Question 1

The two most widely used methods for determining the cost of inventory are

Accepted Answer

A)  FIFO and LIFO 
B)  FIFO and average cost 
C)  LIFO and average cost 
D)  gross profit and average cost 
A)  FIFO and LIFO 
B)  FIFO and average cost 
C)  LIFO and average cost 
D)  gross profit and average cost

Question 2

What is the amount of cost of merchandise sold for the year according to the LIFO method?

Accepted Answer

A)  $1,380 
B)  $1,375 
C)  $1,510 
D)  $1,250 
A)  $1,380 
B)  $1,375 
C)  $1,510 
D)  $1,250

Question 3

While taking a physical inventory, a company counts its inventory as less than the actual amount on hand. How will this error affect the income statement?

Accepted Answer

Net income

Question 4

Garrison Company uses the retail method of inventory costing. It started the year with an inventory that had a retail cost of $45,000. During the year, Garrison purchased an inventory with a retail sales value of $300,000. After performing a physical inventory, Garrison calculated the inventory at retail to be $80,000. The mark up is 100% of cost. Determine the ending inventory at its estimated cost.

Accepted Answer

A)  $160,000 
B)  $80,000 
C)  $40,000 
D)  $45,000 
A)  $160,000 
B)  $80,000 
C)  $40,000 
D)  $45,000

Question 5

Match each description to the appropriate cost flow assumption a-c).
-Produces results that are similar to the specific identification method

Accepted Answer

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

Question 6

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 LIFO inventory cost method.

Accepted Answer

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

Question 7

The lower-of-cost-or-market method of determining the value of ending inventory can be applied on an item by item, by major classification of inventory, or by the total inventory.

Accepted Answer

A) True 
 B)False

Question 8

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 LIFO?

Accepted Answer

$755 × 30 units) + $

Question 9

Beginning inventory, purchases, and sales data for tennis rackets are as follows:   Complete the inventory cost card assuming the business maintains a perpetual inventory system and calculates the cost of merchandise sold and ending inventory using LIFO.

Accepted Answer

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

Question 10

A business using the retail method of inventory costing determines that merchandise inventory at retail is $2,300,000. If the ratio of cost to retail price is 55%, what is the amount of inventory to be reported on the financial statements?

Accepted Answer

$2,300,000

Question 11

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

Accepted Answer

A)  net income is understated 
B)  net income is overstated 
C)  cost of merchandise sold is understated 
D)  merchandise inventory reported on the balance sheet is overstated 
A)  net income is understated 
B)  net income is overstated 
C)  cost of merchandise sold is understated 
D)  merchandise inventory reported on the balance sheet is overstated

Question 12

It's not unusual for large companies to use different inventory costing methods for different segments of its inventory.

Accepted Answer

A) True 
 B)False

Question 13

Taking a physical count of inventory

Accepted Answer

A)  is not necessary when a periodic inventory system is used 
B)  should be done near year-end 
C)  has no internal control relevance 
D)  is not necessary when a perpetual inventory system is used 
A)  is not necessary when a periodic inventory system is used 
B)  should be done near year-end 
C)  has no internal control relevance 
D)  is not necessary when a perpetual inventory system is used

Question 14

Match each description to the appropriate cost flow assumption a-d).
-Cost flow is in the order in which the costs were incurred.

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

The units of an item available for sale during the year were as follows: $$\begin{array} { | l c | l | l | } 
\hline \text { January } & 10 & \text { Inventory } & 27 \text { units } @ \$ 90 \
\hline \text { February } & 27 & \text { Purchase } & 54 \text { units } @ \$ 98 \
\hline \text { July } & 11 & \text { Purchase } & 63 \text { units } @ \$ 106 \
\hline \text { November } & 13 & \text { Purchase } & 36 \text { units } @ \$ 115 \
\hline
\end{array}$$ There are 50 units of the item in the physical inventory at December 31. The periodic inventory system is used. Determine the ending inventory cost by a) the first-in, first-out method, b) the last-in, first-out method, and c) the average cost method. Show your work.

Accepted Answer

a)$5,624 36 units at $115 plus 14 units

Question 16

Match each situation to its impact a-c) on the current year's net income.
-The beginning inventory was recorded as $10,000, when actual inventory on hand was $12,000.

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 17

Match each situation to its impact a-c) on the current year's net income.
-Merchandise that was sold and shipped FOB shipping point on the last day of the year was not included in the seller's 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 18

The weighted average inventory cost flow method is the least used of the inventory costing methods.

Accepted Answer

A) True 
 B)False

Question 19

During periods of decreasing costs, the use of the LIFO method of costing inventory will result in a lower amount of net income than would result from the use of the FIFO method.

Accepted Answer

A) True 
 B)False

Question 20

List the internal control objectives illustrated by the following:
a) keeping the inventory storeroom locked
b) counting the inventory at the end of the accounting period and comparing it with the inventory ledger clerk's records
c) using subsidiary ledgers and a perpetual inventory system

Accepted Answer

a) safeguarding the inventory from damag

Exam 6: Inventories

The two most widely used methods for determining the cost of inventory are

What is the amount of cost of merchandise sold for the year according to the LIFO method?

While taking a physical inventory, a company counts its inventory as less than the actual amount on hand. How will this error affect the income statement?

Match each description to the appropriate cost flow assumption a-c). -Produces results that are similar to the specific identification method

The lower-of-cost-or-market method of determining the value of ending inventory can be applied on an item by item, by major classification of inventory, or by the total inventory.

Beginning inventory, purchases, and sales data for tennis rackets are as follows: Complete the inventory cost card assuming the business maintains a perpetual inventory system and calculates the cost of merchandise sold and ending inventory using LIFO.

A business using the retail method of inventory costing determines that merchandise inventory at retail is $2,300,000. If the ratio of cost to retail price is 55%, what is the amount of inventory to be reported on the financial statements?

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

It's not unusual for large companies to use different inventory costing methods for different segments of its inventory.

Taking a physical count of inventory

Match each description to the appropriate cost flow assumption a-d). -Cost flow is in the order in which the costs were incurred.

Match each situation to its impact a-c) on the current year's net income. -The beginning inventory was recorded as $10,000, when actual inventory on hand was $12,000.

Match each situation to its impact a-c) on the current year's net income. -Merchandise that was sold and shipped FOB shipping point on the last day of the year was not included in the seller's ending inventory.

The weighted average inventory cost flow method is the least used of the inventory costing methods.

During periods of decreasing costs, the use of the LIFO method of costing inventory will result in a lower amount of net income than would result from the use of the FIFO method.

List the internal control objectives illustrated by the following: a) keeping the inventory storeroom locked b) counting the inventory at the end of the accounting period and comparing it with the inventory ledger clerk's records c) using subsidiary ledgers and a perpetual inventory system

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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