedures 
C) in violation of the matching principle 
D) in violation of the going concern principle

Question 4

When a company is evaluating whether or not to use a perpetual vs.a periodic inventory system the following statement is most accurate:

Accepted Answer

A) A perpetual inventory system provides far superior information and should be used at any cost. 
B) A periodic system is inferior and should never be used if possible. 
C) The cost of the system used should be measured against the benefits it provides. 
D) Both systems are equally good. 
A) A perpetual inventory system provides far superior information and should be used at any cost. 
B) A periodic system is inferior and should never be used if possible. 
C) The cost of the system used should be measured against the benefits it provides. 
D) Both systems are equally good.

Question 5

The cost flow assumption used by a firm must match the physical flow of units through the firm.

Accepted Answer

A) True 
 B)False

Question 6

Tommy Co.prepares its estimate of LCM using the net realizable value.Inventory item 101 cost $45 and its current replacement cost is $50.The item is currently selling in the market for $55 and selling costs are estimated to be $6.Tommy expects to earn a profit of $4 on the sale of this item.In its year-end financial statements, Tommy Co.should value this item at:

Accepted Answer

A) $50 
B) $45 
C) $49 
D) $55 
A) $50 
B) $45 
C) $49 
D) $55

Question 7

Use the following information for questions:
A company had the following inventory activity during May: $\begin{array}{lrrrr}&\text { Units}&\text { Unit Cost }&\text {Total Cost }&\text { Unit Price }\\hline
\text { Beginning inventory } & 100 & \$ 20.00 & \$ 2,000 & \
\text { Purchase: May 3 } & 900 & \$ 21.00 & 18,900 & \
\text { Sale: May 5 } & (900) & & & \$ 30.00 \
\text { Purchase: May 15 } & 1,000 & \$ 21.00 & 21,000 & \
\text { Sale: } & (900) & & & \$ 30.00
\end{array}$
-If the company uses a perpetual system and the moving average cost flow assumption, what is the gross margin on the May 5 sale closest to?

Accepted Answer

A) $6,100 
B) $8,100 
C) $8,190 
D) $8,550 
A) $6,100 
B) $8,100 
C) $8,190 
D) $8,550

Question 8

Which of the following risks are unique to inventory as an asset class?

Accepted Answer

A) Finding suppliers and obsolescence 
B) Finding suppliers and estimating collection 
C) Finding buyers and obsolescence 
D) Finding buyers and estimating collection 
A) Finding suppliers and obsolescence 
B) Finding suppliers and estimating collection 
C) Finding buyers and obsolescence 
D) Finding buyers and estimating collection

Question 9

Which of the following should be included in the cost of inventory?

Accepted Answer

A) The cost of keeping the inventory records 
B) Amortization on the inventory warehouse 
C) The salesperson's commission. 
D) Receiving and inspection costs 
A) The cost of keeping the inventory records 
B) Amortization on the inventory warehouse 
C) The salesperson's commission. 
D) Receiving and inspection costs

Question 10

An inventory of grocery items where the shelves are stocked from the back would be similar to which cost flow assumption?

Accepted Answer

A) FIFO 
B) Specific identification 
C) Moving average 
D) FISH 
A) FIFO 
B) Specific identification 
C) Moving average 
D) FISH

Question 11

If a company's inventory turnover ratio is 6.6 it takes them on average 55 days to sell their inventory.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is the correct flow of costs in a manufacturing operation?

Accepted Answer

A) Raw materials to finished goods 
B) Raw materials to finished goods to work-in-process 
C) Raw materials to work-in-process to finished goods 
D) Direct materials to work-in-process to finished goods. 
A) Raw materials to finished goods 
B) Raw materials to finished goods to work-in-process 
C) Raw materials to work-in-process to finished goods 
D) Direct materials to work-in-process to finished goods.

Question 13

The LCM rule is usually applied to groups of similar items.

Accepted Answer

A) True 
 B)False

Question 14

Use the following information for questions:
A company had the following inventory activity during January: $\begin{array}{lrrr}&\text { Units}&\text { Unit Cost }&\text {Total Cost }\\hline
\text { Beginning inventory } & 800 & \$ 10.00 & \$ 8,000 \
\text { Purchase: January } 5 & 1,400 & 11.00 & 15,400 \
\text { Sale: January } 8 & (1,500) & & \
\text { Purchase: January 13 } & 900 & 10.50 & 9,450 \
\text { Sales: January } 24 & (900) & &
\end{array}$
-If the company is using a perpetual system and the FIFO costing assumption, what is the cost of goods sold closest to?

Accepted Answer

A) $25,700 
B) $25,500 
C) $25,200 
D) $25,930 
A) $25,700 
B) $25,500 
C) $25,200 
D) $25,930

Question 15

Use of the FIFO cost flow assumption means that:

Accepted Answer

A) the perpetual costing system is used. 
B) the ending inventory contains the oldest costs. 
C) the periodic costing system is used. 
D) the ending inventory contains the most recent costs. 
A) the perpetual costing system is used. 
B) the ending inventory contains the oldest costs. 
C) the periodic costing system is used. 
D) the ending inventory contains the most recent costs.

Question 16

Which of the following is not an inventory account in a manufacturing company?

Accepted Answer

A) Raw material 
B) Work in process 
C) Goods available for sale 
D) Finished goods 
A) Raw material 
B) Work in process 
C) Goods available for sale 
D) Finished goods

Question 17

Use the following information for questions:
A company had the following inventory activity during January: $\begin{array}{lrrr}&\text { Units}&\text { Unit Cost }&\text {Total Cost }\\hline
\text { Beginning inventory } & 800 & \$ 10.00 & \$ 8,000 \
\text { Purchase: January } 5 & 1,400 & 11.00 & 15,400 \
\text { Sale: January } 8 & (1,500) & & \
\text { Purchase: January 13 } & 900 & 10.50 & 9,450 \
\text { Sales: January } 24 & (900) & &
\end{array}$
-If the company is using a perpetual system and the FIFO costing assumption, what is the ending inventory closest to?

Accepted Answer

A) $7,100 
B) $7,350 
C) $7,650 
D) $7,920 
A) $7,100 
B) $7,350 
C) $7,650 
D) $7,920

Question 18

Use the following information to answer questions 
Handel Inc.values its inventory on an LCM basis.The following data came from the 2011 inventory, which consisted of two items: $\begin{array}{lrr}&\text { Item \# 130}&\text { Item \# 140 }\\hline
\text { Original cost } & \$ 12,000 & \$ 15,000 \
\text { Selling price } & 15,000 & 26,000 \
\text { Estimated selling costs } & 5,000 & 10,000 \
\text { Replacement cost } & 13,000 & 15,000 \
\text { Normal profit margin } & 1,500 & 1,000
\end{array}$
-The appropriate carrying value for the entire inventory when applying the LCM rule using net realizable value to the inventory as a whole would be:

Accepted Answer

A) $25,000 
B) $26,000 
C) $27,000 
D) $28,000 
A) $25,000 
B) $26,000 
C) $27,000 
D) $28,000

Question 19

Management incentives to overstate ending inventory include all of the following except:

Accepted Answer

A) increasing the current year's income. 
B) increasing next year's income. 
C) increasing the collateral value for a loan. 
D) increasing the current ratio. 
A) increasing the current year's income. 
B) increasing next year's income. 
C) increasing the collateral value for a loan. 
D) increasing the current ratio.

Question 20

Which of the following would be most likely to use the specific identification method?

Accepted Answer

A) shoe store 
B) car dealership 
C) grocery store 
D) bookstore 
A) shoe store 
B) car dealership 
C) grocery store 
D) bookstore

All of the following are typical manufacturing costs except:

Which of the following statements best describes net realizable value when applying the LCM rule?

Inventory sold as a result of liquidation or bankruptcy is:

When a company is evaluating whether or not to use a perpetual vs.a periodic inventory system the following statement is most accurate:

The cost flow assumption used by a firm must match the physical flow of units through the firm.

Which of the following risks are unique to inventory as an asset class?

Which of the following should be included in the cost of inventory?

An inventory of grocery items where the shelves are stocked from the back would be similar to which cost flow assumption?

If a company's inventory turnover ratio is 6.6 it takes them on average 55 days to sell their inventory.

Which of the following is the correct flow of costs in a manufacturing operation?

The LCM rule is usually applied to groups of similar items.

Use of the FIFO cost flow assumption means that:

Which of the following is not an inventory account in a manufacturing company?

Management incentives to overstate ending inventory include all of the following except:

Which of the following would be most likely to use the specific identification method?

Overview of Corporate Financial Reporting

Business Transaction Analysis and Financial Statement Effects

Processing Data Through the Accounting System

Revenue Recognition

Cash Flow Statement

Cash, Temporary Investments, and Accounts Notes Receivable

Capital Assetstangible and Intangible

Short-Term Liabilities

Long-Term Liabilities

Shareholders Equity

Financial Statement Analysis

Accounting for Investments and Consolidated Financial Statements

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Exam 7: Inventory

All of the following are typical manufacturing costs except:

Which of the following statements best describes net realizable value when applying the LCM rule?

Inventory sold as a result of liquidation or bankruptcy is:

When a company is evaluating whether or not to use a perpetual vs.a periodic inventory system the following statement is most accurate:

The cost flow assumption used by a firm must match the physical flow of units through the firm.

Which of the following risks are unique to inventory as an asset class?

Which of the following should be included in the cost of inventory?

An inventory of grocery items where the shelves are stocked from the back would be similar to which cost flow assumption?

If a company's inventory turnover ratio is 6.6 it takes them on average 55 days to sell their inventory.

Which of the following is the correct flow of costs in a manufacturing operation?

The LCM rule is usually applied to groups of similar items.

Use of the FIFO cost flow assumption means that:

Which of the following is not an inventory account in a manufacturing company?

Management incentives to overstate ending inventory include all of the following except:

Which of the following would be most likely to use the specific identification method?

Overview of Corporate Financial Reporting

Business Transaction Analysis and Financial Statement Effects

Processing Data Through the Accounting System

Revenue Recognition

Cash Flow Statement

Cash, Temporary Investments, and Accounts Notes Receivable

Capital Assetstangible and Intangible

Short-Term Liabilities

Long-Term Liabilities

Shareholders Equity

Financial Statement Analysis

Accounting for Investments and Consolidated Financial Statements

Filters