Question 1

Average inventory is computed by adding the inventory at the beginning of the period to the inventory at the end of the period and dividing by two.

Accepted Answer

A) True 
 B)False

Question 2

Match each description to the appropriate cost flow assumption a-c).
-Rarely used with a perpetual inventory system

Accepted Answer

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

Question 3

A subsidiary inventory ledger can be an aid in maintaining inventory levels at their proper levels.

Accepted Answer

A) True 
 B)False

Question 4

Match each description to the appropriate cost flow assumption a-d).
-Cost flow is assumed to be in the reverse order of costs 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 5

Which of the following is used to analyze the efficiency and effectiveness of inventory management?

Accepted Answer

A)  inventory turnover only 
B)  number of days' sales in inventory only 
C)  both inventory turnover and number of days' sales in inventory 
D)  neither inventory turnover or number of days' sales in inventory 
A)  inventory turnover only 
B)  number of days' sales in inventory only 
C)  both inventory turnover and number of days' sales in inventory 
D)  neither inventory turnover or number of days' sales in inventory

Question 6

Brutus Corporation, a newly formed corporation, has the following transactions during May, its first month of operations.   Calculate total sales, cost of merchandise sold, gross profit, and ending inventory using each of the following inventory methods:
1. FIFO perpetual
2. FIFO periodic
3. LIFO perpetual
4. LIFO periodic
5. Average cost periodic round average to nearest cent)

Accepted Answer

The answer of Brutus Corporation, a newly formed corporation, has...

Question 7

On the basis of the following data, determine the estimated cost of the inventory as of March 31 by the retail method, presenting details of the computation in good order.

Accepted Answer

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

Question 8

Under a periodic inventory system

Accepted Answer

A)  accounting records continuously disclose the amount of inventory 
B)  a separate account for each type of merchandise is maintained in a subsidiary ledger 
C)  a physical inventory is taken at the end of the period 
D)  merchandise inventory is debited when goods are returned to vendors 
A)  accounting records continuously disclose the amount of inventory 
B)  a separate account for each type of merchandise is maintained in a subsidiary ledger 
C)  a physical inventory is taken at the end of the period 
D)  merchandise inventory is debited when goods are returned to vendors

Question 9

Beginning inventory, purchases, and sales data for widgets 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 FIFO.

Accepted Answer

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

Question 10

Determine the total value of the merchandise using net realizable value. $\begin{array}{|l|l|l|l|}
\hline \text { Item } &{\text { Quantity }} &{\text { Selling Price }} &{\text { Commission }} \
\hline \text { Doll } & 10 & \$ 7 & \$ 2 \
\hline \text { Horse } & 5 & 9 & 3 \
\hline
\end{array}$

Accepted Answer

A)  $35 
B)  $80 
C)  $115 
D)  $25 
A)  $35 
B)  $80 
C)  $115 
D)  $25

Question 11

What is the amount of the inventory at the end of the year using the LIFO method?

Accepted Answer

A)  $1,685 
B)  $1,575 
C)  $1,805 
D)  $3,815 
A)  $1,685 
B)  $1,575 
C)  $1,805 
D)  $3,815

Question 12

During periods of rapidly rising costs, the use of the LIFO method results in illusory or inventory profits.

Accepted Answer

A) True 
 B)False

Question 13

The average cost method will always yield results between FIFO and LIFO.

Accepted Answer

A) True 
 B)False

Question 14

Inventory controls start when the merchandise is shelved in the store area.

Accepted Answer

A) True 
 B)False

Question 15

Match each description to the appropriate cost flow assumption a-c).
-Never results in either the highest or lowest possible net income

Accepted Answer

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

Question 16

Complete the following table using the perpetual FIFO method of inventory flow.

Accepted Answer

The answer of Complete the following table using the perpetual...

Question 17

Generally, the lower the number of days' sales in inventory, the better.

Accepted Answer

A) True 
 B)False

Question 18

If ending inventory for the year is overstated, stockholders' equity reported on the balance sheet at the end of the year is understated.

Accepted Answer

A) True 
 B)False

Question 19

When merchandise inventory is shown on the balance sheet, both the method of determining the cost of the inventory and the method of valuing the inventory should be shown.

Accepted Answer

A) True 
 B)False

Question 20

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 gross profit for the sale of May 23 using the FIFO inventory cost method.

Accepted Answer

A)  $108 
B)  $120 
C)  $72 
D)  $180 
A)  $108 
B)  $120 
C)  $72 
D)  $180

Exam 6: Inventories

Average inventory is computed by adding the inventory at the beginning of the period to the inventory at the end of the period and dividing by two.

Match each description to the appropriate cost flow assumption a-c). -Rarely used with a perpetual inventory system

A subsidiary inventory ledger can be an aid in maintaining inventory levels at their proper levels.

Match each description to the appropriate cost flow assumption a-d). -Cost flow is assumed to be in the reverse order of costs incurred.

Which of the following is used to analyze the efficiency and effectiveness of inventory management?

On the basis of the following data, determine the estimated cost of the inventory as of March 31 by the retail method, presenting details of the computation in good order.

Under a periodic inventory system

Beginning inventory, purchases, and sales data for widgets 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 FIFO.

Determine the total value of the merchandise using net realizable value. Item Quantity Selling Price Commission Doll 10 \ 7 \ 2 Horse 5 9 3

What is the amount of the inventory at the end of the year using the LIFO method?

During periods of rapidly rising costs, the use of the LIFO method results in illusory or inventory profits.

The average cost method will always yield results between FIFO and LIFO.

Inventory controls start when the merchandise is shelved in the store area.

Match each description to the appropriate cost flow assumption a-c). -Never results in either the highest or lowest possible net income

Complete the following table using the perpetual FIFO method of inventory flow.

Generally, the lower the number of days' sales in inventory, the better.

If ending inventory for the year is overstated, stockholders' equity reported on the balance sheet at the end of the year is understated.

When merchandise inventory is shown on the balance sheet, both the method of determining the cost of the inventory and the method of valuing the inventory should be shown.

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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