Question 1

During periods of increasing costs, an advantage of the LIFO inventory cost method is that it matches more recent costs against current revenues.

Accepted Answer

A) True 
 B)False  True

Question 2

Under the inventory method, accounting records maintain a continuously updated inventory value.

Accepted Answer

A)  retail 
B)  periodic 
C)  physical 
D)  perpetual 
A)  retail 
B)  periodic 
C)  physical 
D)  perpetual D

Question 3

The units of an item available for sale during the year were as follows: $\begin{array}{ll}
\text { Jan. } 1 \text { Inventory } & 25 \text { units at } \$ 45 \
\text { Mar. } 4 \text { Purchase } & 15 \text { units at } \$ 50 \
\text { June } 7 \text { Purchase } & 35 \text { units at } \$ 58 \
\text { Nov. } 15 \text { Purchase } & 20 \text { units at } \$ 65
\end{array}$ There are 30 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the ending inventory cost using FIFO.

Accepted Answer

$1,880 20 units at $65 and 10 units at $58)

Question 4

Match each description to the appropriate cost flow assumption a-c).
-Cost of the latest purchases are assigned to ending inventory

Accepted Answer

A) FIFO 
B) LIFO 
C) Weighted average 
A) FIFO 
B) LIFO 
C) Weighted average

Question 5

Based upon the following data, estimate the cost of ending merchandise inventory using the gross profit method.

Accepted Answer

The answer of Based upon the following data, estimate the...

Question 6

If a company uses a periodic inventory system, the gross profit method can be used to estimate inventory for monthly or quarterly statements.

Accepted Answer

A) True 
 B)False

Question 7

On the basis of the following data, determine the value of the inventory at the lower of cost or market. Apply lower of cost or market to each inventory item. Show your work.

Accepted Answer

The answer of On the basis of the following data,...

Question 8

Under a perpetual inventory system, the amount of each type of merchandise on hand is available in the

Accepted Answer

A)  customer's ledger 
B)  creditor's ledger 
C)  inventory ledger 
D)  purchase ledger 
A)  customer's ledger 
B)  creditor's ledger 
C)  inventory ledger 
D)  purchase ledger

Question 9

Fill in the missing amounts from the chart below regarding the calculation of Bean Corporation's estimated inventory using the retail method of estimation.

Accepted Answer

The answer of Fill in the missing amounts from the...

Question 10

During a period of falling prices, which of the following inventory methods generally results in the lowest balance sheet amount for inventory?

Accepted Answer

A)  average cost method 
B)  LIFO method 
C)  FIFO method 
D)  cannot tell without more information 
A)  average cost method 
B)  LIFO method 
C)  FIFO method 
D)  cannot tell without more information

Question 11

A perpetual inventory system is an effective means of control over inventory.

Accepted Answer

A) True 
 B)False

Question 12

All of the following are reasons to use an estimated method of costing inventory except

Accepted Answer

A)  Perpetual inventory records are not maintained. 
B)  Purchase records are not maintained. 
C)  A disaster has destroyed the inventory records and the inventory. 
D)  Interim financial statements are required but physical inventory is only taken at the end of the financial accounting period. 
A)  Perpetual inventory records are not maintained. 
B)  Purchase records are not maintained. 
C)  A disaster has destroyed the inventory records and the inventory. 
D)  Interim financial statements are required but physical inventory is only taken at the end of the financial accounting period.

Question 13

Match each description to the appropriate document used for inventory control a-c).
-establishes an initial record of the receipt of inventory

Accepted Answer

A) Receiving report 
B) Vendor's invoice 
C) Purchase order 
A) Receiving report 
B) Vendor's invoice 
C) Purchase order

Question 14

Describe three inventory cost flow assumptions and how they impact the financial statements.

Accepted Answer

1. Cost flow is in the order in which co

Question 15

Which document establishes an initial record of the receipt of the inventory?

Accepted Answer

A)  receiving report 
B)  vendor's invoice 
C)  purchase order 
D)  petty cash voucher 
A)  receiving report 
B)  vendor's invoice 
C)  purchase order 
D)  petty cash voucher

Question 16

If the perpetual inventory system is used, the merchandise inventory account is debited for purchases of merchandise.

Accepted Answer

A) True 
 B)False

Question 17

Beginning inventory, purchases, and sales for an inventory item are as follows: $\begin{array}{|l|l|}
\hline \text { Beginning inventory } & 150 \text { units } @ \$ 755 \
\hline \text { Sale } & 120 \text { units } \
\hline \text { First purchase } & 400 \text { units } @ \$ 785 \
\hline \text { Sale } & 200 \text { units } \
\hline \text { Second purchase } & 300 \text { units } @ \$ 805 \
\hline \text { Sale } & 290 \text { units } \
\hline
\end{array}$ The firm uses the perpetual inventory system and there are 240 units of the item on hand at the end of the year. What is the total cost of ending inventory according to FIFO?

Accepted Answer

$805 × 240

Question 18

The firm uses the periodic system and there are 20 units of the commodity on hand at the end of the year. What is the amount of inventory at the end of the year according to the FIFO method?

Accepted Answer

A)  $655 
B)  $620 
C)  $690 
D)  $659 
A)  $655 
B)  $620 
C)  $690 
D)  $659

Question 19

If merchandise inventory is being valued at cost and the purchase price is steadily falling, which method of costing will yield the largest net income?

Accepted Answer

A)  average cost 
B)  LIFO 
C)  FIFO 
D)  weighted average 
A)  average cost 
B)  LIFO 
C)  FIFO 
D)  weighted average

Question 20

During the taking of its physical inventory on December 31, 2014, Barry's Bike Shop incorrectly counted its inventory as $350,000 instead of the correct amount of $280,000. The effect on the balance sheet and income statement would be

Accepted Answer

A)  assets overstated by $70,000; retained earnings understated by $70,000; and net income statement understated by $70,000 
B)  assets overstated by $70,000; retained earnings understated by $70,000; and no effect on the income statement 
C)  assets, retained earnings, and net income all overstated by $70,000 
D)  assets and retained earnings overstated by $70,000; and net income understated by $70,000 
A)  assets overstated by $70,000; retained earnings understated by $70,000; and net income statement understated by $70,000 
B)  assets overstated by $70,000; retained earnings understated by $70,000; and no effect on the income statement 
C)  assets, retained earnings, and net income all overstated by $70,000 
D)  assets and retained earnings overstated by $70,000; and net income understated by $70,000

Exam 6: Inventories

During periods of increasing costs, an advantage of the LIFO inventory cost method is that it matches more recent costs against current revenues.

Under the inventory method, accounting records maintain a continuously updated inventory value.

Match each description to the appropriate cost flow assumption a-c). -Cost of the latest purchases are assigned to ending inventory

Based upon the following data, estimate the cost of ending merchandise inventory using the gross profit method.

If a company uses a periodic inventory system, the gross profit method can be used to estimate inventory for monthly or quarterly statements.

On the basis of the following data, determine the value of the inventory at the lower of cost or market. Apply lower of cost or market to each inventory item. Show your work.

Under a perpetual inventory system, the amount of each type of merchandise on hand is available in the

Fill in the missing amounts from the chart below regarding the calculation of Bean Corporation's estimated inventory using the retail method of estimation.

During a period of falling prices, which of the following inventory methods generally results in the lowest balance sheet amount for inventory?

A perpetual inventory system is an effective means of control over inventory.

All of the following are reasons to use an estimated method of costing inventory except

Match each description to the appropriate document used for inventory control a-c). -establishes an initial record of the receipt of inventory

Describe three inventory cost flow assumptions and how they impact the financial statements.

Which document establishes an initial record of the receipt of the inventory?

If the perpetual inventory system is used, the merchandise inventory account is debited for purchases of merchandise.

The firm uses the periodic system and there are 20 units of the commodity on hand at the end of the year. What is the amount of inventory at the end of the year according to the FIFO method?

If merchandise inventory is being valued at cost and the purchase price is steadily falling, which method of costing will yield the largest net income?

During the taking of its physical inventory on December 31, 2014, Barry's Bike Shop incorrectly counted its inventory as $350,000 instead of the correct amount of $280,000. The effect on the balance sheet and income statement would be

Introduction to Accounting and Business

Analyzing Transactions

The Adjusting Process

Completing the Accounting Cycle

Accounting for Merchandising Businesses

Sarbanes-Oxley, Internal Control, and Cash

Receivables

Fixed Assets and Intangible Assets

Current Liabilities and Payroll

Corporations: Organization, Stock Transactions, and Dividends

Long-Term Liabilities: Bonds and Notes

Investments and Fair Value Accounting

Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting Concepts and Principles

Job Order Costing

Process Cost Systems

Cost Behavior and Cost-Volume-Profit Analysis

Variable Costing for Management Analysis

Budgeting

Performance Evaluation Using Variances From Standard Costs

Performance Evaluation for Decentralized Operations

Differential Analysis, Product Pricing, and Activity-Based Costing

Capital Investment Analysis

Cost Allocation and Activity-Based Costing

Lean Principles, Lean Accounting, and Activity Analysis

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