Question 1

The inventory costing method that reports the most current prices in ending inventory is

Accepted Answer

A)  FIFO 
B)  specific identification 
C)  LIFO 
D)  average cost 
A)  FIFO 
B)  specific identification 
C)  LIFO 
D)  average cost

Question 2

"Market" as used in the phrase "lower of cost or market" for valuing inventory, refers to the price at which the inventory is being offered for sale by the company.

Accepted Answer

A) True 
 B)False

Question 3

Match each description to the appropriate inventory system a or b).
-Average cost is rarely used with this system.

Accepted Answer

A) Perpetual 
B) Periodic 
A) Perpetual 
B) Periodic

Question 4

The units of Manganese Plus available for sale during the year were as follows:   ​There are 15 units of the product in the physical inventory at November 30. The periodic inventory system is used. Determine the inventory cost by a) FIFO, b) LIFO, and c) average cost methods.

Accepted Answer

The answer of The units of Manganese Plus available for...

Question 5

Beginning inventory, purchases, and sales data for tennis rackets are as follows: $$\begin{array} { | l | l | l | l | l | l | l | } 
\hline & \text { April 3 } & \text { Inventory } & & 12 \text { units } & @ & \$ 45 \
\hline & 11 & \text { Purchase } & & 13 \text { units } & @ & \$ 47 \
\hline & 14 & \text { Sale } & & 18 \text { units } & & \
\hline & 21 & \text { Purchase } & & 9 \text { units } & @ & \$ 60 \
\hline & 25 & \text { Sale } & & 10 \text { units } & & \
\hline
\end{array}$$ Complete the inventory cost card assuming the business maintains a perpetual inventory system and calculates the cost of merchandise sold and ending inventory using FIFO.

Accepted Answer

The answer of Beginning inventory, purchases, and sales data for...

Question 6

Merchandise inventory at the end of the year is overstated. Which of the following statements correctly states the effect of the error?

Accepted Answer

A)  stockholders' equity is overstated 
B)  cost of merchandise sold is overstated 
C)  gross profit is understated 
D)  net income is understated 
A)  stockholders' equity is overstated 
B)  cost of merchandise sold is overstated 
C)  gross profit is understated 
D)  net income is understated

Question 7

FIFO reports higher gross profit and net income than the LIFO method when

Accepted Answer

A)  prices are increasing 
B)  prices are decreasing 
C)  prices remain stable 
D)  prices are reduced by 50% 
A)  prices are increasing 
B)  prices are decreasing 
C)  prices remain stable 
D)  prices are reduced by 50%

Question 8

Match each situation to its impact a-c) on the current year's net income.
-Purchased merchandise was shipped FOB shipping point on the last day of the year. The cost of the merchandise was not included in ending inventory.

Accepted Answer

A) Net income for the current year will be overstated. 
B) Net income for the current year will be understated. 
C) There will be no error effect on net income. 
A) Net income for the current year will be overstated. 
B) Net income for the current year will be understated. 
C) There will be no error effect on net income.

Question 9

Addison, Inc. uses a perpetual inventory system. The following is information about one inventory item for the month of September: $$\begin{array} { r l l } 
\text { Sep. } 1 & \text { Inventory } & 20 \text { units at } \$ 20 \
4 & \text { Sold } & 10 \text { units } \
10 & \text { Purchased } & 30 \text { units at } \$ 25 \
17 & \text { Sold } & 20 \text { units } \
30 & \text { Purchased } & 10 \text { units at } \$ 30
\end{array}$$
-If Addison uses FIFO, the cost of the ending merchandise inventory on September 30 is

Accepted Answer

A)  $800 
B)  $650 
C)  $750 
D)  $700 
A)  $800 
B)  $650 
C)  $750 
D)  $700

Question 10

Match each description to the appropriate cost flow assumption a-c).
-Produces the highest ending inventory when costs are increasing

Accepted Answer

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

Question 11

Under the LIFO inventory costing method, the most recent costs are assigned to ending inventory.

Accepted Answer

A) True 
 B)False

Question 12

The primary objectives of control over inventory are

Accepted Answer

A)  safeguarding the inventory from damage and maintaining constant observation of the inventory 
B)  reporting inventory in the financial statements 
C)  maintaining constant observation of the inventory and reporting inventory in the financial statements 
D)  safeguarding inventory from damage and reporting inventory in the financial statements 
A)  safeguarding the inventory from damage and maintaining constant observation of the inventory 
B)  reporting inventory in the financial statements 
C)  maintaining constant observation of the inventory and reporting inventory in the financial statements 
D)  safeguarding inventory from damage and reporting inventory in the financial statements

Question 13

The choice of an inventory costing method has no significant impact on the financial statements.

Accepted Answer

A) True 
 B)False

Question 14

Match each description to the appropriate cost flow assumption a-d).
-The cost of the units sold and in ending inventory is a weighted average of the purchase costs.

Accepted Answer

A) Weighted average 
B) First-in, first-out FIFO)
c. Last-in, first-out LIFO)
d. Specific identification 
A) Weighted average 
B) First-in, first-out FIFO)
c. Last-in, first-out LIFO)
d. Specific identification

Question 15

During times of rising prices, which of the following is not an accurate statement?

Accepted Answer

A)  Average costing will yield results that are between those of FIFO and LIFO. 
B)  LIFO will result in a higher cost of merchandise sold than FIFO. 
C)  FIFO will result in a higher net income than LIFO. 
D)  LIFO will result in higher income taxes than FIFO. 
A)  Average costing will yield results that are between those of FIFO and LIFO. 
B)  LIFO will result in a higher cost of merchandise sold than FIFO. 
C)  FIFO will result in a higher net income than LIFO. 
D)  LIFO will result in higher income taxes than FIFO.

Question 16

If a company mistakenly counts less items during a physical inventory than actually exist, how will the error affect the cost of merchandise sold?

Accepted Answer

A)  understated 
B)  overstated 
C)  no change 
D)  only inventory will be affected 
A)  understated 
B)  overstated 
C)  no change 
D)  only inventory will be affected

Question 17

Match each description to the appropriate cost flow assumption a-c).
-Does not follow the physical flow of goods in most cases

Accepted Answer

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

Question 18

Use the information below to answer the following questions.
The Boxwood Company sells blankets for $60 each. The following was taken from the inventory records during May. The company had no beginning inventory on May 1. $$\begin{array} { | l | l | l | l | } 
\hline \text { Date } &  { \text { Blankets } } & \text { Units } & \text { Cost } \
\hline  { \text { May } 3 } & \text { Purchase } & 5 & \$ 20 \
\hline 10 & \text { Sale } & 3 & \
\hline 17 & \text { Purchase } & 10 & \$ 24 \
\hline 20 & \text { Sale } & 6 & \
\hline 23 & \text { Sale } & 3 & \
\hline 30 & \text { Purchase } & 10 & \$ 30 \
\hline
\end{array}$$
-Assuming that the company uses the perpetual inventory system, determine the cost of merchandise sold for the sale of May 20 using the FIFO inventory cost method.

Accepted Answer

A)  $120 
B)  $180 
C)  $136 
D)  $144 
A)  $120 
B)  $180 
C)  $136 
D)  $144

Question 19

Match each situation to its impact a-c) on the current year's net income.
-Beginning inventory was understated.

Accepted Answer

A) Net income for the current year will be overstated. 
B) Net income for the current year will be understated. 
C) There will be no error effect on net income. 
A) Net income for the current year will be overstated. 
B) Net income for the current year will be understated. 
C) There will be no error effect on net income.

Question 20

On the basis of the following data, what is the estimated cost of the merchandise inventory on May 31 using the retail method?

Accepted Answer

A)  $250,000 
B)  $360,000 
C)  $172,500 
D)  $187,500 
A)  $250,000 
B)  $360,000 
C)  $172,500 
D)  $187,500

Exam 6: Inventories

The inventory costing method that reports the most current prices in ending inventory is

"Market" as used in the phrase "lower of cost or market" for valuing inventory, refers to the price at which the inventory is being offered for sale by the company.

Match each description to the appropriate inventory system a or b). -Average cost is rarely used with this system.

The units of Manganese Plus available for sale during the year were as follows: ​There are 15 units of the product in the physical inventory at November 30. The periodic inventory system is used. Determine the inventory cost by a) FIFO, b) LIFO, and c) average cost methods.

Merchandise inventory at the end of the year is overstated. Which of the following statements correctly states the effect of the error?

FIFO reports higher gross profit and net income than the LIFO method when

Match each situation to its impact a-c) on the current year's net income. -Purchased merchandise was shipped FOB shipping point on the last day of the year. The cost of the merchandise was not included in ending inventory.

Match each description to the appropriate cost flow assumption a-c). -Produces the highest ending inventory when costs are increasing

Under the LIFO inventory costing method, the most recent costs are assigned to ending inventory.

The primary objectives of control over inventory are

The choice of an inventory costing method has no significant impact on the financial statements.

Match each description to the appropriate cost flow assumption a-d). -The cost of the units sold and in ending inventory is a weighted average of the purchase costs.

During times of rising prices, which of the following is not an accurate statement?

If a company mistakenly counts less items during a physical inventory than actually exist, how will the error affect the cost of merchandise sold?

Match each description to the appropriate cost flow assumption a-c). -Does not follow the physical flow of goods in most cases

Match each situation to its impact a-c) on the current year's net income. -Beginning inventory was understated.

On the basis of the following data, what is the estimated cost of the merchandise inventory on May 31 using the retail method?

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

Filters

The units of Manganese Plus available for sale during the year were as follows: There are 15 units of the product in the physical inventory at November 30. The periodic inventory system is used. Determine the inventory cost by a) FIFO, b) LIFO, and c) average cost methods.